Author Topic: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem  (Read 18954 times)


Penn42

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #1 on: September 08, 2018, 10:13:22 AM »
I mean, the article isn't wrong.  30 is a pretty lofty goal.  I applaud those who are able to do it whether it's through exceptionally high incomes and good choices with their money or ERE levels of frugality (which seems to me to not be a benchmark this forum uses that often).

I'm a millennial who is only here due to the increased exposure the FIRE mentality is getting.  It is pretty unlikely I'll be at full FIRE by the end of my 30's, but knowing I'm making early retirement (i.e. early/mid 40's) a reality for myself is still exceptionally empowering.  I think the main issue that inspires the likes of the Bloomberg article is that it's so much glamorous to focus on the smaller portion of this movement who accomplish this goal extremely early. 

There's so much less pizazz in the headline "Reduce your expenses by 20% and retire at 48" than there is in the NY times headline from last week.

Capt j-rod

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #2 on: September 08, 2018, 11:18:26 AM »
The absolute worst possible outcome for someone who is "fired" is a part time job to supplement. Seems like the machine is a little pissed that we aren't all drinking the consumer cool-aid.

EnjoyIt

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #3 on: September 08, 2018, 11:31:57 AM »
Honestly I believe that those very lean FIRE crowd are a little too optimistic. But that is their choice and if they are willing to take on part time work if needed to make it work then Kudos for them.  I like a little extra discretionary income in my plan that I can always cut back on vs being forced to cut lawns or working in Walmart for a few years.  But, that is what is so nice about our community we understand the math and the choices we make.

Dabnasty

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #4 on: September 08, 2018, 12:13:18 PM »
I guess I should just get used to it at this point, but yet another title that has little to do with the content. The author makes out like they will address the math of whether it's possible to retire at 30 and then they use an example of a median wage earner saving 20%. That should be a minimum goal for average people. Anyone working to retire early is well aware(hopefully) that they need to save considerably more than that and to retire as early as 30, earn considerably more as well.

If I were starting with my salary today, 22 years old, no savings and assuming their 2% returns on investment, the difference between saving 70% and 20% would change my FI age from 40 to 103(ignoring social security and using a 2% safe withdrawal rate.)

In other words, the math doesn't work if you use stupid numbers. Thanks for letting us know.
« Last Edit: September 08, 2018, 12:15:56 PM by Dabnasty »

Kay-Ell

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #5 on: September 08, 2018, 03:19:38 PM »
The point of it being easier to retire early if you come from a place of privilege is well taken. Iím not from the U.K. so I canít speak to the numbers used in the article but if you take these assumptions:

ďIn the U.K., the median salary is around 20,800 pounds ($27,000) after tax, according to data from the tax authorities. Assume half of that goes on needs and 30 percent on wants. That leaves 4,160 pounds for savings per year.ď

Then switch those numbers so youíre paying the same 50% on needs, reducing spending on wants to 20% and investing the remaining 30% with average returns of 7% - suddenly even this low income single person can retire in their mid 30ís (after 25 years). Improve on that situation with higher income and/or a frugal partner and the timeline can be reduced or the lifestyle can be increased.

fattest_foot

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #6 on: September 08, 2018, 04:15:26 PM »
I mean, I guess it does expose the dirty little secret that to retire extremely early, you have to have the salary to match. There's only so much cost cutting you can do.

But instead of focusing on insane goals like retiring by 30, why not examine retiring 5 years earlier? Would most average income earners be disappointed with 5 years of additional freedom?

It's not all or nothing. There are 30+ years between a retirement in your 30's and one at "traditional" retirement age.

marty998

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #7 on: September 08, 2018, 05:25:27 PM »
I mean, I guess it does expose the dirty little secret that to retire extremely early, you have to have the salary to match. There's only so much cost cutting you can do.

But instead of focusing on insane goals like retiring by 30, why not examine retiring 5 years earlier? Would most average income earners be disappointed with 5 years of additional freedom?

It's not all or nothing. There are 30+ years between a retirement in your 30's and one at "traditional" retirement age.

yes nothing wrong with finishing at 40 or 50/55 etc. But these aren't as click-baity as 30's :)

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #8 on: September 08, 2018, 05:38:44 PM »
I mean, I guess it does expose the dirty little secret that to retire extremely early, you have to have the salary to match. There's only so much cost cutting you can do.

I feel like the ERE folks in fact show that you can be FI at 30 with even a median salary. You just have to make some pretty extremely lifestyle choices (cost cutting). The reality is that almost all of us (including me) could cut our spending even more if we absolutely needed to, but we've hopefully each found our individual optimal point between being free from work earlier to improve happiness and avoiding lifestyle sacrifices that decrease happiness. That's going to be a different optimal point for each of us.

In other words, the math doesn't work if you use stupid numbers. Thanks for letting us know.

