Register a SA Forums Account here!
JOINING THE SA FORUMS WILL REMOVE THIS BIG AD, THE ANNOYING UNDERLINED ADS, AND STUPID INTERSTITIAL ADS!!!

You can: log in, read the tech support FAQ, or request your lost password. This dumb message (and those ads) will appear on every screen until you register! Get rid of this crap by registering your own SA Forums Account and joining roughly 150,000 Goons, for the one-time price of $9.95! We charge money because it costs us money per month for bills, and since we don't believe in showing ads to our users, we try to make the money back through forum registrations.
 
  • Post
  • Reply
Cicero
Dec 17, 2003

Jumpjet, melta, jumpjet. Repeat for ten minutes or until victory is assured.

Sundae posted:

I'd like to point out that he refers to a $10,000 deductible + 20% copay up to 12K limit (meaning $22,000 in a year) as "very manageable" in spite of $22,000 being more than the full annual budgets his example people use. Furthermore, he refers to a $7500 deductible as a Cadillac plan in spite of that being horrible insurance as well. If you're going to predict retirement health cost requirements, you have to assume worst-case scenarios, not best-case (never using the worst, cheapest catastrophic insurance you can find). You have to assume that health care utilization will occur on a yearly basis, and possibly on a more than yearly basis as you get older.
In order to be financially independent, you have to have a huge bank to begin with, so $22,000, while not trivial, isn't an enormous hit either. Planning to hit that every year for thirty years seems like kind of a ridiculous worst-case scenario to plan for to me, equivalent to "well what if you get struck by lightning??". What percentage of physically fit people who don't have dangerous/very physically demanding jobs end up in this situation? Additionally, if you got hit with something that bad off and you were employed, wouldn't you likely lose your job anyway?

quote:

Furthermore, he still didn't address pre-existing conditions or the fact that they tend to add orders of magnitude to the costs of insurance. I wasn't kidding with my quote on what I was paying when I was self-employed.
I thought Obamacare removed the ability to discriminate based on pre-existing conditions?

Basically yeah, if you ended up with some horrible chronic and expensive condition, then worst case scenario, you or your spouse may need to go back to work.

Cicero fucked around with this message at 19:32 on Jul 18, 2013

Adbot
ADBOT LOVES YOU

Harry
Jun 13, 2003

I do solemnly swear that in the year 2015 I will theorycraft my wallet as well as my WoW

Cicero posted:

How does admitting that plans will run from around $350-$600 only 'enforce' (reinforce?) your point that those plans will be one to two thousand dollars? I too believe that when my numbers are off by a factor of 3, that only reinforces them.

Additionally, part of financial independence is usually living in a low cost-of-living area. People aiming for FI are generally willing to move somewhere where costs are cheap, and healthcare is one of those costs; apparently your area is expensive for that, so it'd be something to keep in mind and factor in.

Lastly, yeah runaway medical inflation is a problem, but I think it's one mostly orthogonal to financial independence. 12% obviously can't be sustained forever, another decade and that would have healthcare costs at over half of GDP.

Should be reinforce, phone doesn't know best. Anyway, these were flyby quotes from a website for only 2 people. Even under some dream scenario where you're only paying $380 a month at age 60, you will still be incuring a ton of medical costs from medication and any doctors visit.

Cicero
Dec 17, 2003

Jumpjet, melta, jumpjet. Repeat for ten minutes or until victory is assured.

Harry posted:

Should be reinforce, phone doesn't know best. Anyway, these were flyby quotes from a website for only 2 people. Even under some dream scenario where you're only paying $380 a month at age 60, you will still be incuring a ton of medical costs from medication and any doctors visit.
Old people can have lots of medications, so this is certainly possible, but then again if you only have a few years left until medicare + social security kicks in, you can afford to dip into your principal. After that point, you're in the same position as other retirees, except that you've probably saved up way way more than almost all of them:

quote:

According to a 2012 study, the amount of money singles in their late 60s have saved for retirement is overwhelmingly less than that of married couples. The study found that the median married household had saved up nearly 10 times more for retirement in 2008 than the median single-person household, or $111,600 compared with $12,500.
http://www.huffingtonpost.com/2013/05/02/retirement-planning-single-retirees-save-less_n_3194912.html

Demented Guy
Apr 22, 2010

IF YOU ARE READING THIS IN AN NBA THREAD, LOOK TO YOUR RIGHT TO SEE MY EXPLETIVE RIDDEN, NONSENSICAL POST OF UTTER BULLSHIT
$111,600 and $12,000 at age 60. drat that's depressing. :smith:

hitension
Feb 14, 2005


Hey guys, I learned Chinese so that I can write shame in another language
For health care, couldn't you just move to Massachusetts, Hawaii, or any other country that provides health care or has it for a cheaper cost(i.e., almost all of them)?

