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I understand the attraction for "Financial Independence" and retiring early, but how do you plan on handling health insurance? Medicare doesn't kick in until 65, and if you have a huge amount of money needed to retire early you will not qualify for subsidies. Not to mention if dependents, god forbid, have some horrible disease or condition. I think Early retirement is a "Tiny House" kind of dream. Great on paper, but not realistic.
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Jan 7, 2017 03:32
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Pompous Rhombus posted:OK, cya I mean I will if you insist but a simple conversation about how big of an account people need vs how much they plan to withdraw seems like a pretty valid discussion
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Jan 7, 2017 03:32
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kys posted:I understand the attraction for "Financial Independence" and retiring early, but how do you plan on handling health insurance? Medicare doesn't kick in until 65, and if you have a huge amount of money needed to retire early you will not qualify for subsidies. Not to mention if dependents, god forbid, have some horrible disease or condition. I think Early retirement is a "Tiny House" kind of dream. Great on paper, but not realistic. Careful, you seem to be posting badly, like me! One of us! One of us!
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Jan 7, 2017 03:34
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kys posted:I understand the attraction for "Financial Independence" and retiring early, but how do you plan on handling health insurance? Medicare doesn't kick in until 65, and if you have a huge amount of money needed to retire early you will not qualify for subsidies. Not to mention if dependents, god forbid, have some horrible disease or condition. I think Early retirement is a "Tiny House" kind of dream. Great on paper, but not realistic. For the last 8 years it has been easy to get subsidies and insurance on the ACA exchanges. As a couple you only needed an MAGI under $60k or so to qualify for some subsidies... you could have $2,000,000 in taxable stock investments and still not get $60k in dividends, and all of your tax sheltered money wouldn't count either. Hard to say what will happen now with Trump and Ryan, but presumably people will go back to buying it privately from insurance companies.
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Jan 7, 2017 03:35
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Droo posted:The origin of the "4% rule" was based on a high likelihood of not completely running out of money within 30 years when looking at a portfolio of US investments. I consider it optimistic for a 25 year old because 30 years is not long enough, and in my opinion it is unrealistic to expect global returns over the next 200 years to look like they did over the last 200 years in the United States. Yeah, I strongly disagree with this. Early retirement people typically seem pretty risk adverse, but isn't it interesting that the super stars of this world tend more towards risk-taking? You can play it as safe as you want, but if your budget has flexibility and you're planning on working even a little bit, the 4% rule becomes a bit conservative unless you assume economic ruin on a scale never seen before in the US.
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Jan 7, 2017 03:36
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baquerd posted:Yeah, I strongly disagree with this. Early retirement people typically seem pretty risk adverse, but isn't it interesting that the super stars of this world tend more towards risk-taking? You can play it as safe as you want, but if your budget has flexibility and you're planning on working even a little bit, the 4% rule becomes a bit conservative unless you assume economic ruin on a scale never seen before in the US. You said yourself that the 4% rule failed 18% of the time in the backtesting over a 50 year period.. so I'm not sure why you think it's never happened before. baquerd posted:Historically, following this exact protocol, a blended 75/25 stocks/bonds portfolio has a success rate of 95% over 30 years and 82% over 50 years.
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Jan 7, 2017 03:38
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Droo posted:You said yourself that the 4% rule failed 18% of the time in the backtesting over a 50 year period.. so I'm not sure why you think it's never happened before. Because the 4% rule is based on you acting like a lemming and never adjusting spending or finding a source of income. Retirement isn't video games and smoking pot 24/7, people who are driven to save this way typically don't go for that sort of thing.
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Jan 7, 2017 03:40
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kys posted:I understand the attraction for "Financial Independence" and retiring early, but how do you plan on handling health insurance? Medicare doesn't kick in until 65, and if you have a huge amount of money needed to retire early you will not qualify for subsidies. Not to mention if dependents, god forbid, have some horrible disease or condition. I think Early retirement is a "Tiny House" kind of dream. Great on paper, but not realistic. I married a Canadian and am applying for residency.