As excellent a summary of this article and far too much popular reporting on both investing and personal finance. With your permission I may borrow it in the future (with proper attribution of course!).

use2betrix

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #9 on: September 08, 2018, 06:27:47 PM »
Iím 30 right now and have made around 1.3-1.4 mil in my life so far. I cringe seeing those numbers compared to my net worth. That being said, Iím still way ahead of most 30 year olds and still on a very fast path to FIRE. If I wanted to not take any more sabbaticals and cut back my spending I could FIRE in 6-8 years. Instead, Iíll be cutting back to a few months of work a year before that point and continue that out a bit longer.

PhilB

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #10 on: September 09, 2018, 01:07:31 AM »
The kicker in the UK is the cost of housing in most areas. This generally prevents you from getting a properly mustachian savings rate unless you either have a salary well above the median, or help from parents.  It's easier for a couple with both earning, but not if they want to have kids.

MrThatsDifferent

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #11 on: September 09, 2018, 06:15:43 AM »
Yeah, what Malkyn said! I mean, sheesh. There arenít too many people that are advocating retiring by the time you turn 30, but itís entirely possible to set yourself on that path. To me they are missing key tenets that can be learned early and if applied can absolutely lead to ER by the end of your 30s or 40s, which is a helluva lot better than 67-70 that is currently being advocated. Those tenets?
1. Take on as little debt as possible
2. Create a budget that maximises what you value and minimizes consumerism and keeping up with Jonesís
3. Have a vision/goal of your post FT work life and create a budget that supports that life, understand what the 4% rule means
4. Save and invest as much as possible, as soon as possible
5. When investing, think index funds with the lowest fees and maximizing retirement accounts
6. Research and understand tax minimization strategies
7. Become more self-sufficient and challenge your thinking around wealth
8. Find like-minded people you can learn from, who support values around wealth
9. Know that itís never too late to change and if youíve made mistakes, you still have time to fix them, adjust and put yourself in the path
10. Remember: itís the journey, not the destination and you wonít achieve this over night, but youíll achieve it faster than you think if you keep at it
11. Continue to grow and increase your own value so that you can continually grow your income as much as possible while working, until FIRE
12. Once youíre FI, your RE can be and look however you want, you define it, it doesnít define you.

jlcnuke

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #12 on: September 09, 2018, 07:05:00 AM »
The absolute worst possible outcome for someone who is "fired" is a part time job to supplement. Seems like the machine is a little pissed that we aren't all drinking the consumer cool-aid.

If you think that's the absolute worst possible outcome, I'm afraid you haven't accurately considered all possible outcomes.

Fomerly known as something

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #13 on: September 09, 2018, 07:47:45 AM »
Funny, title says Millennials,  the two people with the most coverage are solidly Gen X and on the margins of Gen X/Millennial respectively.

Dabnasty

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #14 on: September 09, 2018, 07:58:01 AM »
In other words, the math doesn't work if you use stupid numbers. Thanks for letting us know.

As excellent a summary of this article and far too much popular reporting on both investing and personal finance. With your permission I may borrow it in the future (with proper attribution of course!).

Of course, and yes, this could summarize so many of these articles on why early retirement is dangerous or why even regular retirement will be difficult for millennials. If someone wants to discuss the possibility that stock market investing won't pan out in the future or that healthcare costs will ruin our well laid plans, then by all means, that's worth discussing. But just using silly numbers to show a single example? At least put together a simple table to show various saving rates/investment returns.

PizzaSteve

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #15 on: September 09, 2018, 08:41:45 AM »
I always feel those who target retirement at 30 should maybe consider that while a 20something job may feel less empowered, in your 30s and 40s your enhanced skills can allow for some pretty fun, cool and empowered difference making at work.

It is great to be FI by 30 (I was), but assuming one quits the work force is limiting.  How about using the FI to target only a job one loves, or taking more risks at work due to the confidence it brings.  For me I got a lot out of my job and hit burn out more at 50.  The habits of saving are great, but life goals change with maturity, kids, etc.

Articles like this tend to treat life plans as static.  What is interesting is that the habits of saving and investment compounding can create financial independence for any generation.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #16 on: September 09, 2018, 09:02:33 AM »

Seems like the machine is a little pissed that we aren't all drinking the consumer cool-aid.

Of course they are.  You're supposed to drink the kool-aid, and they're supposed to live off the blood of the exploited working class.  If you take that away, what's left to them? 

LifePhaseTwo

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #17 on: September 09, 2018, 09:56:45 AM »
[quote author=Malkynn

Also, my case exactly: Mustachians analyze the shit out of every possible goddamn scenario within which their lives could fall apart due to circumstances beyond their control.

Meanwhile, those same things could happen to anyone, and the early retiree will probably be in a much better position to handle it than the in-debt worker or the later in life retiree.

Normal age retirees donít generally do that. They just retire.

People also tend to forget that early retirees tend to retire with MORE money than traditional age retirees. So itís not like the late retirees have some kind of advantage, they just spent more on useless shit along the way. Let's compare apples to apples here.
[/quote]

Excellent points - well said.

