Author Topic: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem  (Read 18952 times)

fattest_foot

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #50 on: September 10, 2018, 09:41:12 AM »
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.

I think selling early retirement as "only for high income families" is damaging.

The idea that we're all stuck in a certain income class for life is a fallacy. There are a few articles that you can find it in (not sure if they all cite the same study), but close to three-quarters of all people will spend at least one year earning in the top 20% of income (about $80k in today's dollars), and more than half will spend at least one year earning in the top 10% ($110k in today's dollars).

If you live by the principals of the FIRE community even when you're earning a low to medium wage, if/when you do crack those higher salaries, you'll be able to rocket yourself towards an earlier retirement. Unfortunately, most people will see those fat years as an opportunity to spend well above their typical lifestyle. Worse, is they may expect that salary to be the new norm and allow lifestyle inflation to take over even when their income falls again.

My wife and I are a good example of this. We spent a long time making below average to average salaries ($30-60k household) and saved what we could. It took almost a decade for us to hit $100k in savings. But then, when we hit our 30's, we just continued our spending habits while our salaries doubled. Now we've got a savings rate of around 65% and in the last 2-3 years our acceleration towards FIRE is increasing rapdily.

Lews Therin

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #51 on: September 10, 2018, 09:43:36 AM »
How about a boring person who becomes a plumber or electrician? That doesn't require university, so can start working at 20. He's going to FIRE in his 20s no sweat.

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #52 on: September 10, 2018, 09:47:12 AM »
"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!

Forgoing public health advances like plumbing also means a reduction in life expectancy of around a decade (gleaned by compared industrialized and developing nations). So I'm not sure how relevant this is in a discussion on financial independence. Cutting back from a RAV4 and Tundra in the garage to just one Camry isn't going to meaningfully affect anyone's health.

My point is that there are levels of austerity that do and do not make (common) sense in the pursuit of early retirement. Someone living on $30K a year might be able to engineer a situation where they're living in third world conditions while saving at a mega high rate. Their imperiling their own health and safety, though.

mizzourah2006

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #53 on: September 10, 2018, 09:52:16 AM »
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.

Keep in mind this past 10 years has involved some great returns though too. The CAGR has been over 11%. If instead you had started in in 1998 and wanted to retire in 2008 you would have seen a 10 year CAGR of 3.91%.


Side note: I used the dates of Sept. 10th and the SPY to calculate the CAGR, so numbers may vary slightly.

Zikoris

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #54 on: September 10, 2018, 09:55:17 AM »
My point is that there are levels of austerity that do and do not make (common) sense in the pursuit of early retirement. Someone living on $30K a year might be able to engineer a situation where they're living in third world conditions while saving at a mega high rate. Their imperiling their own health and safety, though.

When I made 30K I was able to save tons of money and still have a great standard of living. My first full year of FIRE-seeking included a trip to Paris and a Caribbean cruise, in addition to my nice Vancouver apartment, home grocery delivery, ballroom dance lessons, and all the other fun stuff I was doing at the time. You don't know what you're talking about, and people like you do damage to the FIRE movement.

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #55 on: September 10, 2018, 09:56:11 AM »

I think selling early retirement as "only for high income families" is damaging.

The idea that we're all stuck in a certain income class for life is a fallacy. There are a few articles that you can find it in (not sure if they all cite the same study), but close to three-quarters of all people will spend at least one year earning in the top 20% of income (about $80k in today's dollars), and more than half will spend at least one year earning in the top 10% ($110k in today's dollars).

Couple of things.

1.) hitting that income for one year is a lot less useful than hitting it for the 10+ years in a row that even the highest savings rate scenarios require in order to achieve financial independence.

2.) Incomes are not randomly distributed by age. I would guess that most of the people who make up this statistic of hitting the top 20% are going to do so in their late 40s and 50s, after the ship has sailed with regards to a super early retirement.

I have a top 10% income in my 20s and I'll likely stay in that range for as long as I decide to work. I am a candidate for these dream stories in a way that others are not.

I don't object to the idea that early retirement (pre 65) is for almost everyone. I just don't really like the way it's being framed right now.

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #56 on: September 10, 2018, 09:57:23 AM »

When I made 30K I was able to save tons of money and still have a great standard of living. My first full year of FIRE-seeking included a trip to Paris and a Caribbean cruise, in addition to my nice Vancouver apartment, home grocery delivery, ballroom dance lessons, and all the other fun stuff I was doing at the time. You don't know what you're talking about,

N = 1

and people like you do damage to the FIRE movement.

This isn't something that I'm particularly concerned about.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #57 on: September 10, 2018, 09:59:25 AM »
My point is that there are levels of austerity that do and do not make (common) sense in the pursuit of early retirement. Someone living on $30K a year might be able to engineer a situation where they're living in third world conditions while saving at a mega high rate. Their imperiling their own health and safety, though.

Jacob at ERE wasn't living in third world conditions, and he was spending $7k/year.

My point was that you seem to have grossly misunderstood what level of austerity can be maintained while still living a relatively normal first world lifestyle.  Most of the public reading these articles just can't fathom that anyone out there is spending less than they are, and yet living better.  Look at MMM's home life as documented in the blog for guidance, and realize that ERE crowd spends less and the bogleheads crowd spends more, and they all get by just fine despite thinking that everyone below them is "imperiling their own health and safety."

Was MMM "living in third world conditions" when his family was spending $30k/year?  Why would you claim this, on a blog that just spent the past five years documenting how awesome life can be on that amount of money?

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #58 on: September 10, 2018, 10:02:21 AM »
N = 1

Now I know you're just trolling.  MMM makes n=2, rebs makes n=3, spartana makes n=4, and the links in this thread make n=5, 6, and 7.  How many more do you need to see before you stop claiming it can't be done?


mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #59 on: September 10, 2018, 10:06:10 AM »
Jacob at ERE wasn't living in third world conditions, and he was spending $7k/year.

My point was that you seem to have grossly misunderstood what level of austerity can be maintained while still living a relatively normal first world lifestyle.  Most of the public reading these articles just can't fathom that anyone out there is spending less than they are, and yet living better.  Look at MMM's home life as documented in the blog for guidance, and realize that ERE crowd spends less and the bogleheads crowd spends more, and they all get by just fine despite thinking that everyone below them is "imperiling their own health and safety."

Was MMM "living in third world conditions" when his family was spending $30k/year?  Why would you claim this, on a blog that just spent the past five years documenting how awesome life can be on that amount of money?

I don't know why you're putting third world conditions in scare quotes when you were the one who brought it up by way of comparing indoor plumbing and internet access to what some in the rest of the world live on.

No, MMM and family were not living in third world conditions on $30K a year spending. They were living on $30K a year spending. You're conflating living on $30K spending and a super high savings rate (driven by your high income), and living on $30K of income and a super high savings rate (driven by extreme austerity). Not really the same thing.

