"Fire" = financial independence retire early. The idea is to save a lot when you are young and retire incredibly early. I love the idea, which I encountered decades ago in "Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence" (which is still available, "revised and updated for 2018"). I think that originally came out in 1992, too late for me to really take advantage of the idea (since I was already 41 and a tenured law professor).
From the article in The Guardian:
Some people, says Shen, see what [Shen and Leung are] doing as “invalidating” because it challenges the status quo. “It really makes people question their lives and they don’t like that because it’s scary.”... Since retiring she is so much happier – at one point, her job made her so miserable she was on anxiety and depression medication – so much so that she wants to show others how to do it, too. She sees Fire as a remedy: “It’s almost like you see people get sick, you know what it feels like and it sucks to be sick and you want to give them the medication to help them feel better.”Meanwhile, Leung opines: “[Donald] Trump’s rise to power was caused by economic fear, Brexit was caused by economic fear … If everybody was FI [financially independent], Trump wouldn’t have got elected.” I don't love that idea, because it's way too limited. If everyone were financially independent, everything would be different. What would the political parties be like? What would the issues be? Who would be the candidates? Impossible to work that out, but sure: no Trump. He wouldn't even have run for office, would he? Or he'd be a completely different person and not the Trump who troubles Leung.
So would they ever go back to their old jobs? Shen giggles drily. “I don’t think I would be very useful as an employee any more.” She has, she says, become too open-minded to obediently follow instruction. “Once you’ve been out of the matrix, you can’t go back into the matrix,” she says soberly. “You’ve already seen too much.”
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109 comments:
Keynes wrote, "In the aggregate, liquidity is unattainable," and the same might be said of financial independence (in the sense of not needing to work). All the capital in the world will not produce a return without labor from someone.
If everyone quit working at 31 the economy would collapse. You can only live on investments if there is something to invest in. This is like a poker strategy that is supposed to make everyone at the table a winner.
Starbucks employees should take note.
Most people have no idea what to do with their own time.
Retiring at 31 would be a disaster for them. They'll just drink and do drugs and sit in front of the TV.
Or, they'll join one of the sexual identity groups and waste their time pretending they are victims. Recruits for the pride parades and cosplay conventions.
Or, they'll become political addicts and cause mongers.
I lived in Woodstock, NY for 40 years. A lot of people there who retired at 30 whether or not they had money. Almost all of them wasted their lives on the shit listed above. Another favorite pre-occupation of the retired in Woodstock is sleeping around.
Many of them became artists... very bad artists... littering the world with even more stupid, mostly political, crap.
and their investment portfolio has grown since they left their old lives behind, so they now have more money than they started with.
They’re lucky. Their 4% rule relies on steady state growth but does not account for std deviation events like the one they are experiencing of a period of strong economic and investment growth. Their counterparts in 2008 were not so lucky...
"I think that originally came out in 1992, too late for me to really take advantage of the idea (since I was already 41 and a tenured law professor)."
FFS, a tenured law professor is semi-retired already.
Not to burst their bubble- they are making interesting choices that hopefully work out for them.
In literature, early independence usually leads to dissipation and debauchery. But now we consider 31 to be early.
What will they do when they get over 50 and health insurance skyrockets and Obamacare/SS/Medicare/Medicaid go bust?
Everyone quitting work would be a bit of a burden on the fiscal state government and respective entitlement programs. New rules would need to be written to get at people’s stuff. Did they account for that in their enlightened spreadsheet?
It's sweet that they think they have enough money to survive and thrive until death. Because unlike Obama, I don't think there is a point at which you've made enough money (and given what he and Michelle are doing now post-White House it's fairly clear he doesn't really believe that either). Not as long as there is a government that can tax (aka confiscate) what you have. Not as long as there is illness and war and famine and all sorts of biblical type stuff that can happen in the future in the world in your life.
I remember reading about one of Bernie Madoff's victims, a woman in her 60s who had placed a couple of million, all she had with him for safety and protection. She had to go out and find work once that whole thing blew up, some kind of entry level retail job was all she was qualified for. That's the other thing about leaving the work force, it can leave you behind.
Oh, I forgot, I need to pick up my lottery tickets for tonight's Powerball.
These retire really young proposals suffer from a huge amount of survivor bias. You always see the ones who made it work, never the ones who ended up back in the work force a few years later.