BTDretire

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #18 on: September 09, 2018, 10:42:58 AM »
I mean, I guess it does expose the dirty little secret that to retire extremely early, you have to have the salary to match. There's only so much cost cutting you can do.

But instead of focusing on insane goals like retiring by 30, why not examine retiring 5 years earlier? Would most average income earners be disappointed with 5 years of additional freedom?

It's not all or nothing. There are 30+ years between a retirement in your 30's and one at "traditional" retirement age.

yes nothing wrong with finishing at 40 or 50/55 etc. But these aren't as click-baity as 30's :)

 One step farther, there is great pleasure in retiring at 62 knowing you have a large nest egg and can do anything you want, vs retiring a 62 and living on a monthly SS check.
 Saving for the future is a positive life event.

wageslave23

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #19 on: September 09, 2018, 11:14:47 AM »
Learning to be happy with less is probably the most valuable lesson from pursuing FIRE.  And nothing the economy or stock market does can take that away.

Paul der Krake

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #20 on: September 09, 2018, 11:32:36 AM »
Some of you are way too wrapped into this FIRE identity if you think this article is a hit job. It's merely pointing out that the math isn't going to work for many, many people.

But not you, incensed Bloomberg reader. You are one of the Chosen Ones.

jim555

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #21 on: September 09, 2018, 12:08:25 PM »
I don't see the math to retire at 30 without a crypto jackpot or inheritance. 

Zikoris

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #22 on: September 09, 2018, 12:25:27 PM »
I don't see the math to retire at 30 without a crypto jackpot or inheritance.

Try your math again using a dual income household with low expenses who start young.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #23 on: September 09, 2018, 12:47:07 PM »
I don't see the math to retire at 30 without a crypto jackpot or inheritance.

arebelspy did it, and he and his wife were both school teachers.  They took out mortgages on rental properties, retired at 30, and are now multimillionaires who travel the world on their passive income.

I retired at age 41, but I didn't get my first real job until I was 31 because I was in graduate school until then.  I did it the boring way, mostly by saving more than half of our family income and buying index funds.  Either way, I think ten years of working is approximately sufficient.

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #24 on: September 09, 2018, 01:08:19 PM »
I don't see the math to retire at 30 without a crypto jackpot or inheritance.

The math is quite simple. Essentially the two variables we need to know are when our hypothetical FIREee starts working, and what lifestyle they are willing to accept in early retirement.

-Now Jacob at ERE probably sets the low end of the distribution of the early retirement with an initial budget of only $7,000/year. But let's be generous and multiply that by 2x to $14,000/year.

-If a person first earns a college degree,* they might enter the workforce on their 22 birthday. As the Shockingly Simple Math post shows, if they save 70% of their post-tax income, they will be FI in 8.5 years, halfway through their 30th year.

-If their spending rate is $14,000/year, then a savings rate of 70% requires (14,000/(1.00-0.700)) = $46,700/year in income,** which is no unheard of for a college graduate with an highly employable major.

Now you or I can certainly argue with the degree of safety against unexpected future expenses provided by an annual spend of only $14,000/year. We can also state that $14,000/year is an annual spend so low that you or I would be unhappy. But the key thing to remember here is that individual people's tolerance for risk and breakeven points where they cease to receive increases in happiness are different. And the two criticisms described earlier in this paragraph are the exact same criticisms people on bogleheads tend to have when MMMers venture over there and mention planning to retire with less than $3-5M saved.

*If you started straight out of high school at age 18, you would need a 60% savings rate (12.5 years to FIRE), and thus a take home income of (14,000/(1.00-0.600)) = $35,000/year. As this works out to $17.50/hour pretax it is, indeed, a rather high target for an 18 year old with a high school diploma.
 
**Actually probably a bit more to account for payroll taxes and federal/state income taxes, although hopefully they have access to a 401k + IRA and are able to minimize the bite of the latter.

Apple_Tango

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #25 on: September 09, 2018, 01:13:07 PM »
Mike and Lauren just put up a great video detailing how they are ďretiredĒ or to split hairs, became very part time business owners, at age 30 with an average annual combined salary of $56,000. Family of 3.

Awesome freaking story :) https://youtu.be/ixSC1fTC9i8
« Last Edit: September 09, 2018, 01:15:31 PM by Apple_Tango »

MrThatsDifferent

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #26 on: September 09, 2018, 02:45:02 PM »
I don't see the math to retire at 30 without a crypto jackpot or inheritance.

The math is quite simple. Essentially the two variables we need to know are when our hypothetical FIREee starts working, and what lifestyle they are willing to accept in early retirement.

-Now Jacob at ERE probably sets the low end of the distribution of the early retirement with an initial budget of only $7,000/year. But let's be generous and multiply that by 2x to $14,000/year.

-If a person first earns a college degree,* they might enter the workforce on their 22 birthday. As the Shockingly Simple Math post shows, if they save 70% of their post-tax income, they will be FI in 8.5 years, halfway through their 30th year.

-If their spending rate is $14,000/year, then a savings rate of 70% requires (14,000/(1.00-0.700)) = $46,700/year in income,** which is no unheard of for a college graduate with an highly employable major.