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!
Realistically, everyone is probably planning on being financially independent at some point. It's a really, really smart idea to choose an age and target it rather than just sort of, I don't know, work until you fall apart and let the chips lie where they fall.

Slow News Day
Jul 4, 2007

Cicero posted:

In order to be financially independent, you have to have a huge bank to begin with, so $22,000, while not trivial, isn't an enormous hit either. Planning to hit that every year for thirty years seems like kind of a ridiculous worst-case scenario to plan for to me, equivalent to "well what if you get struck by lightning??". What percentage of physically fit people who don't have dangerous/very physically demanding jobs end up in this situation?

I think this is worth stressing. Nobody picks their car insurance plan based on the worst-case scenario. Most people I know carefully assess their risks as well as other factors such as the value of their car before deciding on a plan that makes sense. Health insurance works the same way.

Furthermore, people who are financially independent rarely pick jobs where they sit in front of a computer for 8-12 hours a day, and they tend to have significantly more time to exercise and cook their own (healthier) food. Therefore they are much less likely to need expensive healthcare.

moana
Jun 18, 2005

one of the more intellectual satire communities on the web

No Wave posted:

Okay - are you trying to say that financial independence doesn't work? Because it does, for many people.

I mean, to get caught up in health care etc. is missing the point.
I disagree - health issues seem like the biggest possibility for loving up plans for financial independence, so it makes sense to scrutinize that area to see if there's any way to avoid undue risk. I always want to hope for the best, plan for the worst.

I'm not far away from being financially independent, and I could probably quit my day job tomorrow and be totally okay taking care of myself and my significant other with savings and scaling up my side income that I do for fun. But I don't want to expect the best case and end up royally screwed if something happens. I want to have a buffer, and where I get concerned is figuring out how big that buffer has to be.

If I ended up having a child with special needs that needs tons of medical care and special schooling, I don't want to have to try to rejoin the workforce after 5-10 years of "unemployment" because my $500k nest egg won't carry my family through. I think it makes sense to consider these kinds of scenarios just in case. That's one of the reasons I wouldn't consider 'retiring' before I had kids, because there's so much risk that goes along with it. To consider the possibility that your kid is born with special needs is not at all the same as to assume lightning will strike you.

It seems like a lot of people who talk about their ER nest egg being easy to calculate are young single males who either don't want kids or aren't thinking about the problems they could have later on in life. That MMM guy not buying his daughter braces? Yeah, I'm not going to do that to my kids. Moving to a different state for tax/healthcare reasons? Are you loving kidding me? My friends and family are here, I'm not moving to bumfuck, Ohio so I can live cheaply. To me these are ridiculous solutions. I hope that this thread can help me find a nest egg figure to shoot for realistically so I have an excellent buffer that protects against the worst case scenario, not just a figure that lets me retire as quickly as possible.

Cicero
Dec 17, 2003

Jumpjet, melta, jumpjet. Repeat for ten minutes or until victory is assured.

moana posted:

I disagree - health issues seem like the biggest possibility for loving up plans for financial independence, so it makes sense to scrutinize that area to see if there's any way to avoid undue risk. I always want to hope for the best, plan for the worst.
Sure, but which worst? Like, nobody would seriously plan for, "But what if my spouse gets MS, all of my kids turn out to be special needs, I get hit by a car once every five years, and the US erupts into violent civil war??" You need to draw the line at some level of probability.

quote:

If I ended up having a child with special needs that needs tons of medical care and special schooling, I don't want to have to try to rejoin the workforce after 5-10 years of "unemployment" because my $500k nest egg won't carry my family through. I think it makes sense to consider these kinds of scenarios just in case. That's one of the reasons I wouldn't consider 'retiring' before I had kids, because there's so much risk that goes along with it. To consider the possibility that your kid is born with special needs is not at all the same as to assume lightning will strike you.
One is much more likely, sure. I brought up lightning striking because we were talking about the possibility of spending your max out-of-pocket expenses for health care for every year for thirty years straight. To me, that's unlikely enough as to not warrant special consideration.

quote:

It seems like a lot of people who talk about their ER nest egg being easy to calculate are young single males who either don't want kids or aren't thinking about the problems they could have later on in life. That MMM guy not buying his daughter braces? Yeah, I'm not going to do that to my kids. Moving to a different state for tax/healthcare reasons? Are you loving kidding me? My friends and family are here, I'm not moving to bumfuck, Ohio so I can live cheaply. To me these are ridiculous solutions. I hope that this thread can help me find a nest egg figure to shoot for realistically so I have an excellent buffer that protects against the worst case scenario, not just a figure that lets me retire as quickly as possible.
I am married with one (and probably more in the future) kid(s). While I definitely plan to buy my kids braces, I'm also thinking I'll probably do some kind of financial independence-lite where I work as a programming tutor or something. I'm ok with regular work, I just don't like a structured 40 hours+. Personally my and my wife's family are all so spread out we can't really pick somewhere to live close to family as a whole, we'd have to pick one particular family, and even then there's a good chance they'd up and move on us at some point, so moving to somewhere cheaper (it wouldn't be middle of nowhere, though) feels fine to me.

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!

moana posted:

I disagree - health issues seem like the biggest possibility for loving up plans for financial independence, so it makes sense to scrutinize that area to see if there's any way to avoid undue risk. I always want to hope for the best, plan for the worst.
Sure - that's just setting the right target for you.

If you're making a decent amount of money, working and living without a notion of when you want to be financially independent is a huge mistake. I'd love for this thread to be an introduction to the concept and framework for a lot of people, because structuring my work and approach to finances this way has changed my life and has made my future immeasurably better.

zmcnulty
Jul 26, 2003

I had a longer post typed up but I guess it boils down to a single question: how do you reconcile living life to its fullest with frugality?

I feel like a lot of the great experiences in my life thus far, and most of those I have planned, require a lot of money and... there aren't any substitutes. I fully agree that consumer culture buying new iPads/whatever is really dumb, and I shy away myself, however doing something awesome like visiting Antarctica is often expensive. Where do you draw the line?

Also, assuming I'll live to 45/65/85 or whatever seems sort of dangerous. Am I the only one that sometimes feels like I'll drop dead at 35?

zmcnulty fucked around with this message at 02:40 on Jul 19, 2013

moana
Jun 18, 2005

one of the more intellectual satire communities on the web
How exactly did you decide on a target number, No Wave, if you don't mind me asking?

Ignoranceisbliss88
Jun 9, 2012

by Pipski

Cicero posted:

Yeah, screw spending time with your family!

Seriously though, it does bug me that I can only spend an hour or so (and that can be optimistic) every day directly interacting with my son, because, well, other stuff has to get done. I'd kill for a few more hours each day of that time. If spending time with your family is boring and mundane to you, you're either a terrible father/husband/mother/wife, or your family sucks.

Or...it's not? We don't even have a tv subscription here, and while my son does watch Backyardigans videos sometimes, this is usually because otherwise he'll get in our way when doing chores.

It's dull if you make it dull, sure. The thing is, the kind of people who exert enough control over their lives and have enough foresight to retire very early are definitely not the sort to sit on their butts watching sports all day. If they were, they wouldn't have been able to muster the effort and self-discipline to retire quickly in the first place!

It seems like most people who reach FI continue working in some form, they just get to be really picky. In fact, Jacob (from ERE, the 'original' well-known Early Retirement blog) un-retired because he got a job that was just that interesting to him (IIRC it was in finance).

Luckily, people who reach early retirement are under no such condition. See above.

That's great, and this illustrates why people have started using the term financial independence rather than early retirement; the word retirement is just so loaded that it always spawns a bunch of discussion either about how retiring would be so boring, or that if you do anything for money after 'retiring' it doesn't count anymore, no matter how much you enjoyed the task or how little you needed the money.

How old is your son? I imagine that he's probably pretty young and quite happy to hang out with old dad/mom. What happens when he's 15 and independent (maybe hates your guts), or when he moves across the country for college or for a new job? My point is, you can't base your entire 60+ years of adult life around 15 years of your children's adolescence. Family is great, I just don't think that for most people devoting their life to their family is enough. I think most people need a little slice of their own life, which for many is a career. I'm only playing devil's advocate here, the concept of financial independence/early retirement is great, I just don't think it's quite what many people think it is. The grass is always greener.

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!

moana posted:

How exactly did you decide on a target number, No Wave, if you don't mind me asking?
Realistically, I'm still working it out - I'm very new to it!