Star-Trek socialism.
The problem for many is that by the time you reach your retirement "number" you have a new "number".
Human wants tend to be relative and infinite, which is why you need a system of economic allocation, either the market or the state.
I suspect the big reveal of "FIRE" is intertemporal "number" discipline.
If everyone were FI at age 31, it's not like the need for employees would go away. So, companies would have to change. They would treat employees differently; pay better, have more flexible time, reduce busy work, etc. And your average person would still want to be useful, to be a part of something bigger than they are, so the desire for work would still be there for many.
If you want eight figure CEO salaries to go away, work to become FI. Then you can RE if you want to.
Saving and being independent is good life advice no matter the goal. But the motivation as described seems like tired, leftist drivel.
'We're scary because we challenge the status quo, man. If you would open your mind, we wouldn't have Trump or Brexit or - Screw it, live how you want just vote against Trump.'
I'm sure that having it presented by the Guardian makes them sound worse than they really are. That and the fact that I can't bring myself to read it.
I retired 7 years ago.
Grandkids came along. Watching the grandkids has been a half time job.
Took up playing classical music on piano, an interest I hadn't pursued since college.
Expanded my church music biz.
I did this on a modest budget. My bills are paid.
The electorate would be a lot more conservative if everyone was financially independent. The socialism stuff wouldn't wash.
It's important to live within your means, save and invest, but I'd like to see how they do this in an extended bear or flat market. The time frame over which these have done this has been very beneficial to asset appreciation.
I retired at 58... not bad at all.
In my personal experience, DFFI (Debt Free, Financially Independent) beats the socks off FIRE. My wife and I both still work, but we've been totally debt free for more than 15 years. Out salary is decidedly middle-class, but we live off one paycheck and save the rest.
Getting up to go to work each morning feels a whole lot different when all the bills are already paid.
From the Article: at one point, her job made her so miserable she was on anxiety and depression medication
Well, she chose a bad job then. I question her judgement in this FIRE thing too, based on past choices.
Memories of Stagflation make me skeptical. It could happen again, even if you learn to code.
Also worth noting that they have written two books, and started a blog. So they really haven't retired, just switched to a different job. Probably a less stressful job, but it's still work, and likely still income.
A better idea is to find work that you love and to keep your spending within the income you make from that work. Don't try to for the biggest, most high-paying career. Know yourself and understand what you truly enjoy doing and don't get distracted by generally prevalent ideas about ambition. Figure out right kind of frugality that works for you. Not spending is way more effective than making money.
Elizabeth Warren has a plan to punish their hard work, saving, and FI with a wealth tax. When they have their assets taxed away and are pushed back into the workforce, maybe they'll regale their new coworkers with tales of early retirement during the "good old days" of the Trump administration.
"Also worth noting that they have written two books, and started a blog. So they really haven't retired, just switched to a different job. Probably a less stressful job, but it's still work, and likely still income."
Yes, I would not trust them or anyone else who is SELLING the idea of retiring while claiming to be retired. They are promoting something that they are not doing. But many people, I assume, are doing something like retiring or something like what I recommended in my previous comment, which can be an ethical way of being a working person, and they're not calling attention to themselves. There are also, I assume, millions of people who do their best to hold onto a job that they're not doing ethically, where they are drawing an income but physically/mentally retired.
I retired on my 69th birthday. Why quit when when you’re having fun?
I believe in the ideal of the country gentleman.
They are a disinterested and stabilizing, conservative element in the world.
There is no rural gentry in the US.
Exactly. It's just changing jobs. I'm self employed too, and it's still a job. There are deadlines, and stresses and challenges and people to deal with and hopefully paychecks. You should quit a job you hate for something better and then rinse and repeat until you too are "retired" at your dream job. True retirement sounds boring as hell, and I'll never accept it.
A better idea is to find work that you love and to keep your spending within the income you make from that work.
Mike Rowe is not a fan of advising graduates to find work that you love.
But I think you both are making similar points.
For the most part, the people who are financially independent work more than those who are not.
I thought we discussed this previously. I'm a fan of the concept of FIRE, but after with JRoberts about DFFI. The key is the ability to walk away from a deal you don't want to take. Debt locks you into deals that you learn to late aren't worth taking.
The Trump angle is ludicrous. I don't want to be dependent on any politician. Democrats more than Trump want me dependent on government and thus politicians.