Now you or I can certainly argue with the degree of safety against unexpected future expenses provided by an annual spend of only $14,000/year. We can also state that $14,000/year is an annual spend so low that you or I would be unhappy. But the key thing to remember here is that individual people's tolerance for risk and breakeven points where they cease to receive increases in happiness are different. And the two criticisms described earlier in this paragraph are the exact same criticisms people on bogleheads tend to have when MMMers venture over there and mention planning to retire with less than $3-5M saved.

*If you started straight out of high school at age 18, you would need a 60% savings rate (12.5 years to FIRE), and thus a take home income of (14,000/(1.00-0.600)) = $35,000/year. As this works out to $17.50/hour pretax it is, indeed, a rather high target for an 18 year old with a high school diploma.
 
**Actually probably a bit more to account for payroll taxes and federal/state income taxes, although hopefully they have access to a 401k + IRA and are able to minimize the bite of the latter.

I think the college graduate route is the better one to model, but it assumes something major, not having many loans to repay, which is hard. So you need a lot going for you from a young ageógreat grades, scholarships, affordable schools, minimal expenses, helpful parents and a strategy. Definitely possible though.

I personally donít think 30 should be anyoneís target, but 40 would be great and 50 the max.

Goldielocks

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #27 on: September 09, 2018, 02:54:55 PM »

Bloomberg Opinion's gloomy reply to story highlighting the FIRE revolution:
https://www.bloomberg.com/view/articles/2018-09-07/millennials-on-fire-risk-getting-burned-fingers?utm_campaign=news&utm_medium=bd&utm_source=applenews

Original NYT story (featuring many familiar names!):
https://www.nytimes.com/2018/09/01/style/fire-financial-independence-retire-early.html
Hah!  Thanks for that. I just read the NYT story and this popped out..

"Followers of FIRE tend to be male and work in the tech industry, left-brained engineer-types who geek out on calculating compound interest over 40 years, or the return on investment (R.O.I.) on low-fee index funds versus real estate rentals."


First, I am not male,(tee hee);  and second -- this makes it sound like only a minority of the population geeks out on calculating compound interest, etc.   Isn't it closer to 1 in 2?  :-)


"ďWeíve just chosen to live far below our means. That itself is a radical idea.Ē"
  Pure gold.
« Last Edit: September 09, 2018, 02:57:09 PM by Goldielocks »

Paul der Krake

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #28 on: September 09, 2018, 03:19:29 PM »
I think the college graduate route is the better one to model, but it assumes something major, not having many loans to repay, which is hard. So you need a lot going for you from a young ageógreat grades, scholarships, affordable schools, minimal expenses, helpful parents and a strategy. Definitely possible though.
Median college debt upon graduation (which doesn't include people who have none), is what, 30-35k? It's nothing compared to what it will take to achive FIRE in your 30s.

Why focus on what the average person can do when it's very clear that MMM readers are nothing but average?

They're way more likely to be college-educated, way more likely to own stocks, way more likely to be young, way more likely to be immigrants, way more likely to be in good physical shape, way less likely to have ever been arrested, etc. They are not a representative cross-section of society any way you look at it.

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #29 on: September 09, 2018, 03:20:14 PM »
Agreed, that is definitely an assumption and one that won't be true for all college graduates. I should have included that disclaimer in my post, thank you for pointing it out, MrThatsDifferent.

However, having student loans isn't necessarily a kiss of death for extreme early retirement: The average college grad owes about $17k in student loans. If we consider only people who graduated with some degree of debt (so removing all the people without loans from the denominator), that number is closer to $30k. But consider that in the college-educated retire-at-30 scenario, our potential retiree is accumulating assets at a rate of ~$32,700/year. So we're talking about either an extra year of work or needing to earn an average of 7.5% more year relative to a person who graduated with no student loans at all (so needing an income of ~$50k/year).

I personally donít think 30 should be anyoneís target, but 40 would be great and 50 the max.

I do disagree with your last sentence. Certainly no one should feel bad if they aren't able to make their personal numbers work for retirement within less than a decade of entering the workforce but I also I don't think we should be in the position of dictating how early is too early for people who can make the numbers work. (Or conversely dictating how late is too late for people who either enjoy their work or have had to face a lot of financial headwinds over the course of their lives.) 30 didn't work out for me,* but I can understand why it would for others.

*And I should still manage to hit FI, if not FIRE, within 8 years of completing my education.

Gyosho

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #30 on: September 09, 2018, 04:20:48 PM »

I retired at age 41, but I didn't get my first real job until I was 31 because I was in graduate school until then.  I did it the boring way, mostly by saving more than half of our family income and buying index funds.  Either way, I think ten years of working is approximately sufficient.

I too didn't get my first real job until I was 30 because I was in graduate school until then. I also saved more than half my income and bought index funds. <- Could this be the key to early retirement?

I wasn't able to retire until 56, (well, I could have retired earlier, but I was enjoying my job until then), but I also believe 25 or so years of working is more than sufficient.