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Jan 7, 2017 03:44
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baquerd posted:Because the 4% rule is based on you acting like a lemming and never adjusting spending or finding a source of income. Retirement isn't video games and smoking pot 24/7, people who are driven to save this way typically don't go for that sort of thing. I think you should really read some early retirement boards.. I'm not sure the average person who does it is fits this profile you seem to have in your mind. And most of them are realistic enough to know that it is going to be very hard to find a job as a 60 year old who hasn't had a job in 10 years, and they want to make sure they don't end up in that situation due to events beyond their control. As far as the idea of variable spending year to year, that is a more valid point and the common belief is you can buff your withdrawals by about a percent a year if you are willing to adjust your spending every year. So people used to talk about 4% fixed/5% variable, and I would agree that 3% fixed/4% variable is probably a safe enough strategy going forward. But in this case we were talking about someone thinking of living on $2000/month... I'm not sure how much room he had to reduce his spending to compensate for a market crash if one occurred.
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Jan 7, 2017 03:46
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VendaGoat posted:You want to be retired and do basically gently caress all for 36 years of your life? If you live to the average of 71. It could be much longer then that. kys posted:I understand the attraction for "Financial Independence" and retiring early, but how do you plan on handling health insurance? Medicare doesn't kick in until 65, and if you have a huge amount of money needed to retire early you will not qualify for subsidies. Not to mention if dependents, god forbid, have some horrible disease or condition. I think Early retirement is a "Tiny House" kind of dream. Great on paper, but not realistic. Droo posted:But in this case we were talking about someone thinking of living on $2000/month... I'm not sure how much room he had to reduce his spending to compensate for a market crash if one occurred. $/month | $/year |||| Required Savings $2,000 |||| $24,000 | $600,000 $2,500 |||| $30,000 | $750,000 $3,000 |||| $36,000 | $900,000 $3,500 |||| $42,000 | $1,050,000 $4,000 |||| $48,000 | $1,200,000 $4,500 |||| $54,000 | $1,350,000 I was mostly just curious if these numbers were really conservative, really aggressive, or somewhere in the middle. And if anyone had other opinions as to what the required savings number should look like depending on how much you plan to withdraw per month during retirement. Blinky2099 fucked around with this message at 04:03 on Jan 7, 2017 |
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Jan 7, 2017 03:57
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There are ways to secure lifelong health insurance. You can keep Tricare health care after only twenty years in the military. I joined the military at 18, so I could've had lifelong health care after 38, plus a pension. The Federal government also provides lifelong health insurance in retirement. Living overseas may be necessary for lower health care costs as well.
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Jan 7, 2017 04:03
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Droo posted:I think you should really read some early retirement boards.. I'm not sure the average person who does it is fits this profile you seem to have in your mind. And most of them are realistic enough to know that it is going to be very hard to find a job as a 60 year old who hasn't had a job in 10 years, and they want to make sure they don't end up in that situation due to events beyond their control. Well, I'm FI and have cut back hours and am about to "retire" while doing various things I feel like doing for very modest income. I guess we don't read the same boards, because I've seen that poo poo on ERE and perhaps a touch of it here and there elsewhere, but most of what I'm reading is far more optimistic. If you "retire" and gently caress off and don't keep working for 20 years and don't keep monitoring your poo poo, yeah, you might have some problems. If you "retire" and work part-time in various ways, perhaps start your own business, your investments do better than the worst possible case scenario, etc. well, it's a different story. Your point is taken though on someone planning on doing this on $2k a month, that's going to take a special level of dedication to maintain for someone with earning power.
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Jan 7, 2017 04:05
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Blinky2099 posted:no i dont want to sit on my rear end for 36 years and i dont really get why you think that, that's not really what FI is about. It'd be nice to switch to learning some other skills, potentially on zero income for god knows how long, or very little income. At least have the option. What's a better alternative than that exactly? Buying a huge house? Well, now that's a much different version of your initial statement, isn't it? You also stated it in a much different tone. The answer is it depends on what you want? You're 25 years old, you could find a partner tomorrow, fall madly in love and change absolutely everything about the plan you currently have. You could fall down a set of stairs and become paralyzed. Then on top of it, in just the most base monetary sense, you have to decide how much is "enough". So, what do you want to do with your life? I'd worry more about answering that question, at your age, then how much money do I need to be beholden to no one. But, what do I know? I'm just a pile of poo poo, in your opinion.