"But many people, I assume, are doing something like retiring or something like what I recommended in my previous comment, which can be an ethical way of being a working person, and they're not calling attention to themselves."
I completely agree. This is basically my goal.
Follow tour passion? What if your passion is jerking off all day?
This is a fancy way to stress the importance of saving.
Yes, saving is important.
If you can save enough to retire, awesome.
If you can save enough to retire at 31, double-triple awesome, but I've never met anyone who did.
But, lets back up: To save, ya gotta (1) earn and (2) not spend. Those things are difficult when you're young.
I remember saving 10K by age 26. I thought I had done well! But 1 bad business investment, a trip to Europe and a car gobbled it all up pretty quickly.
Retiring at 31 is unrealistic for 99% of folks. At that age, I was getting my career started and trying to buy a house.
"There are also, I assume, millions of people who do their best to hold onto a job that they're not doing ethically, where they are drawing an income but physically/mentally retired."
Two words...health insurance.
"If everybody was FI [financially independent], Trump wouldn’t have got elected.” I don't love that idea, because it's way too limited. If everyone were financially independent, everything would be different. What would the political parties be like? "
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True. Look at the Dems promising free stuff..even to "migrants".
They trade on dependence.
The “fears” of blacks, women and gays are legitimate political agendas.
The “fears” of whites indict them as awful bigots.
A robber comes up to Jack Benny on the street, waves a gun at him and says "Your money or Your life!"
But Jack Benny doesn't respond.
So the robber repeats, "I said your money or your life! Which is it?"
And Jack Benny says "I'm thinking, I'm thinking."
"If everyone were financially independent, everything would be different."
Kind of a weird idea. If everyone were financially independent, you would not be able to purchase anything made by human beings. Until your shoes wore out, you could walk by the drive-thru window, but there wouldn't be anyone there to make you a sammie.
Two words...health insurance.
One word: Obamacare.
Now I can’t decide whether that supports your statement or not.
Remember what Nancy P said Obamacare frees up people to be artists, etc. all these jobs would be created. Instead we got the new normal.
True. Look at the Dems promising free stuff..even to "migrants".
They trade on dependence.
And getting rich off of it. Bernie. I have 1 house, why should he have 3?
Work is rewarding.
"If everyone were financially independent, you would not be able to purchase anything made by human beings. Until your shoes wore out, you could walk by the drive-thru window, but there wouldn't be anyone there to make you a sammie."
You act like people wouldn't want to make stuff anymore. That's not how people are. We make stuff because we have to. There would still be people making shoes, because people love shoes. And some people REALLY love shoes. Just probably not in sweat shops or other poor work environments, because no one would have to work there. There would still be work, just more humane work.
Marie Antoinette, cake
Reading the article, I notice no mention of children.
It's really quite easy to scrimp and save and then live cheaply while traveling the world, when you have dual incomes and no kids.
The “Trump who troubles Leung” is entirely a figment of her imagination.
Why can't you be financially independent and work?
But then, some of the commetariat ties 'independence' to 'government'. Independence from government is what we want and why we have people like Trump. The government pushes people away from financial independence, forcing them to be dependent on government.
Financial Independence is not a requirement for life: just pay off your debts - stop being a slave.
Mike, we HOPE people would still work. And we HOPE there's a lid for every pot. But are there enough twenty-something's to collect garbage and fix broken toilets and build roads in the hot sun? Or, in anticipation of that beautiful day when they're 31 and retired, are too many twenty-something's going to go to college to learn how to do the Thing They Love so they can eventually do it in that humane working environment you're touting?
Money is motivational, when NOT everyone is financially independent. Work itself can be motivational for some - but I've known too many deadbeats (some of them living on the public dole, some of them perpetual students hoping their loans never come due, a few living on their parents or their trust funds) to believe that we can successfully run an economy simply on people's doing Things They Love.
I should add, some of them - like me - living on their spouses' income. It's my job to run our house and our investments - but let's be real. I've been sitting outside enjoying the lovely morning and letting Roomba vacuum while I've been reading this thread. And my husband is at work, bringing home the bacon.
Laborare est orare
Jamie, I think we disagree on this one. I believe all of that stuff would get taken care of somehow or another. I'm not living in a trash heap, for one. The corporate led world is better than what we've had before, but it's not permanent.