I'm not male either.
« Last Edit: September 09, 2018, 04:27:03 PM by Gyosho »

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #31 on: September 09, 2018, 04:39:03 PM »
The Bloomberg article isn't very well written and is light on details, but I appreciate the reality checking.

I'm of the opinion that FIRE is oversold right now. The blog-o-sphere likes to paint it as a feat that is achieved through quirky and frugal lifestyles. More often than not though, you get there with (preferably dual) high incomes and a modest but comfortable, Western/American lifestyle. It's more profitable if you make it seem like everyone can do it though.

Too often, media coverage of FIRE amounts to shallow fluff pieces that are tantamount to marketing for people who are already rich to make even more money, which in itself, alters the FIRE narrative that they're selling.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #32 on: September 09, 2018, 05:08:21 PM »
I'm of the opinion that FIRE is oversold right now.

I think it is drastically undersold.  As in, there is a fundamentally society-altering transition under way and only 2% of the public has any idea what's going on.  I think it's an idea that could see 100% growth for many consecutive years.

Quote
you get there with (preferably dual) high incomes and a modest but comfortable, Western/American lifestyle.

The whole point of this website is that your income doesn't matter.  Only your savings rate matters.  You can retire just as fast on $30k/year as you can on $300k/year, if you are comfortable living on 40% of your income.  That's the only variable that matters.

Is it easier to live on 40% of $300k than of $30k?  Of course it is, but there are literally thousands of other people already doing it and you could do.  I guarantee you that some of those people are happier than you are.  As someone pointed out above, bogleheads sniffs at MMM level poverty in much the same way that MMM sniffs at ERE level poverty.  And the Bouviers or Vanderbilts of the world sniff at bogleheads level poverty for the exact same reason. 

No matter where you are on the economic ladder, you think everyone below you is dangerously close to catastrophe.  I recently watched a youtube video of a businessman claiming that anyone who is worth less than ten million dollars was mere moments away from being homeless because he "can't even afford to provide adequate legal defense for his own family."  He honestly thought that anyone with a single digit number of millions of dollars was not yet financially secure enough to stop working 80 hour weeks on building his wealth, because financial insolvency was hiding right around the corner (at which point he would probably have to work 80 hours per week to support himself).  It was kind of sad, really.  Priorities, people!
« Last Edit: September 09, 2018, 05:16:59 PM by sol »

jim555

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #33 on: September 09, 2018, 05:09:49 PM »
I personally donít think 30 should be anyoneís target, but 40 would be great and 50 the max.
Whew, just made it in at 49.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #34 on: September 09, 2018, 05:19:56 PM »
30 didn't work out for me,

Don't feel bad, it's just shorthand designed for the majority of people who enter the workforce at younger ages.  Those of us who sentenced ourselves to extra years of co-eds and beer pong in our 20s probably get a pass.  I figure I was kind of pre-retired for all of those years before I started working. 

Except for the last year of my thesis.  That was definitely work. 

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #35 on: September 09, 2018, 05:49:17 PM »
The whole point of this website is that your income doesn't matter.  Only your savings rate matters.  You can retire just as fast on $30k/year as you can on $300k/year, if you are comfortable living on 40% of your income.  That's the only variable that matters.

I guess that's why we see a roughly uniform distribution of success stories across all levels of income ;)

By saying that only savings rate matters, you're implicitly saying that income matters because your savings rate is a function of your income. Quite literally. It's the denominator.

I don't doubt that there are exceptions here and there that prove the rule. And hats off to those people. But the modern ER Internet community (as measured by the launch of the MMM blog) has existed exclusively in a historic bull market and after the passage of landmark healthcare legislation (for us Americans). I'll be interested in seeing what the landscape looks like in five to ten years for the lower income folks, given that ObamaCare was recently imperiled, and that a 'FIRE at the margins' plan can get blown up in one year of hitting a family out of pocket max. Even then though, the universe of observable cases will probably suffer from some survivorship bias.

Unemployment is at 4%. Downward market volatility simply hasn't been a thing for almost a decade. And you have a good number of people making money, ironically by selling an anti-consumerism message on what I'll generously call, incomplete information. All that makes me think that FIRE as a concept is at something of a local maximum right now.
« Last Edit: September 09, 2018, 05:51:55 PM by mathlete »

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #36 on: September 09, 2018, 06:20:36 PM »
Quote
I personally donít think 30 should be anyoneís target, but 40 would be great and 50 the max.

I do disagree with your last sentence. Certainly no one should feel bad if they aren't able to make their personal numbers work for retirement within less than a decade of entering the workforce but I also I don't think we should be in the position of dictating how early is too early for people who can make the numbers work. (Or conversely dictating how late is too late for people who either enjoy their work or have had to face a lot of financial headwinds over the course of their lives.) 30 didn't work out for me,* but I can understand why it would for others.

I too, strongly believe that people should aim to have a basic, minimum retirement funded by age 30...

e.g., have sufficient money at age 30, that, if untouched, will grow by age 65 to offer a very basic retirement that you can live on, but not be wealthy.   I don't mean everyone should stop working at age 30.