With regards to how awesome life can be, life is awesome when you're a celebrity blogger. While I truly believe that it can be very very awesome if you're a garden variety person living on $30K, I'd say that it's decidedly less so.

I don't know Jacob of ERE and can't really comment on that until I make time to read up on him.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #60 on: September 10, 2018, 10:08:03 AM »
I don't know why you're putting third world conditions in scare quotes

I wasn't putting it in square quotes, I was literally quoting your words back to you.  Using quotation marks, which are the appropriate punctuation to use when quoting someone else's words.


mizzourah2006

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #61 on: September 10, 2018, 10:10:36 AM »
How about a boring person who becomes a plumber or electrician? That doesn't require university, so can start working at 20. He's going to FIRE in his 20s no sweat.

Let's run your math. Plumbers where I grew up make an average of about $45k/yr. Let's assume that is the average through their 20s.

- FICA taxes: $3,442.5
- Let's assume he/she saves 20% of their remaining in a 401k ($8,311.5)
- Pays federal and state taxes on the remaining $33,246
- $27,878.10 remaining

Bottom line is about 15-20% would be taken away in taxes even at a relatively low income. Even if they could get by on about $19k/yr and max out their 401k.

This is extremely simplistic because it would need to assume you make enough to max out the 401k every year and still have about $18-$20k/yr left to live off of. It's more likely you start out making in the $30ks and end your 20s making closer to $50-$55k/yr. But keeping the simplistic assumption you'd need a CAGR of just over 21% for the years 20-29 to retire with the half a million you'd need to maintain that $20k/yr lifestyle.

So, retire in your 20s no sweat....I'd say he/she would need a bit of help or an abnormal plumber/electrician income (at least in the midwest in a moderately priced cost of living city).

mathlete

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #62 on: September 10, 2018, 10:15:18 AM »
N = 1

Now I know you're just trolling.  MMM makes n=2, rebs makes n=3, spartana makes n=4, and the links in this thread make n=5, 6, and 7.  How many more do you need to see before you stop claiming it can't be done?

I'm not claiming that it can't be done, I'm supporting my argument that it's oversold. People who spend a lot of time here know the score, and I'm not concerned about them. They know that even if they can't achieve the mega star success stories that are pitched in the NYTimes article, they can dramatically improve their lives by cutting needless spending. That's all good.

But the way the concept is sold to a general audience often borders on disingenuousness and that misinforms and bums out less educated people. We recently had a (now deleted) thread from one of these people. And I know for a fact that there are many more out there.

I wasn't putting it in square quotes, I was literally quoting your words back to you.  Using quotation marks, which are the appropriate punctuation to use when quoting someone else's words.


My mistake. I made an inference based on context, but clearly it was the wrong one. Thanks for clearing that up.

PoutineLover

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #63 on: September 10, 2018, 10:15:42 AM »
I won't retire in my thirties, but I think I can make it by my forties and I am currently only earning the median wage for my area. That's based on my current spending and earning for a single person, but if I combine finances with my partner, if we have kids, if we purchase a home or rental, if there's a crash, then some of the variables change and so does my FIRE date.
However, it's not impossible or even that difficult to live on 24k a year. I do it and I still eat out, go on vacation, buy new things and cover my basic living expenses. If I got real serious about this, I could save even more, but I'm choosing to work fewer hours and spend time on leisure activities, and I don't want to cut all frivolous spending out of my budget. I do make intentional choices about how to spend my money and time, and in my opinion, that's really what it takes to FIRE if you live in a first world country and earn more than enough to meet your basic needs.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #64 on: September 10, 2018, 10:22:53 AM »
- $27,878.10 remaining

Mizz, under what circumstances does a person making $33k/year pay over $5k in taxes?  I think you've miscalculated.

By my math, $33,246 in taxable income would at bare minimum get the $12k standard deduction and then pay $2700 in the 10% and the 15% bracket, assuming a worst case scenarios (single filer, no kids, no credits, etc).  You're math is off by approximately a factor of 2.

In reality, this person could easily get their tax burden to zero by increasing their savings rate in their 401k, which is conveniently how you get to retire early anyway.  It just so happens to work out that the problems you see magically disappear when you follow the advice of this forum.

mizzourah2006

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #65 on: September 10, 2018, 10:33:14 AM »
- $27,878.10 remaining

Mizz, under what circumstances does a person making $33k/year pay over $5k in taxes?  I think you've miscalculated.

By my math, $33,246 in taxable income would at bare minimum get the $12k standard deduction and then pay $2700 in the 10% and the 15% bracket, assuming a worst case scenarios (single filer, no kids, no credits, etc).  You're math is off by approximately a factor of 2.

In reality, this person could easily get their tax burden to zero by increasing their savings rate in their 401k, which is conveniently how you get to retire early anyway.  It just so happens to work out that the problems you see magically disappear when you follow the advice of this forum.

I did forget the standard deduction, but I counted back in the FICA taxes, because those still count as income too. So yeah, you are right it's closer to $24k being taxable on both state and federal. So it's about $3.7k in taxes instead of the $5.5k I estimated. So, sorry $29.5k it still doesn't really change my math. Perhaps they can save an extra $100/month under the new estimate, which essentially drops the needed CAGR over the 9 years by less than 0.5%.

So you think you could squeeze it to work in 9 years? Like I said if they max out their 401k that's $18.5k/yr. They'd still pay approximately $1.8k/yr in federal and state taxes and another $3.4k/yr in FICA. So they are up at $5.2k. So that leaves them with $21.3k/yr in spending. Let's say of that they are really good with money and can save another 3k/yr. Bringing their total savings to $21.5k/yr. You'd need a 17.5% CAGR and again need to be able to make that income consistently from 20-29. So again, show me how it's "FIRE in your 20s no sweat"
« Last Edit: September 10, 2018, 10:39:20 AM by mizzourah2006 »

Still Being

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #66 on: September 10, 2018, 10:43:30 AM »
What about Gen Z dreaming of retiring at 30?

mizzourah2006

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #67 on: September 10, 2018, 10:54:10 AM »
- $27,878.10 remaining

Mizz, under what circumstances does a person making $33k/year pay over $5k in taxes?  I think you've miscalculated.

By my math, $33,246 in taxable income would at bare minimum get the $12k standard deduction and then pay $2700 in the 10% and the 15% bracket, assuming a worst case scenarios (single filer, no kids, no credits, etc).  You're math is off by approximately a factor of 2.

In reality, this person could easily get their tax burden to zero by increasing their savings rate in their 401k, which is conveniently how you get to retire early anyway.  It just so happens to work out that the problems you see magically disappear when you follow the advice of this forum.