Enjoying your comments, Jamie. I'm afraid it works for us working types as well. I'm sitting at my job like I do every day, but I've left like ten comments on the blog, among other things. Not the most productive three hours of my life, but not uncommon.
I read and followed the “Your Money or Your Life” plan for awhile. It really helped - I got a handle on my spending, got out of debt, and managed to sock away $30,000 over a couple of years. But I determined the full plan was unrealistic— the end game was to buy T-bills and live off the returns, and live an incredibly modest life. I wanted to buy a house, raise a family, go on vacations, and send my kids to college. T-bill returns were Ok when they wrote the book, but were shit when I was looking into them. And I ended up using all my savings during an extended period of unemployment. There’s nothing wrong with working.
One word: Obamacare.
If your income is low enough, Obamacare is great. The premium subsidy is based on 1040 income, not wealth. Out of pocket max is lowered yugely, too.
My ex-boss's dad was still coming to work everyday when he was 82. Stopped when he broke his hip and died a month later. But he had wanted to travel decades earlier when his wife's mobility was shot from obesity.
Isn't all of it based on fear? If you're smart enough to value liberty, tour fear would be the rise of what Von Mises called "Omnipotent Government," which results not only in less liberty but in greater poverty. If you're stupid (as "liberals" and other statists tend to be), your fear is that without Daddy and Mommy State protecting you and robbing your neighbors to give you free stuff, you'll be up Feces Creek.
It isn't what you save, it is what you save in excess of the average. I didn't have a family, and I had a high paying job- so retiring at 43 was easy for me. Had I wife and at least two kids, I would still be working today at age 53. I could have probably retired at 35 had I been frugal to the extreme- spent more on housing than I needed to given it was just me, but I didn't know it would be just me at the time either- my crystal ball wasn't that clear. It helped that neither big stock market crash greatly affected me either- the one 2000-2001 I hadn't yet accumulated a large amount of assets, and the one in 2008 I avoided altogether by getting out of stocks in the Fall of 2007 as I was starting to plan to retire by 2011.
Their 4% rule relies on steady state growth but does not account for std deviation events like the one they are experiencing of a period of strong economic and investment growth. Their counterparts in 2008 were not so lucky
This is the advantage of retiring at 31 however. The 4% rules works, except when the std deviation event happens during the first years of retirement. But they are 31, if a 2008 event happens today, they rely on their savings for the time needed to get back to work, rebuild, and retire "early" again, just much later than 31. They have time to do that. If you are 65, you don't.
The longer you go without the negative std deviation event the more likely you will be able to maintain it in perpetuity.
But the math doesn't matter. FIRE isn't about retiring early as people have pointed out above with them writing books and writing blogs, etc. They are still (likely) making some money somewhere. FIRE and really the whole eliminating debt movement (see for example Dave Ramsey, of whom I'm an admirer) is about something else.
It's about the increased desire for flexibility. The ability to travel, to do what you want, to "work" from anywhere, to not be tied down like their parents. To not live in the fear of being foreclosed on. You can't build a business or paint or travel if you have to rely on W-2 income to feed yourself. Your employer expects you to show up on time.
The internet increases this desire for flexibility. You see every one else's highlight reel in social media, but you are stuck working in a cubicle in someone else's dream. In the distant past your social group was your immediate surroundings, the people you hung around the water cooler, and they were stuck in the same situation as you. The grass was greener on the other side, yes, but it was still in the same building or the same town. Not in Fiji traveling the world on a sailboat.
It doesn't help that they were sold a bill of goods by an educational establishment (sorry Professor) that they should study hard in the right schools so that they will have a "good job". And then they get in the work force and realize they don't actually want it (but are now stuck with paying for it).
As someone else pointed out the couple in the article don't have kids. Kids do change your risk perspective in a way, making it harder to retire early. Instead of focusing on long term risk you are focused on the immediate risk of parenting. Every parent wants to provide for their kids.
Social media doesn't help with parenting, either. Everybody's kid is a soccer star or concert pianist, so you sacrifice your long term dreams for immediate needs to provide for kids "necessities" (the $8k a year you spend on the cheer-leading team for your 6 year old --- "But, she'll get a scholarship to college!").
"too late for me to really take advantage of the idea (since I was already 41 and a tenured law professor)"
Then again, people with tenure don't have to retire to retire. Not saying that's what Althouse did.
if a 2008 event happens today, they rely on their savings for the time needed to get back to work, rebuild, and retire "early" again, just much later than 31. They have time to do that. If you are 65, you don't.