It is the ultimate FU money to know that your retirement is already secured, and the nearly 40 years of growth after age 30 really pays off and requires only a smallish amount.

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #37 on: September 09, 2018, 06:31:35 PM »
I don't doubt that there are exceptions here and there that prove the rule. And hats off to those people. But the modern ER Internet community (as measured by the launch of the MMM blog) has existed exclusively in a historic bull market and after the passage of landmark healthcare legislation (for us Americans).

I think this statement might be the crux of the issue. I would date the modern ER internet community back to the launch of Jacob's ERE blog right as the economic world was starting to come apart during the great recession. A lot of the concepts, norms, and principles that we still talk about today trace back to that era.* A lot of the success stories I'm familiar with who FIREd on low to average incomes in a decade are personalities I first became aware of on the ERE forums (although a number of them did migrate here over the years).

So on reflection, I guess I can see how someone who only came to the community more recently (say in the last 2-3 years) would mostly see the super high income (and super high two income household) success stories where people are still spending way above the median household income even after FIRE, and assume that this was where the concept of early retirement had originated.

*Heck, if you look at the original Shockingly Simple Math Behind Early Retirement post, it included a graph from Jacob's book on the same concept. https://web.archive.org/web/20120115012049/https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ (it looks like at some point since 2012, the post was edited to use a different graph instead, perhaps a copyright issue? Or just to simplify and remove all the different curves for different assumed rates of return.).
« Last Edit: September 09, 2018, 06:48:10 PM by maizeman »

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #38 on: September 09, 2018, 06:37:23 PM »
30 didn't work out for me,

Don't feel bad, it's just shorthand designed for the majority of people who enter the workforce at younger ages.  Those of us who sentenced ourselves to extra years of co-eds and beer pong in our 20s probably get a pass.  I figure I was kind of pre-retired for all of those years before I started working. 

Except for the last year of my thesis.  That was definitely work.

Agreed, there were a lot of features of life as a grad student that were a lot like how I'd envision a FIRE lifestyle, so I also consider it an issue of just having shifted the years I need to work a bit later in life.

I'm also reasonably sure I wouldn't be where I am today if I didn't have the experience learning just how happy you can live on a grad student stipend, even in one of the most expensive parts of the USA.

wannabe-stache

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #39 on: September 09, 2018, 06:45:59 PM »
Some of you are way too wrapped into this FIRE identity if you think this article is a hit job. It's merely pointing out that the math isn't going to work for many, many people.

But not you, incensed Bloomberg reader. You are one of the Chosen Ones.

agree 100%.  1000%, were it mathematically possible.  people take everything as an affront to their dogmatic principles.

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #40 on: September 09, 2018, 07:06:47 PM »

I think this statement might be the crux of the issue. I would date the modern ER internet community back to the launch of Jacob's ERE blog right as the economic world was starting to come apart during the great recession. A lot of the concepts, norms, and principles that we still talk about today trace back to that era.* A lot of the success stories I'm familiar with who FIREd on low to average incomes in a decade are personalities I first became aware of on the ERE forums (although a number of them did migrate here over the years).


Perhaps I have some reading to do. Any personalities w/ FIRE journals that you'd recommend? Full disclosure, while I would approach these stories with an open mind, I fully intend on breaking down and scrutinizing each situation to see if it really refutes my narrative or not. If you find that distasteful, I completely understand. Even if people are voluntarily sharing their stories, they might not appreciate being put under the microscope.


agree 100%.  1000%, were it mathematically possible.  people take everything as an affront to their dogmatic principles.

[INNUMERATE EXPRESSION OF ADDITIONAL AGREEMENT]

While I wish the Bloomberg opinion was better, I'll take healthy skepticism where I can get it. Most media coverage of FIRE is a book advert.

Goldielocks

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #41 on: September 09, 2018, 07:09:27 PM »
Some of you are way too wrapped into this FIRE identity if you think this article is a hit job. It's merely pointing out that the math isn't going to work for many, many people.

But not you, incensed Bloomberg reader. You are one of the Chosen Ones.

agree 100%.  1000%, were it mathematically possible.  people take everything as an affront to their dogmatic principles.
I am affronted by the casual approach to the math / facts behind the article, ..shitty flawed assumptions and bad math irritate the crap out of me....
....not so much the fact that there is an article pointing out that many people are very unrealistic to think they can go from broke and in debt at age 27 to FIRED at age 30, because of the trendy articles and bloggers right now who did it.

I think there are way too many people who don't have any money at age 30, people who don't have a very good reason why that is a fact for them.   AND there is a n overlap with the group of people who think they can retire at age 30...

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #42 on: September 09, 2018, 07:15:34 PM »
Perhaps I have some reading to do. Any personalities w/ FIRE journals that you'd recommend? Full disclosure, while I would approach these stories with an open mind, I fully intend on breaking down and scrutinizing each situation to see if it really refutes my narrative or not. If you find that distasteful, I completely understand. Even if people are voluntarily sharing their stories, they might not appreciate being put under the microscope.

