The absolute value of your salary doesn't tell you anything about how long it takes to get to retirement (or more accurately, financial independence). That's exclusively a function of your spending and saving rates. https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si...
Forecasting your spending rate far enough into the future, however, is a very tricky problem if you're trying to retire at 30, especially if you're living through turbulent times.
I'd rather work 3 days a week until I'm dead then let my skills start deteriorating now and live the next 60 years in fear that my fixed income won't be able to sustain me.
spot on. Energy prices are going to rise in Europe for the years ahead so will inflation and then your savings will dwindle... In my country inflation is already around 2.5% years on years.
When you forecast your spending rate, you naturally take some security margin, for example by retiring when your passive earnings gets 1.5x times larger than your targeted spending. And that security margin (which won't be spend most years) will compound.
Sure, you might encounter a black swan event which force you out of retirement only 3 years after you started, and at that point your security margin won't have increased your stash by much, but at the same time your skill won't have deteriorated much in 3 years.
It also work even if the black swan even happens 20 years after your retirement. You just need to take a security margin your are comfortable with, and project how much you will have after 3, 10, 25 years to see how much you have for unforeseen events.
But 20% of $200k/yr is $40k/yr, while 20% of $100k/yr is $20k/yr. If you make twice as much while saving the same rate (i.e. cost of living goes up proportionally), you'll still end up saving twice as fast. Then move to a LCOL area, and you've got twice as much saved as the people who've lived there all their lives.
Yep - this is what a lot of people who suggest moving to a cheaper area as a solution for not being able to buy a house don't seem to think about.
Earning (made up numbers because I don't even live in the USA and I don't know what is reasonable) $100k and spending half of it on rent with no hope of buying a house is still better than earning $50k in an area with much cheaper housing.
Of course if you can score a remote job then you can have the best of both worlds, but that isn't always possible (and some companies seem to pay differently based on your COL now).
I think it's a pretty big unsourced assumption that savings rates are similar between LCOL and HCOL areas. I'm curious if that's really true; I wonder if there's any research/polling done on this.
Even if the saving rates are the same, the higher salary in a higher COL wins because you can always move before retirement.
However, today’s high inflation rates make all these computations iffy, and if you rely too much on inflation beating stock market returns, you won’t be able to ratchet down on risk as you get closer to your preferred early retirement date (a crash can dump you back in the workforce at a bad time). Also, many people in HCOLs don’t want to downgrade to LCOLs after they retire.
Too bad Medicare doesn’t transfer to low cost but nice southeast Asian countries.
Many people in HCOL areas think LCOL areas are a downgrade, and…they are cheap for a reason. If it’s just lack of jobs, for a retiree that’s fine, but high crime bad weather poor infrastructure bad schools bad scenery are also possible. You don’t want to stop living in retirement, especially if you retire early.
Desirable places to retire like Santa Fe are already getting expensive.
Cheap private healthcare works for small things, but you are paying out of pocket for everything and if something big comes up you might not even be able to access the care you need. Guam might work instead, but they aren’t cheap and are pretty far away from anything.
> Fact is many LCOL areas are upgrades if you don't need to work.
Sorry, having lived in Mississippi for 4 years, that is not really true. Or I guess it depends on what you mean by "many", because there are many bad cheap places out there (e.g. Gary Indiana, Port Gibson Mississippi, Monroe Louisiana, ...). It also depends on what you mean by upgrade: many people like big city amenities (food and cultural options) and would see moving to the sticks as depressing, just like many would see the opposite (they love the country side, hate big cities).
Internationally, LCOL areas are generally in developing countries, and even a city like Bangkok will get expensive after awhile (though big cities in the west might get more expensive faster). It is still a trade off, many can't make (and many can, good for them).
I don't think that is accurate. I would say it is a combination of both.
The article you link to obviously makes it sound like it's an exclusive function. But it simply dismisses the fact that not everyone can reasonably sustain the savings rates mentioned.