Either way $18k/yr for fire only works under very specific circumstances, which people often fail to mention. It's a lot easier to live off of $18k/yr when you don't have a car payment or a rent or mortgage payment. But how do you expect this 20-29 year old working as a plumber or electrician to pay a house off in 9 years while saving over half of his/her post tax income for FIRE? Living off of $18.5k/yr wouldn't be a picnic with all those payments. It's possible, but not something I would consider "living the life" or a lifestyle 99% of americans would want to live in perpetuity. . You have to think at least $12-14k of that would have to be on essentials and that's without a car or the associated expenses of having a car. Is it possible to be a journeyman electrician or plumber without a car? How do you get to jobs? I have friends that do both and their site location changes pretty often, so it's not like they could move close to their job as it's constantly changing.

I realize lowering your tax burden is important to achieving FIRE, but pretending virtually anyone can do it in 10 years if they try hard enough is a bit of an exaggeration. However, I do agree with others that are saying it doesn't have to be 10 years, it could be 5-10 years earlier than you had planned, or being able to retire at all vs. planning to work for the rest of your life.

sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #68 on: September 10, 2018, 10:56:21 AM »
So again, show me how it's "FIRE in your 20s no sweat"

Yes, I agree that "in your 20s" is a pretty lofty goal.  Age 30 seems to be the most aggressive scenario we've seen, and as we've reviewed here hundreds of times now it's about your savings rate, not your total dollar figures.  Your example has someone saving 40% of their income for 9 years, which isn't enough according to the Simple Math spreadsheet. 

Saving 40% of your income (assuming uniform 7% returns) takes 18 years to retire, not 9 years.
Retiring in 9 years requires saving 66% of your income, not 40%.

As a wise person once said, "the math doesn't work if you use stupid numbers."

pretending virtually anyone can do it in 10 years if they try hard enough is a bit of an exaggeration.

Anyone can do it in ten years, if they have a high enough savings rate.  Or nine years, or one year, if they're prepared to make the required sacrifices.  The math doesn't care about who pretends what, it is math.
« Last Edit: September 10, 2018, 11:03:15 AM by sol »

mm1970

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #69 on: September 10, 2018, 11:01:03 AM »
I personally don’t think 30 should be anyone’s target, but 40 would be great and 50 the max.
Whew, just made it in at 49.
Too late for us (spouse is 50), but we don't want to retire.

Anyway, though I'm not as mustachian as many (living in  HCOL area with 2 young children), one thing that frugality has given us is freedom, and peace of mind.

I have a great friend who is part of a single-income family. We used to work together, and she quit to raise their 3 kids (work was making it too difficult to stay part time, and to be honest, once kids 2 & 3 came they wouldn't have been able to afford child care).  Well, almost 20 years in, her husband's company shut down.  Now, he got a decent severance.  But job hunting is HARD and SLOW if you 1. aren't a people person (engineer, sending out resumes vs contacting friends and former coworkers for leads), 2. live in a small town (this ain't the bay area) and 3. are pushing 50.  In my experience, many of my friends between the ages of 45 and 55 - you can expect job hunting to take 6-9 months.

Husband and I were chatting a bit about it yesterday, about how freaked out we would be without any income.  Because you still have bills.  Now, my company is the one that is always running out of money, but due to being female, the nature of my boss, and my long tenure, my pay mostly sucks anyway.  He's unlikely to be laid off as he's phenomenal at his job and they have buckets of money.  I just looked at him and said "you know we can retire today" and he finished my sentence with "if we are willing to sell the house and move somewhere else."  Yep. 

Lews Therin

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #70 on: September 10, 2018, 11:04:49 AM »
I did it in what is essentially 7, I live on 20k, and have a quite happy lifestyle. Had I learned about MMM style tax/expenses information I would have done it much quicker. My salary is not in the 100k range, in my best year it was 80k.

45k is pretty low for an electrician here. They have a lot of overtime options.  Add in a spouse....

mizzourah2006

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #71 on: September 10, 2018, 11:22:18 AM »
So again, show me how it's "FIRE in your 20s no sweat"

Yes, I agree that "in your 20s" is a pretty lofty goal.  Age 30 seems to be the most aggressive scenario we've seen, and as we've reviewed here hundreds of times now it's about your savings rate, not your total dollar figures.  Your example has someone saving 40% of their income for 9 years, which isn't enough according to the Simple Math spreadsheet. 

Saving 40% of your income (assuming uniform 7% returns) takes 18 years to retire, not 9 years.
Retiring in 9 years requires saving 66% of your income, not 40%.

As a wise person once said, "the math doesn't work if you use stupid numbers."

pretending virtually anyone can do it in 10 years if they try hard enough is a bit of an exaggeration.

Anyone can do it in ten years, if they have a high enough savings rate.  Or nine years, or one year, if they're prepared to make the required sacrifices.  The math doesn't care about who pretends what, it is math.


I responded to the person who said it would be easy for a plumber or electrician to do it in 10 years and responded why I don't think that math works. Clearly if someone is making $600k/yr and saving $400k/yr they can do it in under 10 years. At smaller incomes you can't manufacture the high enough savings rate. I'm not sure why this is so often ignored. You could make the math reasonable if you were living off of $14k/yr and saving $26k/yr. You could do that in 9 years with an 8% CAGR. But...you'd need to be prepared to live off of $14k/yr for the rest of your life (and even that's a bit generous given the life expectancy of the average American). Again, this works a bit better if you don't have housing or transportation expenses, which is pretty difficult to obtain while saving 65% of your income and making $45k/yr.

talltexan

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #72 on: September 10, 2018, 11:35:13 AM »
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.

The graduate student route is interesting because it delays the years when you earn substantial income, but it allows you to experience many more years of lean living. My expenses of $2,000/month when I was in graduate school included living car-free.

It also gave me practice at seeing the lifestyles of my college friends (many of whom are doctors) inflate, while mine did not.

EnjoyIt

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #73 on: September 10, 2018, 12:03:09 PM »
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.

The thing is, I think we rely on the majority of the population being consumerist suckas.  Without the mindless consumerism those companies we so heavily rely on for living expenses via index funds will have lower profits which will affect our own returns.  I am selfish and my family comes first. 

Letter to Consumerist Sucka,
Please, everyone go to Starbucks twice a day, buy a new iPhone every year, and make sure you are driving the safest car possible by buying a new one every 3 years. Preferably stick to American cars since I am only 30% international. I have mouths to feed and your iPhone purchases make sure my family does not starve.

Thanks,
Early Retiree

Spud

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #74 on: September 10, 2018, 12:10:40 PM »
I just posted for the first time on the ERE forums on an old thread that I stumbled across and found really interesting.

https://forum.earlyretirementextreme.com/viewtopic.php?f=9&t=7119

By choosing to retire on only $200k at the age of 28, this guy is accepting that he will have to live on $4,500 a year. I don't detect any "woe is me" sentiment in his posts.