But mine's high! I'm lucky in an awful lot of ways, but there's no reason not to err on the side of caution here if your income's high enough

I don't have a spouse/family or anything yet, so really I chose a number where I'd be an idiot not to be able to live a good life off of it.

I figure 40k a year of minimally taxed rent-free income will see a family of 3-4 through pretty much anything especially with all that down time and flexibility. If I had a family, I'd want 40k of income in addition to my house. So it would be about a million in investments (really, 800k would be enough) + the cost of a house.

Again, rough as hell. Honestly I sort of just chose the median household income for the USA, figuring that if I got that I'd feel really psychologically sound (and I'd know that if there were a problem, it would be me, not the money). Right now my job's good enough that I wouldn't quit it even if I were financially independent, but that won't last forever. Honestly 30k a year would be fine, but with all the compounding it's a very short time to get the last 10k - only a few years if you're still putting money away. I'm aware of the statistic that happiness correlates w/ money up to 77k a year, but this 40k a.) has very little tax and b.) is rent-free (I included house in the calculations) - slash off the commuting costs, as well, and this 40k will probably roughly correlate to that number.

Ignoranceisbliss88 posted:

How old is your son? I imagine that he's probably pretty young and quite happy to hang out with old dad/mom. What happens when he's 15 and independent (maybe hates your guts), or when he moves across the country for college or for a new job? My point is, you can't base your entire 60+ years of adult life around 15 years of your children's adolescence. Family is great, I just don't think that for most people devoting their life to their family is enough. I think most people need a little slice of their own life, which for many is a career. I'm only playing devil's advocate here, the concept of financial independence/early retirement is great, I just don't think it's quite what many people think it is. The grass is always greener.
Sure - but then you can do whatever you want. I mean, freedom is scary. It forces you into a different mindset, but it makes you loving proactive. When you aren't thinking about getting by, you free your mind up to focus on crazy poo poo - but it takes some time to learn how to "manage" yourself. MMM wrote about this - it was interesting. It's not like you can't be useful to other people with 100% financial stability and tons of free time. On the contrary! You are even more useful... you just don't fit into the normal mold. Which forces you to be more crafty, which honestly can lead to amazing things.

No Wave fucked around with this message at 03:03 on Jul 19, 2013

zmcnulty
Jul 26, 2003

That's exactly what I'm talking about. A trip to Europe with your family will cost like a quarter of your annual budget. I agree there's plenty of down time, but how does <$2k per month for a family of 3-4 provide "flexibility??"

edit: I understand there's plenty of people making do with families and lower salaries, but this thread is basically about rich people so we'll ignore the poors

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!

zmcnulty posted:

That's exactly what I'm talking about. A trip to Europe with your family will cost like a quarter of your annual budget. I agree there's plenty of down time, but how does <$2k per month for a family of 3-4 provide "flexibility??"

edit: I understand there's plenty of people making do with families and lower salaries, but this thread is basically about rich people so we'll ignore the poors
The annual budget is 40k - I added this bit after you posted, but this 40k will more realistically have the lifestyle of a 75k salary because you don't need to commute, rent is paid for, and tax is lower. Not to mention all the daycare/whatever savings.

As for a trip to Europe, I mean, is that mandatory now? I could definitely send the kids off to exchange programs or whatever ($800 round-trip? why not?), but why go all together? It's a waste. Family time can be cheap. If you want to have a cultural experience, it's far more valuable to do it on your own for an extended period of time. I had a family trip to Europe when I was six and it was completely wasted on me - I lived in France in my twenties and it was incredibly rewarding. (also, all my family is in the USA)

Again, I'm getting super theoretical here because, I mean, I'm a single dude, but I don't mind having the discussion. These are important discussions to be having!

No Wave fucked around with this message at 03:03 on Jul 19, 2013

tuyop
Sep 15, 2006

Every second that we're not growing BASIL is a second wasted

Fun Shoe

zmcnulty posted:

I had a longer post typed up but I guess it boils down to a single question: how do you reconcile living life to its fullest with frugality?

I feel like a lot of the great experiences in my life thus far, and most of those I have planned, require a lot of money and... there aren't any substitutes. I fully agree that consumer culture buying new iPads/whatever is really dumb, and I shy away myself, however doing something awesome like visiting Antarctica is often expensive. Where do you draw the line?

Also, assuming I'll live to 45/65/85 or whatever seems sort of dangerous. Am I the only one that sometimes feels like I'll drop dead at 35?