The longer you go without the negative std deviation event the more likely you will be able to maintain it in perpetuity.
If you're 65, hopefully you've managed to accumulate enough assets so it isn't the setback retiring by the skin of your teeth at 31 and trying to go back to work would be. It might be news to someone who is only 31 but there were times when reentering the workforce was a challenge for someone who'd been out of work for a few years. Thank you Donald Trump!
10% market corrections happen less than once every two years. 20% corrections happen less than once every five. Get one of those 20% corrections in your first few years of retirement and guess what? - your financial plan is shot and you're going back to work.
Funny how these enlightened financial gurus weren't talking about this stuff during the Obama years. I recall much agreement with the then President when he pontificated about how fortunate we all were we didn't invest our retirements in that 'risky' stock market. Like I said, these folks are lucky. Thanks Donald Trump!
your financial plan is shot and you're going back to work.
Not if you're living on dividends instead of cap gains. Though the near-total collapse of Wachovia made me ill for a month. Glad I'd taken it off dividend reinvestment in 97.
tcrosse wrote, Laborare est orare.
Arbeit macht frei.
Not if you're living on dividends instead of cap gains
How do you figure that?
If you'd been in BOA instead of Wachovia you would have lost not just significant principal but also most of your income- BOA stopped paying a meaningful dividend- all but .01 late in 2008 until 2014. Tax policy towards dividend income has also changed at both federal and state levels- government gets a bigger chunk. Did everyone plan for that? My point: dividends aren't foolproof either...
My 12-point plan for retiring early consists of:
1. Get sterilized ASAP and resolve never to have kids.
2. Use marriage as a weapon, marrying your partner and divorcing him/her for income tax minimization. You can manage to have up to 5 spouses in your life who on retirement all qualify for a gummint-paid share of your SS benefits.
3. Plan on dying broke.
4. Never leave anything to anyone in your will.
5. Never donate a kidney or blood; you owe it to yourself to find a market where you can sell them instead of enriching some physician or the gummint.
6. Reject all forms of insurance including Obamacare, Life insurance and Medicare parts B, C and D.
7. Live in Yuma, AZ, where you can regularly cross the border to Algodones for all your medical, dental and drug needs at very low cost.
8. Never work as an employee, but rather as a contractor with "no benefits" on a 1099, earning the usual 50% premium in exchange for all the forgone "benefits."
9. Max out your annual IRA or 401K contributions and invest all in an index fund and stop following the daily stock market.
10. Continue to buy ever nicer homes and improve them yourself so that you will realize no ordinary income taxes on sale, paying only low capital-gains taxes and avoiding FICA and ordinary income taxes on your labors altogether.
11. Quit work after 40 quarters, the minimum to qualify for full SS benefits in the future.
12. Learn Spanish while you're in Mexico to have your teeth cleaned, so you can easily enjoy retirement later in Cuenca, Ecuador on SS-benefit or other funds of as low as $700 per month.
From the post:
"Meanwhile, Leung opines: “[Donald] Trump’s rise to power was caused by economic fear, Brexit was caused by economic fear … If everybody was FI [financially independent], Trump wouldn’t have got elected.” I don't love that idea, because it's way too limited. If everyone were financially independent, everything would be different."
Sure it would. Until the socialists decided you were too successful and required you to share with those who were unable, or unwilling, to work.
"Why can't you be financially independent and work?" Exactly. I had the assets to retire at 49, but changed professions instead and worked at something I really loved for the next 15 years, which was also turned out to be something that I was good at and could build wealth doing. I retired from that job on February 28, 2009, or one week before the market bottomed out on March 9. I specifically picked that date because a) the CEO pissed me off and being truly financially independent, I could poke my finger in his eye on the way out, and b) although I had lost about 1/3 of my portfolio by the time the market bottomed, I knew a major rebound had to be right around the corner and I had enough cash to wait for it. In the event, I was whole again within 18 months and building wealth. An added benefit was a private equity firm had bought one of my erstwhile company's competitors and wanted to build the same type of capability at that competitor that I had built at my erstwhile company and asked me to consult for that purpose. As soon as my non compete was up, I stuck my finger in my erstwhile CEO's eye again by taking the consulting gig, reducing his competitor's manufacturing costs per piece by 25% and increasing his market share by double digits over the next three years. Then I quit for good at 68 and have been retired for six years, and probably for good since my wife is also now retired. The point is that I did what I wanted to do almost my entire working life and now that I'm not working I'm doing different things that I want to do, and I've got plenty of money to do it. I don't regret any of that and I don't get the rush to "retire" early in order to work odd jobs and pinch pennies for the next 50 years or so. I passed on that at 49.