EnjoyIt

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #75 on: September 10, 2018, 12:26:29 PM »
I just posted for the first time on the ERE forums on an old thread that I stumbled across and found really interesting.

https://forum.earlyretirementextreme.com/viewtopic.php?f=9&t=7119

By choosing to retire on only $200k at the age of 28, this guy is accepting that he will have to live on $4,500 a year. I don't detect any "woe is me" sentiment in his posts.

Obviously it is possible to only spend $4500/yr.  But, I really really think it is a bit naive to have very little for the unexpected expenses that may arise. I think this poster only understand his/her current math but does not fully appreciate how life may and will change and how some unexpected cost may derail such a tight budget.  Maybe that is why He/She has not updated this journal in over 3 years.

Kay-Ell

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #76 on: September 10, 2018, 12:41:38 PM »
I'm not claiming that it can't be done, I'm supporting my argument that it's oversold. People who spend a lot of time here know the score, and I'm not concerned about them. They know that even if they can't achieve the mega star success stories that are pitched in the NYTimes article, they can dramatically improve their lives by cutting needless spending. That's all good.

But the way the concept is sold to a general audience often borders on disingenuousness and that misinforms and bums out less educated people. We recently had a (now deleted) thread from one of these people. And I know for a fact that there are many more out there.

I'm curious what the real concern here is.  Let's assume for the sake of argument that the idea of fire is oversold, and that it sets up an unrealisticly low target age of 30 for median earners - I still don't understand the need for concern or why it's helpful preemtively to lower "the less educated people's" expectations.  I personally feel like MMM and ERE have done a great job of highlighting the realities of earning, saving, and living off of less, and that anyone interested enough to read through the information will have a pretty realistic idea of their FIRE options.  But again, for the sake of argument, let's accept that you're right and they encourage the average reader to be overly optimistic about the effects that cutting costs will have on their retirement timeline - and that after 5-10 years of living frugally they are bummed out and disollutioned because they're not retired yet.  Why is that grounds for concern? 

The way I see it, the benefits of living frugally, being happier with less, saving and investing money, and exploring no and low cost forms of entertainment are worthwhile even if the person only sticks to it for a few years?  A 27 year old making 40k per year, who saved 40% of their income for the past 5 years and got tired of the frugal life still has almost 100k in the bank.  Even if they never save another penny toward retirement, they'll still have about 1m to retire on when they're 65.  I'm way more concerned about the same person, earning the same amount, who hasn't started saving for retirement and spends 110% of their salary on rampant consumerism each year.

My feelings are similar for the idealistic 30 year old who scrapes together 500k and declares themselves FIRE.  So what if they change their mind down the road?  So what, if living off of $20k/year indefinitely isn't as exciting as the blogosphere lead them to believe it would be.  They have options and serious FU money that sets them up to choose any number of bright futures for themselves.  I'm not concerned for them. 

MrThatsDifferent

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #77 on: September 10, 2018, 02:32:38 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 don’t think 30 should be anyone’s 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.

This is also dependent on what college degree you get and if you can get a decent job out of college without additional schooling and training. It’d be a bit challenging for a Lawyer or doctor to accomplish this by 30 and also a bit of a waste. So someone would have to find the right career, that would employ them right away at a good salary, reasonable debt (or none) and have FIRE as a target. They’d also have to be fairly self-sufficient. Definitely possible, but doesn’t seem probable for many. If you can pull it off, great. I think by 40 would make more sense for most if, in general, it would take someone 10-15 years to FIRE once focused. I totally screwed the pooch on this but fortunately have a great job now and can fast track it but I’m still looking at 51-54.

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #78 on: September 10, 2018, 02:39:38 PM »
N = 1

Now I know you're just trolling.  MMM makes n=2, rebs makes n=3, spartana makes n=4, and the links in this thread make n=5, 6, and 7.  How many more do you need to see before you stop claiming it can't be done?

I'm not claiming that it can't be done, I'm supporting my argument that it's oversold. People who spend a lot of time here know the score, and I'm not concerned about them. They know that even if they can't achieve the mega star success stories that are pitched in the NYTimes article, they can dramatically improve their lives by cutting needless spending. That's all good.

But the way the concept is sold to a general audience often borders on disingenuousness and that misinforms and bums out less educated people. We recently had a (now deleted) thread from one of these people. And I know for a fact that there are many more out there.

mathlete, you are criticizing the examples sol is providing as one-offs (and pointed out examples I could provide wouldn't do anything to change your mind), but you're not actually providing support for your own position, you just keep restating it.

What is your evidence that the presentation you describe is the primary way that the concept of FIRE is presented to a general audience? (Obviously there are always going to be some get rich quick people who will latch onto the terminology of the FIRE movement, so presenting one or several isolated examples isn't going to prove your point.)

With regards to how awesome life can be, life is awesome when you're a celebrity blogger. While I truly believe that it can be very very awesome if you're a garden variety person living on $30K, I'd say that it's decidedly less so.

I don't know Jacob of ERE and can't really comment on that until I make time to read up on him.

A number of us have mentioned life being pretty awesome living as grad students, which often involves living on significantly less than $30k, and doesn't come with the celebrity of being a blogger.* But let's take a step back. How much money do you -- @mathlete -- think it's necessary to spend each year in order to be happy? (In the absence of also being a web celebrity)

I would also put forward that, in the absence of any knowledge of ERE, it is going to be hard to have a productive discussion of the modern FIRE movement, as you're essentially missing the first 3-4 years of the ~10 year history of the community we are a part of today.

*Actually I think I did maintain a blog -- about my area of research -- in grad school... brought in a grand total of 100 unique visitors a day. Heh.

Dabnasty

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #79 on: September 10, 2018, 02:45:03 PM »
If someone who assumes retirement happens at 65+ stumbled across this thread and saw us arguing about whether it's feasible to retire as early as 30 or merely a more run of the mill 40-50, would their head explode?

MrThatsDifferent

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #80 on: September 10, 2018, 02:54:29 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.

The graduate student route is interesting because it delays the years when you earn substantial income, but it allows you to experience many more years of lean living. My expenses of $2,000/month when I was in graduate school included living car-free.

It also gave me practice at seeing the lifestyles of my college friends (many of whom are doctors) inflate, while mine did not.

It’s funny, I lived pretty well as a grad student too and traveled, did whatever, but had no house or car, which is the same as now except I make a shit ton more. The grad life showed me what I can do with less and how to survive in the big city. The difference between now and then is that my place is a bit nicer, my vacations a bit longer, I can eat at fancy restaurants and I have savings, which didn’t even seem possible then. Looking back I realize I could have actually saved a lot if I had approached things differently. In your 20s you can live with several people, eat junk food and have fun just hanging out or playing video games, their expenses are generally a lot less. No kids, no day care, no big commutes. But is that sustainable? Probably not. However, if they can save a couple hundred iby 30, what will that grow to over the next 30 years?