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Jan 7, 2017 04:06
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I think 4% is really optimistic. Success rates in most non-US countries have been far lower.
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Jan 7, 2017 04:13
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Blinky2099 posted:I was mostly just curious if these numbers were really conservative, really aggressive, or somewhere in the middle. And if anyone had other opinions as to what the required savings number should look like depending on how much you plan to withdraw per month during retirement. Here is a poll and discussion. I put their data into excel and came up with an overall average of 3.7% as the highest SWR people were comfortable with. The average age over there is a lot higher than 25 though.. probably closer to 50/60. http://www.early-retirement.org/forums/f28/whats-the-highest-swr-youre-comfortable-with-48616.html
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Jan 7, 2017 04:14
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Droo posted:Here is a poll and discussion. I put their data into excel and came up with an overall average of 3.7% as the highest SWR people were comfortable with. The average age over there is a lot higher than 25 though.. probably closer to 50/60. One thing I wonder if we're not connecting on is the meaning of SWR? If your SWR is based on desired/ideal income, you would have a very different outcome than if your SWR is based on bare-bones income (I'm using the former).
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Jan 7, 2017 04:19
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Droo posted:Here is a poll and discussion. I put their data into excel and came up with an overall average of 3.7% as the highest SWR people were comfortable with. The average age over there is a lot higher than 25 though.. probably closer to 50/60.  (numbers above are at 3% withdrawal rate) as a much more conservative number, or like 3.5% as a slight risk perhaps. although I still don't get why people are uncomfortable with 4% if there's supposedly a 95%+ chance of success even with 0 income and 0 adjustments to income during market drops but I admittedly dont understand the assumptions in those either
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Jan 7, 2017 04:21
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baquerd posted:One thing I wonder if we're not connecting on is the meaning of SWR? If your SWR is based on desired/ideal income, you would have a very different outcome than if your SWR is based on bare-bones income (I'm using the former). I think we aren't connecting because your definition of retirement seems to include continuing to work for additional income.
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Jan 7, 2017 04:22
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Blinky2099 posted:as a much more conservative number, or like 3.5% as a slight risk perhaps. although I still don't get why people are uncomfortable with 4% if there's supposedly a 95%+ chance of success even with 0 income and 0 adjustments to income during market drops but I admittedly dont understand the assumptions in those either Over the last 200 years, in the United States, there was a 95% chance of not completely running out of money, in a 30 year period.
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Jan 7, 2017 04:23
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Droo posted:I think we aren't connecting because your definition of retirement seems to include continuing to work for additional income. "Retirement" is in quotes in my comments so often because this is the "Financial Independence" thread. Being FI is much more about having sufficient assets that you can walk away from bad life situations with an overwhelming safety net, not necessarily that you could in 100% of scenarios always be able to never have to generate any income ever again.
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Jan 7, 2017 04:25
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baquerd posted:"Retirement" is in quotes in my comments so often because this is the "Financial Independence" thread. Being FI is much more about having sufficient assets that you can walk away from bad life situations with an overwhelming safety net, not necessarily that you could in 100% of scenarios always be able to never have to generate any income ever again. Frame this.
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Jan 7, 2017 04:27
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kys posted:There are ways to secure lifelong health insurance. You can keep Tricare health care after only twenty years in the military. I joined the military at 18, so I could've had lifelong health care after 38, plus a pension. I'm not US military, but this a large chunk of what I'm planning around. If I can pull off a 50k pension, a mill in (mostly) tax advantaged investment accounts, and cheap family healthcare I should be able to #yolo by 50. e. quote:frame this I think he's speaking in general terms about the utility of '"gently caress you" money'. Guest2553 fucked around with this message at 04:35 on Jan 7, 2017 |
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Jan 7, 2017 04:33
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Guest2553 posted:I think he's speaking in general terms about the utility of '"gently caress you" money'. Yes.