If you'd been in BOA instead of Wachovia you would have lost not just significant principal but also most of your income
Wachovia's collapse would have been even worse if Wells Fargo hadn't made a much better offer than Citibank. Ten years later, my (inherited) stock and dividends are about a fifth of their peak and they've been flat for years. It was a well run bank (and the climbing price & dividends reflected that) until First Union bought it in the early aughts and they went higher risk. Wells Fargo has not impressed me either. My dad hadn't diversified enough and lost all of a yuge amount on margin calls, thanks to the step-monster squandering money for 20 years.
My point was that most dividends don't drop in a mere correction.
Try doing that in a socialist country.
Get one of those 20% corrections in your first few years of retirement and guess what? - your financial plan is shot and you're going back to work.
Right, which is harder to do at 65 than at 31.
For example, the couple in the article has invested $1M (Chinese, but whatever). You get a 20% correction 1 year after turning in your resignation. Boom its worth 800k. Bad juju.
Have to go back to work. But, it's hard to get a job after being out of the workforce for a year (2 years, 3 years, whatever). But they have a 800k nest egg! For that amount of money they can BUY a business debt free and work at it. Boom, they have a 800k "nest egg" in the form of a business(s), and a full time job. And the energy to do that full time job.
At 65 do you have that energy? Most people don't.
The faster you get at the number you need (What Bob Brinker calls "the land of critical mass") the better off you will be.
I have been retired since my late fifties, I am not going to give you a formula, but will hint that it involved a lot of work and some foolhardy risks. Anyway, my friends all look like they are going to be working until 70, which is depressing to me. I don’t get why you need work to be intellectually stimulated. I enjoyed my job, it was intellectually stimulating, but I brought my mind to my job, I didn’t find it there at my desk when I got there.
Not if you're living on dividends instead of cap gains
There's nothing "magical" about dividend yields versus cap gains returns. It's still a return. Dividends can be cut after all.
Dividends average just less than 2% a year for the S&P 500. All you are really saying is use a 2% withdrawal rate instead of 4%. Save 50 times your yearly expenses, not 25.
Another 5 years of working and that couple in the article would have been at that level too. The more you save the longer it will last. But they would have lost 5 years.
The only thing you can't get back is "time".
“Not spending is way more effective than making money.”
Not eating a donut is worth an hour on the treadmill, calorie wise, anyways.
I don’t get why you need work to be intellectually stimulated.
I used to think that I needed a job to be intellectually stimulated, but as I get older I know there are lots of other things that will intellectually stimulate without having to work a 40 hour work week.
Part of the drive for people to retire at 65 is because of Social Security. And that a lot of people's net worth is tied up in retirement accounts that they can't get at before 60. As a Gen-Xer I never figured social security would be there for me. As my grandfather used to complain to me when I first started working: "Social Security needs to be increased, it barely covers my country club dues!". That's when I knew it was a ponzi scheme.
All the more reason to invest outside of your 401(k).
Leung is wrong. Trump's rise to power was not due to "economic fear," it was due to the fact that his opponent was a corrupt criminal who would have sold out our country to the highest bidder. I was "Anbody But Hillary" and Trump was the Anybody. I didn't know if he'd be a good president or not, but I knew that Hillary would be the wrecking ball to complete the destruction of our country. I took a chance on Trump and was pleasantly surprised at the results. No regrets, and I'll happily vote to help re-elect him next year.
Can somebody explain to me why people who are being screwed over by trends in the national economy that have been aided and abetted by the government shouldn’t vote against those policies?
“Economic fear”? It’s just the way a person who is trying to screw you describes your rational self interest. When the worshipped leader of one party writes you off with the phrase “I don’t have a magic wand,” it only makes sense to take flier on somebody who hasn’t given up on you.
You have one party calling you deplorable white trash and another respecting your contributions to America, who do you vote for, assuming you are not a masochist?