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #81 on: September 10, 2018, 02:59:19 PM »
This is also dependent on what college degree you get and if you can get a decent job out of college without additional schooling and training. It’d be a bit challenging for a Lawyer or doctor to accomplish this by 30 and also a bit of a waste. So someone would have to find the right career, that would employ them right away at a good salary, reasonable debt (or none) and have FIRE as a target. They’d also have to be fairly self-sufficient. Definitely possible, but doesn’t seem probable for many. If you can pull it off, great. I think by 40 would make more sense for most if, in general, it would take someone 10-15 years to FIRE once focused. I totally screwed the pooch on this but fortunately have a great job now and can fast track it but I’m still looking at 51-54.

Yes, if you aren't thinking about FIRE when you get your first job (or at worst within a year or two) it's going to be more work FI by 30. That's true of basically any life goal that requires significant effort over a number of years: people who don't realize they want to do it and start working towards it until later in life are going to take long to achieve it than people who start working on it at a younger age.

It seems we're close to being in agreement about how long it takes to hit FI once a person start seriously working towards it (I'd say 7-12 years once a person starts working towards the goal, assuming no special circumstances like starting with major debt above and beyond twice what the average college student leaves college with, expensive and acrimonious divorces, health issues that would take a person out of the workforce for years). So perhaps our biggest disagreement is about whether or not anyone in their early 20s is actually working towards FI?

Secondarily, I'm getting the sense that you're interpreting my position that it is quite possible for some people to FIRE by 30 as reflecting some sort of negative moral judgement against people who don't hit the same mark until 40 or 50. If so, let me just preemptively clarify that I don't think FIREing at 30 or 40 or 50 makes anyone a better or worse person. All of our circumstances are different, as are our tolerances for risk, and the amount of money we need to spend each year before we cease to get enough additional utility/happiness to justify continuing to work. (If that isn't part of the subtext of your comments, please disregard this paragraph.)

inline five

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #82 on: September 10, 2018, 03:13:19 PM »
I'm not sure the advice to work for high income and save a high % of your earnings is pertinent to certain demographics. I thought that was obvious. It takes a higher income than average to retire early in life let alone retire - lots of "retired" seniors working at Home Depot and Walmart as cashiers...

While the concept may work for a Starbucks barista it probably won't really be applicable. However I often see fairly low wage employees driving newer cars and eating out at my employer. Certainly the concepts here are nothing new but can be utilized by any income group to better their financial picture. That being said, by far the number one contributor toward retiring early is increasing income. It's difficult to cut cost of living below a certain floor, but increasing ones income has unlimited potential.

Where I see this having the highest benefit is for folks who have always earned high incomes right out of college and who don't know any other lifestyle. They can't even comprehend mowing their own lawns, or cooking their own meals, bringing lunch to work, driving an old car or living in a small home.

A common theme among my co-workers who are civilian trained pilots is they have lived very frugally for their first 5-10 years out of school. The thing is, once you hit it big, you do make decent money. But often those habits follow you. I had to laugh at the grad school folks, my first few jobs out of college I made wages similar to them, which is how I developed the frugal DIY mentality. In fact every grad school graduate I know have a similar mentality. I'm sure it's not all, but I wondering if there is a connection.
« Last Edit: September 10, 2018, 03:18:11 PM by inline five »

PhilB

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #83 on: September 10, 2018, 03:33:15 PM »
While the concept may work for a Starbucks barista it probably won't really be applicable. However I often see fairly low wage employees driving newer cars and eating out at my employer. Certainly the concepts here are nothing new but can be utilized by any income group to better their financial picture. That being said, by far the number one contributor toward retiring early is increasing income. It's difficult to cut cost of living below a certain floor, but increasing ones income has unlimited potential.
That very much depends where you are on the income spectrum.  As has already been pointed out in this thread, a $1 decrease in annual consumption is far more powerful than a $1 increase in income, and this is a clear mathematical truth.  The problem is that at lower levels of income / expenditure it gets progressively harder to cut each subsequent $1.  Basically the idea of the shockingly simple math is the tool you use to get to FI, but higher incomes are what makes that tool much easier to use.

moof

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #84 on: September 10, 2018, 03:39:28 PM »
...
"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!
...
There is an imposed floor below which you cannot fall below.  While it is fine in some countries to live out of a self built hut in a field, in the USA you will get CPS called on your children and a the local authorities evicting you for having un-permitted illegal dwelling.

Let your kids scavenge food from the local landfill or defecate daily in the street and it will be more of the same.

Send your kids to school in a loin cloth and you'll have nothing but hassles.

Keep your kids home from school to gather firewood or to send them to the garment mills?  Yet more CPS hassles.

So while I agree that much of the USA's poverty looks luxurious compared to some middle class existence across the globe, it is not fair to say that our much of our lifestyle is optional or chosen.  One can only buck so hard against culture that is enshrined in law, and once you are in a developed country it is often going to be quite counterproductive to attempt to import a Mongolian sheep herder's way of life.

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #85 on: September 10, 2018, 03:46:08 PM »
Let's clean this up a little

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 #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.

Please put some numbers here. What do you consider to be a hefty income? what do you consider to be modest spending? In the absence of numbers, we may actually be in complete agreement, but just have different baselines for what words like "hefty" mean.

I agree that FIRE is neither desirable/enviable to most people. That's what the NYT article which prompted this Bloomberg article prompted so much discussion. When FIRE comes up in the popular press it is more often presented as "look at those weirdos with their strange lifestyle choices." Often they'll interview someone living out of a van to drive home this message. (And some people are quite happy living out of vans, and the van conversions of people like C40 and ToSimplify look pretty sweet. But it's not a lifestyle that appeals to the vast majority of folks.)

Quote
Quote
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 #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.

In addition, an extra dollar of income is subject to both federal and state income tax and payroll at your highest marginal rate. So a dollar of reduced income needs means an extra dollar saved per year and also 25 less dollars you need to save over your lifetime (assuming a 4% WR in retirement). A dollar of extra income only means an extra .55-.90 saved per year.

The median household income you quote includes households of single people but you're talking about how hard it would be for a family of four to save at that income level. Data for median income by household type is much harder to come by, but based on this table* using data from back in 2014 it looks like the median MFJ household is about 50% higher than the median income for all household types. So today a median family of 4 might make close to $90k/year rather than $60k/year. To be clear, I'm not arguing that everyone's personal circumstances permit them to save large fractions of their income, instead I am only arguing that you are painting a misleadingly pessimistic view of what proportion of people it is indeed feasible for.

Finally, if you're making 3x the median household income, you're taking home a lot more each year than I am (and I'm slightly older than you, the comparison would be even more striking if I used my income at 27 or 28). And I can attest that, despite my much lower income, a savings rate of 60-70% still doesn't entail significant sacrifice or unhappiness on my part.