This is literally the mindset and question that caused me to go into 60k of debt. I think it's the fear of death or maybe mediocrity. You can't take it with you and all that, so why not go to Costa Rica? Why not buy that car you really want? If I found out I would die tomorrow would I be pleased with my life?

The answer for me is that living life to its fullest may not mean spending to its fullest. If you have extravagant tastes like travel, then you may be forced to get creative (oh no!) and figure out more affordable ways to do it. Maybe instead of a 400k house in the suburbs somewhere while financing a three month vagabonding trip around Europe you live for awhile in a 40-90k sailboat and travel the world with your family and some likeminded crew members? If you love good, rich food, it may be best to immerse yourself in actually producing some of that food edit: and developing the skills to prepare it rather than paying chefs for that.

It's a hard thing to answer, because it's highly individual, but for me it comes down to mindfulness and stoicism. Putting myself in the moment and trying to cultivate a regular sense of awe and gratitude (gratitude is most important) has changed me from a suicidal chainsmoking alcoholic who drank literally dozens of cups of coffee a day and spent 150% of my salary to... well, I don't drink or want to kill myself and I have three cups of coffee a day and spend about 40% of my salary. Nearly nothing else has changed except that mindset.

Basically, financial independence may require that you disconnect your concept of happiness from external, material possessions and experiences, or pursue those experiences in new and less expensive ways.

Cicero
Dec 17, 2003

Jumpjet, melta, jumpjet. Repeat for ten minutes or until victory is assured.

zmcnulty posted:

I had a longer post typed up but I guess it boils down to a single question: how do you reconcile living life to its fullest with frugality?

I feel like a lot of the great experiences in my life thus far, and most of those I have planned, require a lot of money and... there aren't any substitutes. I fully agree that consumer culture buying new iPads/whatever is really dumb, and I shy away myself, however doing something awesome like visiting Antarctica is often expensive. Where do you draw the line?

Also, assuming I'll live to 45/65/85 or whatever seems sort of dangerous. Am I the only one that sometimes feels like I'll drop dead at 35?
1. Similar to what tuyop said, living to the fullest != spending to the fullest. There are often creative ways to experience something that cost less than the standard route. At the risk of aping MMM too much, he visited Hawaii for a fraction of the cost of most people by helping to build someone's guest apartment there, before his family arrived (in exchange, they got to stay there).

Now, many people would consider that work, because, well, it is. However, a key component of financial independence isn't so much that you end up avoiding work altogether (as you've no doubt noticed, being frugal in an area involves more work than the equivalent $$$ form), but rather the monolithic grind of a regular job. Splitting your labor into many forms that you only do for a short or temporary period means that you get to approach each one as an experience, rather than just another day at the office, not to mention you get to pick and choose which work to do.

This leads me into my next point: living frugally involves a fundamental change of mindset away from avoiding effort, especially physical effort. Modern society, especially American society, has conditioned us to always minimize effort (see: people spending 10 minutes looking for a close parking spot to save 3 minutes of walking). Changing this mindset, so you can do things like bike to most errands instead of driving, is difficult, and I'm still going through it. But it's definitely refreshing, and, uh, doable? It can be done!

2. A good question to ask yourself here is, "Does doing X actually make me happier? Are there cheaper things I could do that would make me just as happy?" Sometimes the answers are "Yes" and "No", respectively, but I'd wager that most people could still be just as happy finding alternatives to most fancy vacations and the like. See: http://en.wikipedia.org/wiki/Hedonic_treadmill

3. Spending money generally has a person in a consumption mode. I'd argue that you can be just as happy, if not happier, being in a producer or participant mode. For example, watching a professional soccer game is consuming, playing in a soccer league is participating, helping to run a soccer league in some form (reffing, coaching, etc.) is producing. Of course, the latter can be labeled as the dreaded work, but it's likely that you can find some hobby where you actually like to produce.

edit: It really comes down to priorities. If going on an overseas vacation every year with your family is really just that important to you, then maybe financial independence isn't for you (or you just have to save a lot longer before you reach it).