Well if you'd like to be formal about it, perhaps it'd be best if you first lay out the specific assertions of your narrative?

Then -- assuming we are in fact is disagreement -- I'd be happy to point out the subset of assertions where I disagree, and reference the information/concepts/examples I believe support my disagreement, and we can go from there.

Kyle Schuant

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #43 on: September 09, 2018, 07:23:43 PM »
Ugh. I just hate sloppy journalism.
I've exchanged a couple of emails with him. To my mind, his article is the financial equivalent of all those articles talking about how exercise doesn't help you lose weight and every food is carcinogenic. The underlying message is, "it's impossible, don't even try, just keep spending and living on cigarettes and KFC."

It's impossible to make things perfect. But we can make them better. I'd like to see more productive articles in the media.

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #44 on: September 09, 2018, 07:29:03 PM »
Well if you'd like to be formal about it, perhaps it'd be best if you first lay out the specific assertions of your narrative?

Then -- assuming we are in fact is disagreement -- I'd be happy to point out the subset of assertions where I disagree, and reference the information/concepts/examples I believe support my disagreement, and we can go from there.

1.) Early retirement, in the abstract, is a luxury that is mostly affordable to only high income families.
2.) This goes double or triple for the media darling stories of early retirement. These stories often promote a more marketable story of cutting expenses over the less marketable, "make more money" and are usually backed with some degree of profit motive.
3.) Though the math ostensibly works at all levels of income, factors such as the inelastic demand for healthcare puts lean early retirees at a greater risk.

Perhaps looking at these stories isn't that germane to my point anyway.

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #45 on: September 09, 2018, 07:46:02 PM »
Well if you'd like to be formal about it, perhaps it'd be best if you first lay out the specific assertions of your narrative?

Then -- assuming we are in fact is disagreement -- I'd be happy to point out the subset of assertions where I disagree, and reference the information/concepts/examples I believe support my disagreement, and we can go from there.

1.) Early retirement, in the abstract, is a luxury that is mostly affordable to only high income families.
2.) This goes double or triple for the media darling stories of early retirement. These stories often promote a more marketable story of cutting expenses over the less marketable, "make more money" and are usually backed with some degree of profit motive.
3.) Though the math ostensibly works at all levels of income, factors such as the inelastic demand for healthcare puts lean early retirees at a greater risk.

Perhaps looking at these stories isn't that germane to my point anyway.

Yeah, looking at your points it seems like they'd be hard to falsify with individual examples, since #1 and #2 are statements about your views of the proportion of different populations which satisfy a set of criteria rather than absolutes. 

For #1, you may also need to quantify how early a retirement has to qualify as "early" and what the lowest level of income you consider to be "high."

For #2, we (as a community, not you and I as far as I can recall), have indeed had long discussions about how a dollar of reduced spending ends up being much more valuable than a dollar of increased income when it comes to accelerating when people hit FI. Are you in disagreement with that conclusion? If so, I'm happy to discuss the reasoning/logic here further to see where your thinking and mine diverge.

For #3, absolutely. Having more money is always going to be less risky than having less money. However, a potential early retiree confronts two issues:

1) As folks like Retire-Canada are fond of pointing out, each additional year you work is a guaranteed year less to live your life the way you want to live it. So additional savings comes at a guaranteed cost, even as it decreases risk.

2) While the decreased risk provided by having more money is always a positive number, the marginal risk reduction of saving more money decreases as total money saved increases. Since it is impossible to have enough money for risk to reach zero, how much is "enough" ends up boiling down to individual risk tolerances, which can vary dramatically between individuals.

Goldielocks

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #46 on: September 09, 2018, 10:49:07 PM »
Low income example (basic)....  Let's ignore inflation and the impact of CPI on wages and cost of living. 

Income $36k/yr, after tax.
Save $12k/yr from age 20 to age 40.   (Because income is low, let's assume this person just went into a trade or work directly)

Total saved at age 40 is $400k  (invested at 5%/yr growth, net of inflation)

Spend $22k/yr from age 40 to age 65.  (Money is now moved to 2%% returns).Move someplace cheaper to make this happen.
At age 65, live off government money, approx $18k/yr plus other provided medical supports and a few subsidies like transit so costs decrease a tad....   

That is one example of retire early in Canada for very low income persons.  The trick is figuring out how to live on about $2k per month for a single adult.  I believe it is possible.

Several of the stories in the news include Canadians.   I am not sure how Americans do it, but there must be a way..  Some examples have one spouse working for benefits, while the other one saves and is "FIRED"...  Or maybe living with relatives and renting a room / contributing to an extended family home.  ERE included a trailer / trailer park set up. etc.

Cranky

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #47 on: September 10, 2018, 05:17:56 AM »
While I think that many people *can* stash away a substantial sum of money if they start early and are willing to accept a pretty low standard of living to do so, I'm not sure that everyone wants to make that trade off, especially if "retirement" means continuing to live on a very tight budget. I'm great with laying out the principles for people, but not everyone, and maybe not most people, will choose that.