“As a Gen-Xer I never figured social security would be there for me. “
What they might do, and maybe they won’t, is basically make it needs based, which is just another way of saying they are going to pay you out of your own 401K and pay others out of the taxes you paid in.
If you want to retire in your early 50s (I realize that's not what the article is about) do this: become a school teacher or municipal bus driver when you leave college, put in your 30 years, and retire in style, thanks to public sector unions.
We are all dependent on each other. Unless we just melt away into the woods and start killing animals and wearing their skins and eating their meat we are dependent on each other. Total Financial Independence is a mirage but it can be a very pleasant one
All these articles with people under 40 have a common theme. No kids.
This is a dead end “movement”. Literally.
That said I’m 90% of the way to retiring before 50 with 3 kids in the Bay Area.
A mentor gave me Napoleon(!) Hill's book "Think and Grow Rich". Very good for building positive drive/ambition.
Right, which is harder to do at 65 than at 31.
If you’re 31, have been out of work- nay, retired- and you’re looking for work because your equity investments tanked because of a medium sized recession, finding work could be VERY tough at 31, too.
The supply of jobs is cyclical, too. How competitive is your CV if you were say in your early thirties and ‘retired’?
The number's gotta be closer to US$3 million in various assets excess to the house to retire at 60, and scrounge. It's US$ 10 million to have services and travel without using hostels. At thirty, the analysis requires adding in two financial crises - based on odds of Democrats getting Congress twice during 60 years - and the backup needs two backups. That ain't "low risk" ETFs that will implode when the gamblers rush for the doors.
In fairness, kids represent a potential income source if properly raised, instead of bossy brats telling you all the time where to live and how to use your funds as they plan to get some residual loot.
If you’re 31, have been out of work- nay, retired- and you’re looking for work because your equity investments tanked because of a medium sized recession, finding work could be VERY tough at 31, too.
I call BS. As the article points out they have a MILLION dollars! If their equity "tanks" (20%? loss) they still have 800k! They can't buy a plumbing business for 800k and make 5%?
Experiencing a medium sized recession in the first years of retirement means that they will have to recoup their losses in some way, but it's not immediate. They don't have to run out and get a job. They won't starve all of a sudden on 4% of 800k! Let's say instead of buying a business and employing themselves, both of them go out and get 10k a year part time jobs. Now their investments only need to get 20k a year to make up the shortfall. And someone that has the life skills to save a million dollars can certainly tell a life story to get a part time 10k a year job.
Is it retirement? No, since they are working, even part time. But all hope is not lost. They aren't starving. A couple years ago by. Their investments recover and because they were only taking out 2% instead of 4% they didn't "lose" anything... but their time. Back to retirement they go.
Early in the retirement is the BEST time for them to be be able to get a job. They still have contacts, skills are still relevant, etc. Again they don't have to get a job tomorrow. They can live for 20 years on the money they have left even AFTER the loss.
Can they get 100k a year job the day after a 20% tank in the market? No, probably not. But they don't NEED that as they've already calculated. They calculated their costs at 40k. You may argue that that is too small, but as the article points out they already did that research and that was their number.
25 times your annual expenses gives you a lot of options.
The number's gotta be closer to US$3 million in various assets excess to the house to retire at 60, and scrounge. It's US$ 10 million to have services and travel without using hostels. At thirty, the analysis requires adding in two financial crises - based on odds of Democrats getting Congress twice during 60 years - and the backup needs two backups.
Median household income in the US is 59k. 4% rule would say you need 1.5 Mill. 3 million would be 50 times income or 2%. There's probably a safe number somewhere in that range.
You won't ever starve.
Note you don't need a house to retire. If I had retired at 30 I certainly wouldn't have bought a house. Might as well have a job.
4% rules only mean anything if you want to leave things to your heirs.
At a point, let's say 75, where you can safely withdraw 5-6% and growing. Or buy an annuity. Because the odds of you making it to 100 are not good.
Basically you need 3 buckets of funds.
1) the near term funds. count backward from 60. Annual expenses multiple by those years. Can't take much risk with these, this is where you should not count on more than 4% return (ie. tax free muni's)
2) the medium term funds. Tax advantaged accounts. Your IRAs/401 that you can withdraw at 59.5. This needs to last from 60-75 or so. but if you're retiring at 30-50, you can invest these a bit more aggressively so you don't "need" as much.