Slow News Day
Jul 4, 2007

zmcnulty posted:

That's exactly what I'm talking about. A trip to Europe with your family will cost like a quarter of your annual budget. I agree there's plenty of down time, but how does <$2k per month for a family of 3-4 provide "flexibility??"

edit: I understand there's plenty of people making do with families and lower salaries, but this thread is basically about rich people so we'll ignore the poors

A $10k trip to Europe? :laffo:

Yeah if you want to stay in super expensive resorts where you can't even tell you're in another country, go ahead and pay that much. But if you want a cultural experience, ironically it will cost you a lot less. Besides, there are plenty of articles online for cheap travel. I like this one. And before you say "families can't do this kind of thing," my uncle owns a world-famous boutique hotel here in Turkey and he hosts backpacker families all the time. They pay very little since everything here is so cheap, and they have amazing experiences.

In addition, during FI your annual budget may be $40k, but this doesn't mean you will spend all of that amount every year. Just like with regular salary, you can underspend one year and "save" so that you have a bigger budget the next year.

tuyop
Sep 15, 2006

Every second that we're not growing BASIL is a second wasted

Fun Shoe
Unfortunately, unless your goal is to never accept payment for work again like Joe Dominguez, many of your... activities will probably generate income, leading to an ever growing rate of savings as you reinvest the interest and contribute more to your nest egg.

Wait, why isn't Your Money or Your Life in the OP?

shrike82
Jun 11, 2005

enraged_camel posted:

A $10k trip to Europe? :laffo:

Do you actually have a family? $10K for a family of 4 isn't going to be a decadent vacation once you add in flight, stay, and touristy expenses.

FrozenVent
May 1, 2009

The Boeing 737-200QC is the undisputed workhorse of the skies.
Seriously, 10k for a family of four going from the states to Europe is pretty reasonable, unless you want to stay in hostels... Which, with two kids, might or might not be a good idea.

I just ran some check on Expedia, and a family of four flying round trip from Cleveland to Paris is in for something like 6k. Just for the flights, and that's looking a year in advance and with transfers... Personally I wouldn't want to spend 11h airport to airport with kids, but hey.

Slow News Day
Jul 4, 2007

shrike82 posted:

Do you actually have a family? $10K for a family of 4 isn't going to be a decadent vacation once you add in flight, stay, and touristy expenses.

Not if you go off-season like a rational person.

Sundae
Dec 1, 2005

Cicero posted:

One is much more likely, sure. I brought up lightning striking because we were talking about the possibility of spending your max out-of-pocket expenses for health care for every year for thirty years straight. To me, that's unlikely enough as to not warrant special consideration.

No, we weren't talking about that at all. That's a gross mischaracterization of what I said. (Though I honestly don't think it's as unlikely as you say. I'm on year five of maxing my deductible + OOP each and every year, but we did agree earlier to ignore pre-existing conditions, so I'll drop that point.)

Let me make this nice and simple:

#1A - You have to assume that, at some point (and possibly more than once depending on your comfort for risk), you will be paying your maximum health amount x 2. This is a December injury or illness.

#1B - If you (in this case MMM) plan on spouting the powers of compounding interest to maintain an independent lifestyle off your original savings, you have to acknowledge that taking a hit like #1A will have a significant long term impact on your projected lifetime finances. The earlier you take that hit, the worse the impact will be.

#2A - You have to assume regular use of health care services. I didn't say "regularly maxing your OOP year after year" or anything of the sort. You have to assume that you or someone in your family will need health care every year. THAT is what I said.

#2B - You have to assume that your need for health care services will increase as you age. This is a matter of reality for the vast majority of the planet, whether they get access to said services or not.


The items identified in #2 have, in the event of catastrophic-only insurance such as what was being offered up earlier in the thread, no or minimal coverage. This is all out of pocket, effectively, meaning that your $7.5K or $10K deductible is getting dug into every year in addition to your premiums.


If you've accounted for this in your budget and have decided that you're comfortable with the degree of risk, great. Go for it. None of the examples posted from MMM accounted for any of that, and spouting out advice like that while ignoring reality is insane enough that I actually went to see if he was trying to sell something. (Doesn't look like he is, really. Was kinda surprised.)

Sundae fucked around with this message at 17:36 on Jul 19, 2013

Cicero
Dec 17, 2003

Jumpjet, melta, jumpjet. Repeat for ten minutes or until victory is assured.

quote:

I'd like to point out that he refers to a $10,000 deductible + 20% copay up to 12K limit (meaning $22,000 in a year) as "very manageable" in spite of $22,000 being more than the full annual budgets his example people use. Furthermore, he refers to a $7500 deductible as a Cadillac plan in spite of that being horrible insurance as well. If you're going to predict retirement health cost requirements, you have to assume worst-case scenarios, not best-case (never using the worst, cheapest catastrophic insurance you can find). You have to assume that health care utilization will occur on a yearly basis, and possibly on a more than yearly basis as you get older.
Sorry, looks like I misinterpreted "that health care utilization" as referring specifically to what you talk about in the first sentence, since you were talking about worst-case scenarios in italics. I blame the ambiguity of English.