Sure, there's reports of very motivated people that live on next to nothing and have a huge savings rate for the first 10 years of their working life, abstaining from everything including having a family and such. For the vast majority of people this is not something they can achieve and that is not taken into account by the 'simple math'.
I would agree with the author that having Starbucks coffee twice a day is not worth retiring later. I'd even give him Cable TV. But I'm not going to live like a hermit. Different people are on different places of this gradient. If I increase my take home pay, I can stay on the same savings rate as before and retire earlier (assuming that I don't want to make a certain percentage of my last pay during retirement and instead have a fixed goal for my retirement income).
We all have to make the choice between prioritizing creature comforts and freedom.
I chose freedom. While my colleagues were living in fancy high rise apartments, buying new gaming rigs and cars, taking extravagant international vacations, and getting married and having kids, I was living in a basement studio with my college mattress on the floor and no car for several years while biking to work.
I'm retired and they're still slaving away with no end in sight.
You call it creature comforts. Starbucks every day I would definitely count as that. I don't count having a family as a creature comfort.
FWIW, I'm completely with you on living below one's means. I don't think the math is as simple as the article makes it out to be. It's missing a few value functions that need to be taken into account that influence what savings rate are reasonably possible at various absolute salaries. Your value functions are different from mine though mine are much closer to yours than the ones your colleagues seem to have with a few key differences.
I'm with you on the fancy high rise. Strike that, nobody needs that. Basement studio with a mattress on the floor? Not worth the <$200 savings for a proper bed frame if you ask me. I've lived in a basement apartment for some years as well and it definitely wasn't bad at all. Very livable but it depends on where. One of my colleague's basement studio is not something I could've lived in. The house I now live in is the "cheapest house in the fanciest neighbourhood I can afford" (i.e. no, we did not buy a house at the top of what the bank would lend us).
I'll give you gaming rigs (and games) as well. I've never been a fan of consoles. Regular "business laptops" for not much money can run reasonably good games that are a few years older perfectly fine. And you get to pick and choose the good ones as you have a treasure trove of information from people that have already played them. I would add cell phones to this (and laptops/computers for that matter). Buy a generation or two behind the new fancy one and you're not worse off at all but save a ton of money. Nobody needs the newest iPhone or fancy MacBook.
(International) vacations is something that our value function would assign a relatively high value to. Can't do without. They aren't extravagant. Nobody's gonna get me to shell out 10k to go to Disney Land, sorry. But yes, we will spend the money to make memories together on a backpacking trip through some exotic country. Best ~500EUR flight and very cheap living costs while there that we ever spent. You can use simple math all you want to tell me how much earlier I could've retired if I had not spent the 500EUR and it won't change my mind.
Which brings me to the next value function: family. Definitely worth it. Even retiring later is worth having a family.
i have not met anyone yet who is married with kids but would have preferred an earlier retirement instead. kids are more expensive than all the other things combined that you listed - no amount of living in the basement or saving 30k on having no car is going to make up for that.
if you read the links you posted, a large portion of these are from people who weren't ready, or had kids with disabilities or adopted without enough vetting, or were not financially ready, etc.
all parents go through difficult periods where they do regret not sleeping, or the work. but on the whole, the vast majority would not trade their kids for lonely family-less early retirement.
just because you found 10k comments on the internet doesnt imply this sentiment applies to 7bn people.
it's great that you'll have no regret about never having kids but instead have a ton of money and free time to spend on something else for 40 years.
> just because you found 10k comments on the internet doesnt imply this sentiment applies to 7bn people.
No, but at least the parent provided some kind of source to back up their assertion. Where's yours? I don't think it's safe to assume "nearly everyone who has kids don't have regrets".
I went through a phase 5+ years ago where I was reading a lot about this sort of thing, and found that there are more people who regret having kids (entirely) than I would have expected, and way more people who regret the timing of when they had kids than I would have expected.