In our case, dh didn't "work" until he was 30yo and finished his PhD, at which point, we wanted to have a family. 3 kids on a postdoc's salary didn't leave a lot of room for saving, and there was absolutely no way we would have come out ahead paying for childcare.

But honestly - that's okay! Dh really likes what he does. It's interesting and challenging. When he retires in a few years, I think he's going to miss it, a lot.

I think there are a couple of paths, probably many, many paths to a happy life. Some people choose to leave work early and pretty much anything is worth it for them to achieve that. I think pretty much everyone is happier with a solid financial life, a good sized emergency fund, living below your means, and that's hard enough for many people to achieve.

It's not because their suckers, it's because they value different things.

I'm also surprised at how many people seem to think that early retirement is a brand new thing. My grandfather retired in his 50's in the actual 1950's. And there used to be lots of pensions that you could claim full benefits after 30 years, so my area is full of people who worked in factories or for the government and retired in their 40's.

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #48 on: September 10, 2018, 09:23:10 AM »
Yeah, looking at your points it seems like they'd be hard to falsify with individual examples, since #1 and #2 are statements about your views of the proportion of different populations which satisfy a set of criteria rather than absolutes. 

For #1, you may also need to quantify how early a retirement has to qualify as "early" and what the lowest level of income you consider to be "high."

For #2, we (as a community, not you and I as far as I can recall), have indeed had long discussions about how a dollar of reduced spending ends up being much more valuable than a dollar of increased income when it comes to accelerating when people hit FI. Are you in disagreement with that conclusion? If so, I'm happy to discuss the reasoning/logic here further to see where your thinking and mine diverge.

For #3, absolutely. Having more money is always going to be less risky than having less money. However, a potential early retiree confronts two issues:

1) As folks like Retire-Canada are fond of pointing out, each additional year you work is a guaranteed year less to live your life the way you want to live it. So additional savings comes at a guaranteed cost, even as it decreases risk.

2) While the decreased risk provided by having more money is always a positive number, the marginal risk reduction of saving more money decreases as total money saved increases. Since it is impossible to have enough money for risk to reach zero, how much is "enough" ends up boiling down to individual risk tolerances, which can vary dramatically between individuals.

For #1 - Prime, I get your point. You're right, most people, regardless of income, can probably take this advice and retire early. But FIRE as a concept isn't sold on that. It's sold on the backs of people retiring in their 30s. This is done, by and large, with hefty incomes and modest, middle class spending. It's not as desirable/enviable otherwise. This is why I think it is oversold. Because that brand of FIRE (gazillionaire by 30!!) is being sold to low and middle income people thanks to a media love affair with web personalities, and said personalities leaning a bit too hard on the role that cutting spending plays. i.e., no one is driving millions of dollars in consumption and generating tens of thousands in ad revenue based on their story of retiring at age 58.

For #2 - Prime, mathematically, I understand the concept you're talking about. If you move one dollar from spending to savings, that impacts your savings rate by a greater percentage than earning an additional dollar and saving it. Because in the second scenario, you're adding a dollar to both the numerator and the denominator, so the ratio doesn't increase as much.

Realistically though, there are floors to cutting spending that most reasonable people probably should consider. Saving 50% of your income at the median ($58K) is difficult for working families. That means living on close to FPL spending for a family of four. Some people manage to do it, but they're looking at razor thin margins if they decide to retire IMO. 

For someone like me, who isn't yet 30 but makes almost 3X the median household income, saving 50% or more isn't heroically austere, it's practically an afterthought. I should be the target audience for this stuff. A nerdy, high income white guy with a cooperative partner. But the message that dreams are achievable on austerity alone is getting a wide reach now. And while the anti-consumerist in me appreciates this, I think it's a bit oversold and should be met with some healthy skepticism. I only wish the naysayers like Bloomberg were doing a better job.
« Last Edit: September 10, 2018, 09:24:50 AM by mathlete »

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #49 on: September 10, 2018, 09:37:01 AM »
While I think that many people *can* stash away a substantial sum of money if they start early and are willing to accept a pretty low standard of living

"Low standard of living" is kind of a relative term, right?  Most human beings on planet Earth today have a lower standard of living than 98% of American citizens.  Do you have a heated residence and indoor plumbing?  An automobile?  Internet access?  Congratulations, you're part of the global elite!

And if you're above that basic level of wealth, I assure you that you're still considered destitute by someone higher up on the ladder than you are.  Jeff Bezos has lunch with his friends and tries not to wince at how shabby their 70 foot yacht is compared to his megacruiser.  Oh it must be so hard to live with a private yacht staff of only 9 people!  It doesn't even have a helipad, what are you supposed to do if you run out of milk and need to fly into town real quick, nevermind having a medical emergency while at sea.  A yacht that size is literally a deathtrap!  Your poverty is a threat to your health and safety, you have to earn more!