Anyway, I think it doesn't concern most people aiming for FI because most of them plan on being capable of living off their investments, but still doing some work some of the time, such that they are able to continually save and increase their stash year after year. But if you're planning on literally never working for any significant amount of money ever again, yes you'd have to be more conservative in how much you save before quitting your job.

canyoneer
Sep 13, 2005


I only have canyoneyes for you
There's an expression in high-finance, consulting, and i-banking called "gently caress you" money. As in, work the soul-sucking super high paying job for 10 years and save up all my money so I can buzz off at the end and go do a (low paid) fun job like being a forest ranger, climbing guide, school bus driver or goat farmer or something.

This "financial independence" movement popularized online recently seems like sort of a more extreme version of that.

Slow News Day
Jul 4, 2007

canyoneer posted:

There's an expression in high-finance, consulting, and i-banking called "gently caress you" money. As in, work the soul-sucking super high paying job for 10 years and save up all my money so I can buzz off at the end and go do a (low paid) fun job like being a forest ranger, climbing guide, school bus driver or goat farmer or something.

This "financial independence" movement popularized online recently seems like sort of a more extreme version of that.

More like, it's a version of it that is open to the 99% who don't work in those high-paying jobs.

April
Jul 3, 2006


moana posted:

How exactly did you decide on a target number, No Wave, if you don't mind me asking?

I have heard that the rule of thumb is to take the income you want to have annually, multiply that by 25, and that's how much you will need to retire and live on indefinitely. So if I want to retire with an annual income of around $60,000, I would need to have $1,500,000 in investments. Has anyone else heard that? Or any other rule/number?

moana
Jun 18, 2005

one of the more intellectual satire communities on the web
So once I own my house outright and need $40k for expenses, I would need to save...

ONE MILLION DOLLARS! (muahahaha!)

The issue is the earlier you retire, the more years you'll need that income. So 25 might not cut it for some (most) of us.

April
Jul 3, 2006


moana posted:

So once I own my house outright and need $40k for expenses, I would need to save...

ONE MILLION DOLLARS! (muahahaha!)

The issue is the earlier you retire, the more years you'll need that income. So 25 might not cut it for some (most) of us.

I think that number came from the idea that your investments will generate 4% interest, which seems pretty sustainable (at least until the next 2008 happens, I suppose). Then again, with inflation, the reasonable annual income of today might not be enough in 20+ years.

Slow News Day
Jul 4, 2007

moana posted:

So once I own my house outright and need $40k for expenses, I would need to save...

ONE MILLION DOLLARS! (muahahaha!)

The issue is the earlier you retire, the more years you'll need that income. So 25 might not cut it for some (most) of us.

Well, if it turns out that what you have saved is not enough, you would have the option of cutting back a bit more on your expenses and/or freelancing and/or even starting your own business. You would have a tremendous amount of freedom that comes from not being chained to some corporate job.

shrike82
Jun 11, 2005

When you talk about early retirement at age 35, 40, 45 etc., I think it's important to remind yourself that your investment planning is going to be probabilistic. Think in terms of confidence levels (50%, 75%, 90%) for avoiding risk of ruin. You're talking about an investment horizon of 50-60 years so it's going to be virtually impossible to nail down a full-proof plan unless you have a portfolio in the 8 figures.

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!

moana posted:

So once I own my house outright and need $40k for expenses, I would need to save...

ONE MILLION DOLLARS! (muahahaha!)

The issue is the earlier you retire, the more years you'll need that income. So 25 might not cut it for some (most) of us.
It should - even very pessimistic estimates of the US's future predict higher than 4% average post-inflation returns. I don't think any 40-year period since 1900 has averaged less than 8% so far.

The idea is that you're making enough so that you're usually actually putting even more money away each year, with a slight decrease in recession years. Whatever - spend a little less that year, or don't, you'll probably be fine.



And keep in mind - 4% average return is highly conservative. Maybe other people known something I don't, but then again, I'm not retired yet so it doesn't matter - the strategy remains the same.