As the parent points out, it is very very taboo -- especially for a mother -- to admit this sort of thing, so we can expect this to be under-reported.
i've met plenty who have regretted the timing, or having 3+ kids instead of two. but never about having 1 kid instead of zero and it preventing their otherwise early retirement.
having one kid will delay any kind of FIRE strategy significantly for all but the top 0.01%.
the GP's argument is that people just dont have the willpower to make the necessary sacrifices to retire early...such as simply skipping having those pesky, retirement-draining offspring!
As said earlier, this is a sentiment that is not socially accepted, so you will have a hard time finding examples or people admitting to it.
I have 2 daughters, I love them but in hindsight if I had to start over I don't think I would have kids. And it is not necessarily about the money. I realize I give up waaaay to much of my own needs and freedom. It may just be also about how I am. While many people will tell their kids to litterally go fuck themselves (well with different words) while they are watching football or leave them unattended while they go for a bicycle ride, I am one of those who will never say no when my daughters ask me to play or require assistance for some creative stuff. Yes I enjoy doing stuff with them but I'd rather go for a bicycle ride, play music or do carpentry. Thanksfully there are a few things we have in common, like playing basketball. Now that I am divorced and we share custody of the girls, it makes it feel somehow harder, as I can't just get away from my ex-wife. There is always something to negociate/organize. Thanksfully the pandemic has opened a lot of possibilities regarding work from home so I could change employer without having to move to another place but I'd rather use the remote work possibilities to become a digital nomad and travel all over the world. I would also be happy living in a camper moving from place to place every few weeks/months. Having kids while being separated from their mother makes it impossible.
“All the time” here means it has happened in the past, it happens today, and it will probably continue happening. It may not be a high percentage of parents but it exists. Believe it or not, Reddit is made up of human beings just like you.
And sure, Reddit is full of humans, but it's nowhere close to a representative sample of the populations. That should be clear as soon as you start reading.
Nothing worth doing is particularly easy, but let me give you a different way to think about it.
You're only on this planet for a few years. You can only taste so much of the human experience. A huge part of the human experience is raising a child. Not experiencing it means leaving a big part of what's possible to experience on the table.
If it's a choice, and you choose, and you're secure in your life, and financially / emotionally / mentally stable, I think regret isn't likely.
> We all have to make the choice between prioritizing creature comforts and freedom.
Of course, this starts from the assumption that work is inherently an undesirable activity and that conversely, pleasurable activities are incompatible w/ work. IMHO, it's not necessarily black and white: it's certainly possible to find satisfaction/fulfillment in one's work (to the extent that some people even choose to work despite not having the financial need to). Personally, I try to find alignment between being a "productive member of society" and deriving happiness from my efforts (both in terms of my work output as well as material gain). I'm sure much more can be said about the drivers of motivation as it relates to finding the meaning of one's life, and the whole thing about life being about the journey, rather than the destination.
In terms of financial independence, I'd be wary of the word "freedom". It can be quite the loaded term, in the sense that one could equally argue that greatly restricting expenditure is "slavery to a run rate", whereas a steady income and a more lavish budget is "liberating". For someone like me who seeks well-roundedness, loaded terms irk me. Though to be clear, I'm not criticizing one lifestyle over another; both FIRE and career-ladder lifestyles are perfectly fine life choices IMHO.
> If I increase my take home pay, I can stay on the same savings rate as before and retire earlier (assuming that I don't want to make a certain percentage of my last pay during retirement and instead have a fixed goal for my retirement income).
That would be extremely unwise - if your savings rate hasn't changed then that means your lifestyle has inflated, and so your fixed retirement income will be a bigger step down and harder to sustain. This isn't just theoretical - people set a retirement goal when they're young thinking they can live like a student, gradually get accustomed to a more comfortable lifestyle, and then get a pretty sharp shock when they try to retire early and realise they're not actually willing to go back to living like that.