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Jan 7, 2017 04:58
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Droo posted:Over the last 200 years, in the United States, there was a 95% chance of not completely running out of money, in a 30 year period. it sounds like no one is ever gonna agree to a safe ish number so I'll just aim for being conservative and quit around 3 to 3.5% withdrawal equivalent thanks for the posts
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Jan 7, 2017 05:49
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Blinky2099 posted:OK yeah, 200 years in one of the highest returning markets in the world seems like a tiny sample size and pretty risky assumption to make. I read on MMM the other day that if your plan is 4% withdrawal rate in years when your stash is >= your starting balance and 3.3% on years when your portfolio drops below your starting balance then you would have never run out of money (based on historical data) on any 20-100 year length retirements. I think having some things in mind you can do to cut back (or temporary work you can pick up) in years when the market drops considerable amounts means you'll be absolutely fine unless asteroid/climate change. I did like using the starting balance as a reference point, I thought it was a great system and I'll be working that into my plans. Chadzok fucked around with this message at 09:12 on Jan 7, 2017 |
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Jan 7, 2017 09:10
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Chadzok posted:I read on MMM the other day that if your plan is 4% withdrawal rate in years when your stash is >= your starting balance and 3.3% on years when your portfolio drops below your starting balance then you would have never run out of money (based on historical data) on any 20-100 year length retirements. Yeah but MMM isn't exactly the most rigorous data guy, that's probably US only data, and backtesting tells us what would have worked not would work. There's nothing magic about 3.3% except someone played around in Excel until the numbers at the end came out > 0. This paper has numbers on how successful the 4% rule is in other countries, in France the success rate (meaning you don't run out of money in 30 years) is more like 40%. It also reminds me a bit of one variable withdrawal method I saw which promised that you "never would have run out of money" in a 30 year period (backtesting of course); I tried plugging in some numbers to see how bad it got and someone retiring in the mid-late '60s would have seen their annual withdrawals drop 30% during the '70s when inflation was raging, you wouldn't even have been able to afford gas on the days you could buy it.
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Jan 7, 2017 09:27
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Chadzok posted:I read on MMM the other day that if your plan is 4% withdrawal rate in years when your stash is >= your starting balance and 3.3% on years when your portfolio drops below your starting balance then you would have never run out of money (based on historical data) on any 20-100 year length retirements. Ralith fucked around with this message at 09:47 on Jan 7, 2017 |
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Jan 7, 2017 09:45
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VendaGoat posted:Calm the gently caress down and live your drat life for a little while. Putting off saving for investments to your 30's is actually really loving stupid due to how compound return works out, FI or not.
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Jan 7, 2017 11:16
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Has anyone (in this thread) looked in detail at the failure cases? If I remember correctly are most of them not based around terrible market conditions in the first few years? Ie the time it is easiest for you to mitigate by contined earning of an income.
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Jan 7, 2017 11:49
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Has anyone really thought about what the OP is doing here? In my opinion, he's looking for motivation. Why not be as optimistic as possible when trying to motivate yourself? 4%, 3%, asteroid, climate change. Who gives a poo poo. At 25, you should be concerned with one thing and one thing only - saving as much as loving possible without sacrificing more quality of life than you're comfortable with. The only day that any of the withdrawal rate concerns really matter is the day you decide to make a serious career change on the basis of an assumed SWR. Until then, one thing can be said for sure, which is that you're going to be much better off if you start saving a ton of money at 25 than putting it off a few years to "live" because you didn't think you could handle a 3.5% withdrawal rate versus 4%, or the idea that you might need to earn a little income to ride through some down years. I'm 28. I have no idea if I'll ever retire fully, but I will have more options than if I weren't saving. That's all that I can expect. I don't concern myself with much else at this point. Optimistic numbers got me started and motivated early, and now that I've banked a pretty significant sum for my age, the motivation is built in. Rick Rickshaw fucked around with this message at 14:25 on Jan 7, 2017 |
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Jan 7, 2017 14:22
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Cast_No_Shadow posted:Has anyone (in this thread) looked in detail at the failure cases? If I remember correctly are most of them not based around terrible market conditions in the first few years? Ie the time it is easiest for you to mitigate by contined earning of an income. Yes, sequence of returns risk, as it is known, is hugely prevalent with failure modes.