*https://www.frugalfringe.com/calculators/compare-your-adjusted-gross-income-to-others-by-age-and-filing-status-using-2014-irs-data/

Goldielocks

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #86 on: September 10, 2018, 06:06:38 PM »
Mathlete, Mizzorah2006...

Let's get back to the original comment -- that the Bloomberg article was sloppy with numbers and facts, in order to deride the FIRE concept.

Likewise, the insistence in some of these posts that seems to say that FIRE is only FIRE at age 30... who made that the rule?  Why must a person have a "certain standard of living" before they qualify as "FIRED"?  Why can't a plumber with $45k/yr retire at age 40 and still call it FIRE?   Why can't a single guy retire on under $20k/yr and be considered FIRE?  Why does the amount spent matter?   Why can't someone be counted as FIRED if they have no kids and have a lean lifestyle?

The NYT article gives the following examples as FIRE:

Carl Jensen Retired age 43, with family, after working $110k job and only realizing a goal to retire 5 years earlier.  Goal to live on $40k/yr after tax.  Wife still work for at least $60k/yr.

Jason Long, Pharmacist, 38 made $150k/yr now retired in rural tennessee. married no kids.

Vicki Robin (YMOYL) FIRED with Joe Dominguez , "retired from city job", continuing to work as a rural truck driver.,

Kristy Shen / Bryce Leung - Toronto, Retired "early 30's", double income no kids.  Did not buy a home before FIRE, now travel.  If you read their blog / history, Kristy worked at a long-hours programming "24-7 all consuming" job she hated for about 5 more years to to save enough.
 
Scott Rieckens and wife Taylor, with baby, retired at ages 32/34 from high income jobs in california, moving to very low COLA to do so.

Also referenced with links:
"Early Reitrement Dude" retirement age 36 - double income, no kids, moved to HCOLA for wages, then immediately back to LCOLA to retire;
Frugalwoods retirement age 31 -- actually transitioned from double income, no kids HCOLA to part time work in rural area;
Our Next Life retirement ages 38 and 41, married two income no kids (I think).


There is not one single example in the article of someone 30 and retired who is not still working part time.  Full retirees were older than that and typically had no kids.

YET -- Bloomberg article stated:

Millennials Dreaming of Retiring at 30 Have a Math Problem


Then had ZERO examples of retirement at 30 listed.

So -- why do we have people on this thread arguing that income level matters because a plumber can't retire at age 30?  What is wrong with 39 or even 40's?  What's wrong with being FIRED with only a little money to spend annually?

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #87 on: September 10, 2018, 06:42:14 PM »
Likewise, the insistence in some of these posts that seems to say that FIRE is only FIRE at age 30... who made that the rule?
... What is wrong with 39 or even 40's?  What's wrong with being FIRED with only a little money to spend annually?

I don't know if this was directed at me, but if it was, I'm certainly not arguing that FIRE after age 30 doesn't count as FIRE.

I wasn't FIRE at 30, and I'll still consider myself FI when I hit 25x expenses and FIRE when I leave my job. There's no asterisk next to it because I was in my 30s. And there wouldn't be if I was in my 40s either.

Goldielocks

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #88 on: September 10, 2018, 06:43:45 PM »
Likewise, the insistence in some of these posts that seems to say that FIRE is only FIRE at age 30... who made that the rule?
... What is wrong with 39 or even 40's?  What's wrong with being FIRED with only a little money to spend annually?

I don't know if this was directed at me, but if it was, I'm certainly not arguing that FIRE after age 30 doesn't count as FIRE.

I wasn't FIRE at 30, and I'll still consider myself FI when I hit 25x expenses and FIRE when I leave my job. There's no asterisk next to it because I was in my 30s. And there wouldn't be if I was in my 40s either.

:)  Not you!   

MrUpwardlyMobile

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #89 on: September 10, 2018, 07:04:02 PM »
I think people forget that a lot of the Bloomberg website consists of tabloid quality editorials... they’re not reporting on stuff, they’re trying to persuade you to adopt their opinion... 

They assume 2% compounding interest, which is barely better than an online savings account a reputable national bank and noticeably worse than a CD...

They jump around between Pounds and Dollars like comparing costs in the UK and US is essentially interchangeable...

The Bloomberg article is responsive to. NYT article about retiring in your 30s (e.g. 30-39) but focuses on age 30 only.

The writer actually starts saying that FIRE is predicated on excessive optimism.  But most People pursing FIRE could be described as extremely grounded and focused on objective analysis of math and careful consideration of cost.

 I’m aiming for ridiculously fat fire at 50.  But I’m also the kind of crazy person looking to own a real castle and understand the monetary costs associate with castle ownership.

Dr.Jeckyl

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #90 on: September 10, 2018, 07:15:12 PM »
Math is hard. Even my 401k gives something like 3% return on investment for it's examples. Someone said it earlier in the thread, "it is impossible with stupid math". There are some people that just don't want to work and they think FIRE is the answer. It reminds me of Peter in Office Space when asked about work, "I'm just not gonna go anymore". In reality, FIRE is all about compromise and math. You can buy that new car, house, avocado toast, or whatever as long as you want to spend your money on that and have already set your FIRE goal and know you are putting enough money into it.

The reason I like the 50/30/20 budget plan is because once you put your needs (set spending) and your savings on auto pilot the rest of the discretionary money can be spent on what you desire. The key is don't spend it on silly shit that you won't enjoy. My family and I went on a vacation this year and I did not complain about spending one dime on the trip. However, I wouldn't buy a bass-o-matic nor do I need the latest greatest smartphone because I would feel that would be a waste. It isn't an all or nothing, just figure out your rat race exit strategy using good old fashioned math.

Lmoot

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #91 on: September 10, 2018, 07:59:49 PM »
What an odd topic...aren't many Millennials already well into their 30's? When will people stop talking about Millennials like we just graduated highschool?

Goldielocks

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #92 on: September 10, 2018, 08:35:13 PM »
What an odd topic...aren't many Millennials already well into their 30's? When will people stop talking about Millennials like we just graduated highschool?
Hey,  I just learned that World of Warcraft first came out in 2004.   2004!!!!   I would have thought it was closer to 6 years ago, tops.   Millenials will always be in the 20's to me... and I have a SIL on the leading edge of it who is currently 36 years old.

maizeman

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #93 on: September 11, 2018, 02:31:09 AM »
What an odd topic...aren't many Millennials already well into their 30's? When will people stop talking about Millennials like we just graduated highschool?
Hey,  I just learned that World of Warcraft first came out in 2004.   2004!!!!   I would have thought it was closer to 6 years ago, tops.   Millenials will always be in the 20's to me... and I have a SIL on the leading edge of it who is currently 36 years old.

Tell me about it. This year I have my first student who was born in the 21st century.