No Wave fucked around with this message at 20:29 on Jul 19, 2013

Slow News Day
Jul 4, 2007

Besides, we're probably due for another crash within the next 5 years. So if you're planning to retire 10 years from now, that's pretty much perfect timing! Just have plenty of savings so you can buy a ton of stocks when they become cheap, and ride them up!

(I'm only half-serious. But deep down inside I am wishing for another crash soon...)

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!

enraged_camel posted:

Besides, we're probably due for another crash within the next 5 years. So if you're planning to retire 10 years from now, that's pretty much perfect timing! Just have plenty of savings so you can buy a ton of stocks when they become cheap, and ride them up!

(I'm only half-serious. But deep down inside I am wishing for another crash soon...)
All my poo poo's in equities. It's always very tempting to try to time the market but if I'd tried that I'd be down 20% from where I am. So, whatever, worst case scenario you wait another two years or so, work's still got its perks.

Slow News Day
Jul 4, 2007

No Wave posted:

All my poo poo's in equities. It's always very tempting to try to time the market but if I'd tried that I'd be down 20% from where I am. So, whatever, worst case scenario you wait another two years or so, work's still got its perks.

I don't mean it in the sense of trying to time the market. I would continue to invest as usual, but if a crash happens then I would gladly dip into my savings (and/or liquidate some assets) to buy even more stocks, since they would be cheap.

Let's say that I'm contributing to my 401k and Roth, and also have $50k saved for a house that I'm going to buy soon. In the event of a big crash, it would be worth (to me) investing that $50k in stocks and delay the purchase of a house for a few years.

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!

enraged_camel posted:

I don't mean it in the sense of trying to time the market. I would continue to invest as usual, but if a crash happens then I would gladly dip into my savings (and/or liquidate some assets) to buy even more stocks, since they would be cheap.
All my assets are stocks. Lol. I'll leave it to the professionals.


One hack I'm still looking into - if you have money in an IRA or 401(k), it seems like you can transfer a little of your money every year into its respective Roth counterpart. This is loving phenomenal for years of low income, ie, most of your years post-financial independence. Just transfer about 25k a year from standard to Roth when your income is zero, pay very little tax, and it'll all be tax-free when you start withdrawing it after age 59.5. This is because money taken from a 401(k) isn't technically "investment" income, and is taxed like normal income, and it's much better to spread out your standard income over a long period (done by the gradual conversion).

Also, moana, remember that you won't be able to touch your 401(k) for a long time! Not a huge deal, as even if you time it extremely close and completely drain your non-401(k) account at age 59.5, the money will still be there. Like, the math will still work out. But you may have different risk profiles for your non-"retirement" accounts and your retirement accounts.

Either way, I certainly recommend talking to a professional when you think you're within a few years of your financial independence for a sanity check. But I'm sure you'd do that anyways.

Slow News Day
Jul 4, 2007

No Wave posted:

All my assets are stocks. Lol. I'll leave it to the professionals.

Be very careful with this. Most people who say this kind of stuff end up losing huge amounts of money to various expenses.

shrike82
Jun 11, 2005

No Wave posted:

And keep in mind - 4% average return is highly conservative. Maybe other people known something I don't, but then again, I'm not retired yet so it doesn't matter - the strategy remains the same.

People really need to read up on sequence of returns...

https://www2.blackrock.com/webcore/...ContentID=40492

Adbot
ADBOT LOVES YOU

No Wave
Sep 18, 2005

HA! HA! NICE! WHAT A TOOL!

enraged_camel posted:

Be very careful with this. Most people who say this kind of stuff end up losing huge amounts of money to various expenses.
SIMPLER ANSWER (I had a bunch of bullshit here earlier): I only just got started and I'm only going to be able to invest a measly 50% of my income because I got real excited and bought a lot of rocking poo poo (that I don't really regret, they're all basically things I'll use for a decade+), all of which is going into retirement funds ('cause I'm self-employed and poo poo's cray like that). But I've got a lil' cash buffer, too.

shrike82 posted:

People really need to read up on sequence of returns...

https://www2.blackrock.com/webcore/...ContentID=40492
Minor quibble - imagine a hypothetical scenario where you lose 99% one year then make back 10000% the next. Withdraw in the first year and you're hosed. So it's better to be slightly more conservative with money that you're withdrawing from. Unless that was your point and it was I who had to read up on it, in which case, whoops, my bad.

No Wave fucked around with this message at 21:42 on Jul 19, 2013

  • 1
  • 2
  • 3
  • 4
  • 5
  • Post
  • Reply