The only way increasing your take home pay lets you retire earlier is if you use it to increase your savings rate, by not letting your lifestyle inflate proportionately.
FWIW, this was simply an example to refute the absolute claim of the parent and the article that only the savings rate matters for when you will be able to retire. This one counter example disproved that.
Now as for your claim, I would agree that it is generally unwise to do that. It doesn't necessarily mean that your lifestyle has inflated in a bad way though.
If I make 50k with 10% savings rate (5k savings), single bread winner w/ a family of 2 and I get a raise to 55k, I will now save 6k w/ a 10% rate. The other 4k are used to finally be able to go to the museum with the kid, buy them some used skates so they can go skate in the park in winter whenever they want instead of renting skates once per winter etc. While I agree that this is "a lifestyle inflation" I wouldn't say it's one that affect the retirement in the way you mentioned.
Now if we are talking lotto winner kind of raise while keeping the savings rate at the exact same and low mark, I would totally agree with you. 50k w/ 10% gets a raise to 300k and starts behaving like the parent mentioned (fancy apartment, extravagant travel etc.) I completely agree with you.
> FWIW, this was simply an example to refute the absolute claim of the parent and the article that only the savings rate matters for when you will be able to retire. This one counter example disproved that.
But you don't have a counterexample, not unless you can show someone actually succeeding in retiring on a different savings rate. Plenty of people think they'll be happy to live more cheaply when they've retired, but experience suggests that this isn't actually true, which is what the article is going by.
> The other 4k are used to finally be able to go to the museum with the kid, buy them some used skates so they can go skate in the park in winter whenever they want instead of renting skates once per winter etc. While I agree that this is "a lifestyle inflation" I wouldn't say it's one that affect the retirement in the way you mentioned.
Of course it does. You get in the habit of buying things for the kid. You get in the habit of going to these places. (I don't think it's bad to spend money on things you enjoy, especially if what you enjoy is helping others, but it's important to be aware that it's extremely habit-forming).
You make statements about all people. You are the one that has to prove that this is true. My counter example works perfectly because I only need one. Specifically we still buy used skates for the kids, even though I would definitely have the money to buy new ones. Same for the vacations. They can tell me about Disney Land all they want and even though I could buy that cash right now, I will not.
I see what you're trying to do there. I need to quote better. Let's retry:
Quoting myself:
an example to refute the absolute claim of the parent and the article that only the savings rate matters for when you will be able to retire. This one counter example disproved that.
Keyword: only. My claim is that it's a combination of both. Then you come along and posit that it's impossible not to have an inflation of lifestyle and you won't be able to live off of less than you had before once you retire:
not unless you can show someone actually succeeding [...] Plenty of people think they'll be happy to live more cheaply when they've retired [...] Of course it does. You get in the habit of buying things for the kid. You get in the habit of going to these places.
As in you are saying that nobody can succeed in living off less money than they had before. This is what I am giving a counter example for in my last reply. I have increased my salary over the years and I have very carefully kept my spending in check and given this continued habit I think it is entirely possible to retire on less income than now (i.e. 'live more cheaply') as expenses we now have (even used skates do cost money) will no longer be present at that time. Of course the jury is still out and we can talk again in 30 years and see how it actually turned out in the end ;) FWIW, if I look at my parents, same thing happened. Living off way less now in retirement than what they had before but it's OK. Kids are out of the house and self-sufficient. We were always frugal.
I'm not claiming how many people do and can do this. Just that it's absolutely possible. It's probably in the ballpark of people that can take 10 years of the beginning of their career to live so frugally that they retire at 32 with millions in the bank :)
In the same trivial sense, it's also an absolute ceiling for expense rate. Expenses are essential, and it's all about relative savings rate. Salary, ignorant of expenses, is meaningless for these discussions.
Yes I did. Your comment indicates that you don't understand ceiling. The article is overly simplistic in regards to things like cost of living, inflation, and returns on the savings.