It's not clear exactly where people define the tail end of the millennial generation (generally somewhere between 1996 and 2000), but the youngest millennials are either entering college or graduating from college or somewhere in between as we speak.

mrmoonymartian

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #94 on: September 11, 2018, 07:57:31 AM »
"You see things and you say WHY? But I dream things that never were and I say...WHY NOT?" - George Bernard Shaw

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"Millennials Dreaming of Retiring at 30 Have a Math Problem" - Bloomberg

anonymouscow

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #95 on: September 11, 2018, 08:07:21 AM »
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Mizz, under what circumstances does a person making $33k/year pay over $5k in taxes?  I think you've miscalculated.

By my math, $33,246 in taxable income would at bare minimum get the $12k standard deduction and then pay $2700 in the 10% and the 15% bracket, assuming a worst case scenarios (single filer, no kids, no credits, etc).  You're math is off by approximately a factor of 2.

In reality, this person could easily get their tax burden to zero by increasing their savings rate in their 401k, which is conveniently how you get to retire early anyway.  It just so happens to work out that the problems you see magically disappear when you follow the advice of this forum.

I did forget the standard deduction, but I counted back in the FICA taxes, because those still count as income too. So yeah, you are right it's closer to $24k being taxable on both state and federal. So it's about $3.7k in taxes instead of the $5.5k I estimated. So, sorry $29.5k it still doesn't really change my math. Perhaps they can save an extra $100/month under the new estimate, which essentially drops the needed CAGR over the 9 years by less than 0.5%.

So you think you could squeeze it to work in 9 years? Like I said if they max out their 401k that's $18.5k/yr. They'd still pay approximately $1.8k/yr in federal and state taxes and another $3.4k/yr in FICA. So they are up at $5.2k. So that leaves them with $21.3k/yr in spending. Let's say of that they are really good with money and can save another 3k/yr. Bringing their total savings to $21.5k/yr. You'd need a 17.5% CAGR and again need to be able to make that income consistently from 20-29. So again, show me how it's "FIRE in your 20s no sweat"

How would someone max out their 401k when they only make 33k...?

I make under 30k ($29,640), $5,328 goes to SS, Medicare, Federal, State, City taxes, $24,312 left. $1,006 for health insurance, $23,306 left. $1,480 gas to and from work and car insurance, $21,826 left. $1,819 a month left for housing, home repairs, car repairs, utilities, food.

This year I purchased a used vehicle for $4,400, spent $3,000 on car repairs, $2,500 in medical bills, that leaves $11,926 for housing, home repairs, utilities, food.

I am pretty much saving $0.00, this is without eating out, not buying anything that's not needed, buying everything I can used or on sale. I spent 30 dollars for a pair of shoes this year, my SO bought me socks and underwear for my birthday, that's the extent of my clothing purchases. I fill up 4 - 5 gallon gas cans when I have fuel points at Kroger.

There was a time my expenses were less, I had a paid off house in a "LCOL" area, had a roommate, was single. I'm not saying it's impossible to save thousands a year only making 30k a year, but my situation has changed and right now I have more expenses than I used to. I might be able to save a few thousand, but it's laughable to suggest I can save 18.5K a year.

Bucksandreds

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #96 on: September 11, 2018, 08:12:21 AM »
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Mizz, under what circumstances does a person making $33k/year pay over $5k in taxes?  I think you've miscalculated.

By my math, $33,246 in taxable income would at bare minimum get the $12k standard deduction and then pay $2700 in the 10% and the 15% bracket, assuming a worst case scenarios (single filer, no kids, no credits, etc).  You're math is off by approximately a factor of 2.

In reality, this person could easily get their tax burden to zero by increasing their savings rate in their 401k, which is conveniently how you get to retire early anyway.  It just so happens to work out that the problems you see magically disappear when you follow the advice of this forum.

I did forget the standard deduction, but I counted back in the FICA taxes, because those still count as income too. So yeah, you are right it's closer to $24k being taxable on both state and federal. So it's about $3.7k in taxes instead of the $5.5k I estimated. So, sorry $29.5k it still doesn't really change my math. Perhaps they can save an extra $100/month under the new estimate, which essentially drops the needed CAGR over the 9 years by less than 0.5%.

So you think you could squeeze it to work in 9 years? Like I said if they max out their 401k that's $18.5k/yr. They'd still pay approximately $1.8k/yr in federal and state taxes and another $3.4k/yr in FICA. So they are up at $5.2k. So that leaves them with $21.3k/yr in spending. Let's say of that they are really good with money and can save another 3k/yr. Bringing their total savings to $21.5k/yr. You'd need a 17.5% CAGR and again need to be able to make that income consistently from 20-29. So again, show me how it's "FIRE in your 20s no sweat"

How would someone max out their 401k when they only make 33k...?

I make under 30k ($29,640), $5,328 goes to SS, Medicare, Federal, State, City taxes, $24,312 left. $1,006 for health insurance, $23,306 left. $1,480 gas to and from work and car insurance, $21,826 left. $1,819 a month left for housing, home repairs, car repairs, utilities, food.

This year I purchased a used vehicle for $4,400, spent $3,000 on car repairs, $2,500 in medical bills, that leaves $11,926 for housing, home repairs, utilities, food.

I am pretty much saving $0.00, this is without eating out, not buying anything that's not needed, buying everything I can used or on sale. I spent 30 dollars for a pair of shoes this year, my SO bought me socks and underwear for my birthday, that's the extent of my clothing purchases. I fill up 4 - 5 gallon gas cans when I have fuel points at Kroger.

There was a time my expenses were less, I had a paid off house in a "LCOL" area, had a roommate, was single. I'm not saying it's impossible to save thousands a year only making 30k a year, but my situation has changed and right now I have more expenses than I used to. I might be able to save a few thousand, but it's laughable to suggest I can save 18.5K a year.

This is just a question and not a suggestion but would saving in a 401k and thus lowering MAGI qualify you for lower cost or free health insurance through the ACA or Medicaid?

mizzourah2006

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #97 on: September 11, 2018, 08:24:22 AM »
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Mizz, under what circumstances does a person making $33k/year pay over $5k in taxes?  I think you've miscalculated.

By my math, $33,246 in taxable income would at bare minimum get the $12k standard deduction and then pay $2700 in the 10% and the 15% bracket, assuming a worst case scenarios (single filer, no kids, no credits, etc).  You're math is off by approximately a factor of 2.

In reality, this person could easily get their tax burden to zero by increasing their savings rate in their 401k, which is conveniently how you get to retire early anyway.  It just so happens to work out that the problems you see magically disappear when you follow the advice of this forum.

I did forget the standard deduction, but I counted back in the FICA taxes, because those still count as income too. So yeah, you are right it's closer to $24k being taxable on both state and federal. So it's about $3.7k in taxes instead of the $5.5k I estimated. So, sorry $29.5k it still doesn't really change my math. Perhaps they can save an extra $100/month under the new estimate, which essentially drops the needed CAGR over the 9 years by less than 0.5%.