3) Asset consumption phase. 75+, you need no more than 20 (being optimistic) years worth of assets.
invest accordingly.
oh. forgot 1) rental real estate that's cash flow positive is a good personal pension plan.
Using a percentage of median income rule of thumb does nothing to address ever increasing costs. There is too much certainty purported to be expressed in what is unmoored shorthand financial planning mumbo jumbo. The rent and taxes and inflation and groceries costs are too damn high and going ever higher as a matter of official policy, until the wheels fully come off after the next huge serial failure and confiscation or two.
Uh, kids?
That's what they left out of their essay.
Uh, kids?
That's what they left out of their essay.
I covered that above. It's all about choice.
There are families though that are "retired" and sailing the world for example. With kids. It's not a extravagant, but their kids are seeing things a vast majority won't ever.
It can be done.
I call BS. As the article points out they have a MILLION dollars
The couple not only reportedly has a million dollars they also have JOBS! A blog and income steam from two books, I believe. The problem is what they and the ‘movement’ are advocating- Putting together a thin nest egg using a skimpy rule that’s supposed to get you through several decades of economic peaks and troughs, lifestyle changes, health challenges...not to mention the possibility of family growth. It’s BS, and it isn’t new. Same crap what shows up every decade or so.
There’s a great deal of innumeracy going on with the assumptions about investment returns, inflation expectations, living expenses and the time value of money. Expected needs are unrealistically small and return expectations are overly optimistic. We just came through a lost decade of equity returns - zero. Ten years. While you would have been drawing down principal.
Hope you like top ramen.
US$ 3 million throws off only around $63k per annum, at a 3% yield ($90 k gross income) and 30% tax drag. 3% return without eating principal is highish in a zirp and nirp world as far as the eye can see. Average rent in LA for a 78 square meter space (that's freaking small!) but not clear how dodgy the average neighborhood is, is reportedly $2300 per month, up 6% YOY from last year. That's half the income gone on a second rate one bedroom apartment.
They’re not contributing to SS if they’re retired. Was this covered?
A nursing home will suck up a lot of money fast. Medicare will be more expensive for people with more than SS.
There are a lot of cheaper places in the country than LA.
$63K is higher than the median income in most. And without kids, it's easy to live on. It's not a luxury life but solidly middle class.
Also $3M invested into a couple 16 unit apartment buildings (one just sold for example in Madison for $1.45M), will yield around $300k gross, 180k or so net. and you get to raise the rents (your income) with inflation.
think outside of the zirp box.
at one point, her job made her so miserable she was on anxiety and depression medication
Wow, a 30 year old burnout.
There are certainly some people who can live this way -- you hear about investment bankers or biglaw associates who hate their lives but dream of retiring by 30 -- but it's important to realize that not everybody can pull this off. Much better to find a job you enjoy and put off retirement until, I don't know, 35?
Even someone with ONE MEELYON DOLLARS! is not looking at a very luxurious retirement if they start drawing it down at age 30.
A 50 year annuity (takes you to age 80) at 4% interest and $1 million starting balance pays out $3844.25 per month. Call it $45,000 a year. If that's all you need to live on, you don't need to be working the kind of high stress job that puts you on anxiety and depression medicine.
In other words, "retire" and become a bird-dogging multifamily real estate investor and landlord in some far flung locale. That is outside of the box. And so simple.
Is referral to median income not an assumption that the person planning to retire is planning in part to be a deadbeat?
These are people living with a leaky bucket, assuming the bucket will never run dry.
These are people living with a leaky bucket, assuming the bucket will never run dry.
They are buying TIME with their decisions! And freedom. It's not without risk as they admit in the article. And as has been pointed out they still "work". They just don't have JOBS.
What is the value of time? Once spent it cannot be bought again.
I'm not saying I advocate retiring at 31, I certainly didn't. I'm pushing 50 and still collect 24 pay checks a year. I'm saying that there is a kernel of truth to what the article details. People don't need as much as they think they do:
You don't need to:
1. Live in that high tax state
2. Live in that big house
3. Drive that expensive (new?) car
4. Eat at expensive restaurants
5. Drink that coffee
The median income in the US is 59k/year. Half of people in the US live and survive and (some) thrive on less than that.
And saving money is a good thing. But dying rich (especially with no heirs) is a shame.
For us mere mortals..
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