Do you really think you can save 90% of your income and retire after 3 years? This is terrible financial advice and completely ignores functions and changes in spending due to life events. Not to mention, I don't believe that function is legitimate depending on retirement age and current age combinations.
Hell, in many places you can retire under those conditions if you "only" make $500k a year. The trick is to move to a much lower cost-of-living area after you retire, often abroad. If that kind of thing floats your boat, anyway.
If your income is $100k and you save $90k, spending $10k, after 3 years, you will have saved $270k. With growth, you might have $300k. To support your ongoing $10k annual expenses, you'd only be spending 3% of your portfolio. The math checks out. Of course with taxes, a savings rate of 90% is more than likely to be possible.
Not sure I agree. Trinity study suggests that if you retire 30 years before death, you can safely withdraw 4% every year during retirement, regardless of economic fluctuations. If you retire super early and need 50 or 60 years, your safe withdrawal rate is probably closer to 3% or even 2%, though.
Your point may be that we should expect significant economic turmoil in the near- and medium-term, much more than "fluctuations", which may be true, or may not be. Impossible to predict the future.
Consider that the 2021 inflation rate is likely a symptom of COVID. Monthly inflation rates for the last few months of 2021 were trending downward. Hopefully we can expect inflation to get back to something approaching normal by the end of 2022. Even if it takes a couple more years, there's no reason to expect that 7% inflation is the norm going forward.
(Also consider that people who are doing FIRE certainly don't have much in treasuries. It's going to be mostly in stocks. That certainly carries other risks, of course.)
> It's mostly a symptom of reckless monetary and fiscal policies.
... as a result of the pandemic...
The US public will not tolerate sustained high inflation. Congresspeople and presidents who push monetary and fiscal policies that increase inflation (and nominate Fed leadership that do the same) will get voted out over time.
Your chart measures a 12 month trailing computation. That number going up does not imply that the month-by-month inflation is actually going up. If that number went up in December all it means is that December 2021 had more inflation than December 2020. It says nothing at all about the relative inflation between November 2021 and December 2021.
Wow I never heard of the "Trinity Study", its a report written 25 years ago by a few guys at a small university I've never heard of. Remember back then bond yields were 5% and inflation was 2%, Clinton was president and the dotcom boom was really starting. Things are very different now.
I don't think "things are very different now" is a refutation of the study without providing more specifics. It's also been repeated more recently, with updated data. The 30-year results, I believe, still hold, but as I note, if your retirement horizon is much longer than 30 years, you'll have to be more conservative with your withdrawal rate.
That is actually, quite literally, inflation. It's money depreciating in value relative to stocks and financial products. Just like a burger at the golden arches shooting up in price is inflation, so is the price of a stock. It's probably not _only_ inflation, supply and demand will have caused the majority of this shift, since savers saw their money start evaporating. But that is of itself of course a second order effect of inflation, so I think the point stands.
Sure, but the only kind of inflation that really crushes people living off their investments is stagflation, where increasing prices of goods is not reflected in portfolio sizes. If your investments are growing way faster than the price of goods, there is no problem.
you might as well ask what's the point of insurance if you never wreck your car. I have some nice things, but none of them bring me as much peace as having a deep buffer for unexpected problems. if I learned that I would die in a month, I wouldn't be sad that I hadn't managed to burn all my money.
I am in the same mindset. I take deep satisfaction that I have something substantial to leave to my kids. I don't want to spend it on me. I don't like to travel, and I don't like "stuff." I have a few hobbies but they are not expensive.
>if I learned that I would die in a month, I wouldn't be sad that I hadn't managed to burn all my money.
I'd probably feel that way too. But I have to ask - how much thought have you really given it? I vaguely remember reading a surprising number of posts from HNW people that regretted not trying certain hobbies / activities when they were young enough fully enjoy them. That saying that no one on their deathbed says their biggest regret is that they didn't work harder, is probably a trope for a reason.