So you think you could squeeze it to work in 9 years? Like I said if they max out their 401k that's $18.5k/yr. They'd still pay approximately $1.8k/yr in federal and state taxes and another $3.4k/yr in FICA. So they are up at $5.2k. So that leaves them with $21.3k/yr in spending. Let's say of that they are really good with money and can save another 3k/yr. Bringing their total savings to $21.5k/yr. You'd need a 17.5% CAGR and again need to be able to make that income consistently from 20-29. So again, show me how it's "FIRE in your 20s no sweat"

How would someone max out their 401k when they only make 33k...?

I make under 30k ($29,640), $5,328 goes to SS, Medicare, Federal, State, City taxes, $24,312 left. $1,006 for health insurance, $23,306 left. $1,480 gas to and from work and car insurance, $21,826 left. $1,819 a month left for housing, home repairs, car repairs, utilities, food.

This year I purchased a used vehicle for $4,400, spent $3,000 on car repairs, $2,500 in medical bills, that leaves $11,926 for housing, home repairs, utilities, food.

I am pretty much saving $0.00, this is without eating out, not buying anything that's not needed, buying everything I can used or on sale. I spent 30 dollars for a pair of shoes this year, my SO bought me socks and underwear for my birthday, that's the extent of my clothing purchases. I fill up 4 - 5 gallon gas cans when I have fuel points at Kroger.

There was a time my expenses were less, I had a paid off house in a "LCOL" area, had a roommate, was single. I'm not saying it's impossible to save thousands a year only making 30k a year, but my situation has changed and right now I have more expenses than I used to. I might be able to save a few thousand, but it's laughable to suggest I can save 18.5K a year.

That was kind of two examples intermingled. The first example was someone making $45k/yr and saving 20% in their 401k (leaving them with $33k after FICA and 401k deductions) and then it switched to maxing your 401k to lower taxes as much as possible. But, yes I agree it would be difficult for a single person earning even $45k/yr to max out their 401k as that would likely leave them with about $20k for spending for the year. Not impossible, but definitely not easy.

Dabnasty

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #98 on: September 11, 2018, 08:41:16 AM »
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Mizz, under what circumstances does a person making $33k/year pay over $5k in taxes?  I think you've miscalculated.

By my math, $33,246 in taxable income would at bare minimum get the $12k standard deduction and then pay $2700 in the 10% and the 15% bracket, assuming a worst case scenarios (single filer, no kids, no credits, etc).  You're math is off by approximately a factor of 2.

In reality, this person could easily get their tax burden to zero by increasing their savings rate in their 401k, which is conveniently how you get to retire early anyway.  It just so happens to work out that the problems you see magically disappear when you follow the advice of this forum.

I did forget the standard deduction, but I counted back in the FICA taxes, because those still count as income too. So yeah, you are right it's closer to $24k being taxable on both state and federal. So it's about $3.7k in taxes instead of the $5.5k I estimated. So, sorry $29.5k it still doesn't really change my math. Perhaps they can save an extra $100/month under the new estimate, which essentially drops the needed CAGR over the 9 years by less than 0.5%.

So you think you could squeeze it to work in 9 years? Like I said if they max out their 401k that's $18.5k/yr. They'd still pay approximately $1.8k/yr in federal and state taxes and another $3.4k/yr in FICA. So they are up at $5.2k. So that leaves them with $21.3k/yr in spending. Let's say of that they are really good with money and can save another 3k/yr. Bringing their total savings to $21.5k/yr. You'd need a 17.5% CAGR and again need to be able to make that income consistently from 20-29. So again, show me how it's "FIRE in your 20s no sweat"

How would someone max out their 401k when they only make 33k...?

I make under 30k ($29,640), $5,328 goes to SS, Medicare, Federal, State, City taxes, $24,312 left. $1,006 for health insurance, $23,306 left. $1,480 gas to and from work and car insurance, $21,826 left. $1,819 a month left for housing, home repairs, car repairs, utilities, food.

This year I purchased a used vehicle for $4,400, spent $3,000 on car repairs, $2,500 in medical bills, that leaves $11,926 for housing, home repairs, utilities, food.

I am pretty much saving $0.00, this is without eating out, not buying anything that's not needed, buying everything I can used or on sale. I spent 30 dollars for a pair of shoes this year, my SO bought me socks and underwear for my birthday, that's the extent of my clothing purchases. I fill up 4 - 5 gallon gas cans when I have fuel points at Kroger.

There was a time my expenses were less, I had a paid off house in a "LCOL" area, had a roommate, was single. I'm not saying it's impossible to save thousands a year only making 30k a year, but my situation has changed and right now I have more expenses than I used to. I might be able to save a few thousand, but it's laughable to suggest I can save 18.5K a year.

When you add in the car purchase/repairs and medical bills, it doesn't sound like this was a good year to be saving much. On the other hand, remember that if you did max a 401k your tax liability would be <$2300, a savings of $3,000 based on your above number. You would pay zero state and federal taxes. And assuming those one time expenses aren't matched next year, you could be on track to save $9,900+tax savings+401k match (this is assuming you have a 401k option which wasn't clear, but there's always IRA).

I'm certainly not criticizing your spending because it looks like you're doing pretty well, but the idea of maxing a 401k at $30,000 income is not laughable. As has been mentioned, Jacob of ERE lived on $7,000 annual expenses. He didn't have free housing or any other special circumstance, he made it happen.


sol

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Re: Bloomberg: Millennials Dreaming of Retiring at 30 Have a Math Problem
« Reply #99 on: September 11, 2018, 09:01:09 AM »
How would someone max out their 401k when they only make 33k...?

Lol, you must be new here.  This forum is literally dedicated to showing people like you how to do this.  Have you been reading along?

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I make under 30k
...
I am pretty much saving $0.00

Then you are spending too much, if your goal is an early retirement.  A person who saves zero dollars per year can never retire.  That's the path you're currently on.

Just as a first helpful suggestion, you're probably not going to buy a new car every year, right?  So the $4k you spent on one this year can go 100% to savings next year, and that 4k out of your 23k of take home pay would put you at a 17% savings rage, on track to retire after 32 years of working according to the Simple Math spreadsheet.  Which sounds about right to me. 

If you want to retire earlier than that, you need to save more.  Get another roommate, for example, or move closer to a higher paying job.  It doesn't make sense for you to say that the simple math doesn't work when you use numbers that work just fine, but give you an answer you don't like. 

For the record, I saved more than $4k/year when I was a graduate student making less than $30k, and I'm sure you could too.

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There was a time my expenses were less

Awesome!  So you already know how it can be done.  Why have you inflated your spending so much?  You know that you are sacrificing your retirement, right?

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my situation has changed and right now I have more expenses than I used to.

That's probably your decision.  And it's a fine one, if you have decided that working longer in order to spend more today is a good trade off for you, but don't pretend it's the only choice you have.