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Jan 7, 2017 15:04
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Blinky2099 posted:it sounds like no one is ever gonna agree to a safe ish number so I'll just aim for being conservative and quit around 3 to 3.5% withdrawal equivalent
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Jan 7, 2017 17:31
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You can use firecalc to play what-if scenarios all day. None of it matters until you are 90% of the way there. One you are theoretically ready in the next two years, that is when you start doing calculations and planning.
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Jan 7, 2017 17:45
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Blinky2099 posted:I don't really want to talk personal finances but I think I can retire by 35 at the latest. if I marry someone who insists on a million dollar house I hope the bwm thread shames me for the rest of my life. http://firecalc.org should give you another estimation option. The website explains how it works better than I can, but basically it uses the historical data on as the simulation data going forward, and runs your number through every historic market and plots them on a graph. It gives you an 82% chance of success with $600k plan for 60 years, by the way. Edit: ^ beaten
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Jan 7, 2017 17:48
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If you're single and not living in an expensive area I don't think $24k/yr is that low. Especially because not working can save you a ton of money, because you can do stuff like maintenance and cooking on your own instead of paying someone or eating out. I spend less than that and still have nice stuff, a decent used car, go on a couple vacations every year and take the girlfriend out to eat every once in a while. Granted I get health insurance through work, not sure how much that would be if I had to buy it myself.
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Jan 7, 2017 18:19
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High deductible health insurance isn't that expensive right now, though i don't know how that will change by time my body starts falling apart and i start needing expensive things.
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Jan 7, 2017 18:30
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MiddleOne posted:Putting off saving for investments to your 30's is actually really loving stupid due to how compound return works out, FI or not. Well, that's an extreme way of taking what I said. Thank you for your radical opinion!
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Jan 7, 2017 18:34
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VendaGoat posted:Well, that's an extreme way of taking what I said. Thank you for your radical opinion! How about this as a more reasonable way: I started saving in my 20s, maxing out my IRA/401k, and as of a few years ago, I could stop saving for retirement entirely and still have a very nice nest egg at a normal retirement age. If I was still in my 20s and saw how much I had saved, I might think "hey that's enough to retire" but once you get old, your tastes change and also you might not enjoy sleeping in hostels or in tents to cut down on travel costs (or might not be able to, thanks sleep apnea.) Reading posts of MMM groupies, I'm reminded of dotcom stock day traders in the '90s and house flippers in the '00s. I don't think it's as easy as they think it is, and a lot of it is based on recent stock market returns which have been stellar since 2009; some of them were freaking out at the beginning of 2016 which they thought was a bear market  They think stock market declines are all like Brexit where it goes down for a few days and then goes right back up again. There is going to be a rude awakening at some point.
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Jan 7, 2017 18:42
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MMM's entire schtick is making due with less and putting the difference into saving for the future. Suddenly deciding to live lavishly to the detriment of your future is not really within that mindset. If that happens it'll likely happen early. After a year or two of being below projected, no one is going to slide into debt. They'll tighten their belt, stop lavish spending, or do some part time work All of this is assuming there's no additional income from hobbies ever, which is clearly not the case in a majority of people. Bhodi fucked around with this message at 18:56 on Jan 7, 2017 |
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Jan 7, 2017 18:54
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Oh my god! Opinions that aren't knee jerk over reactions! Well thought out opinions with a dash of life experience. Actual knowledge and understanding. Wait, Wait, No not yet. UNNNNNNNNNNNGGGGGGGGGGGGGHHHHHHHHHH! 
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