The fallacy of calculating retirement needs.

[Skyhigh]

It is common to see people and articles produce a number in regards to what they expect to need in retirement. It seems to me to be a risky approach since the future is unknowable. To cease work efforts early because a Money magazine article says you have enough to last the next 35 years seems foolish to me. A lot can happen in that time. To pull the plug early and expect to be able to carefully meter a trickle of cash for subsistence seems to be inviting fate to deal a blow.

Is one million enough? Three million? To me these answers are unknowable. The economy could fail. Unexpected health issues could consume the nest egg. Runaway inflation could negate the value of savings. Too often I have seen early retirements result in a blue Walmart vest in old age. The conservative approach might be to keep working even a little bit to maintain professional viability in case it is needed.

[minority_finance_mo]

Hi Skyhigh,

You bring up a couple of great points, and I think they all boil down to this: one can never really know the future, so is it wise to give up the certainty of a "safe" job today for comforts in the future?

You're right in your argument that we cannot predict the future with 100% certainty, however the conclusion you draw from it can be improved. While we can't predict the future, we can use historic data and caution to mitigate risks when planning for retirement. This is where concepts like safe withdrawal rates (SFW, typically 4%) come in. This is a number that has been historically been shown to stand over long periods of study. If that still presents a risk for you, you can do the same calculation with a lower withdrawal rate (say, 3 or 3.5%) and calculate the required nest egg that way. Similarly, your estimated annual costs in the future can be derived from your current costs, factoring in inflation. Again, if you feel that isn't conservative enough for you, leave some wiggle room for yourself.

While you're right that we cannot predict the future, we can do a lot to mitigate risks for ourselves, and that (for most people) is better than the alternative: to work until you're well into old age.

You're right, the stock market may crash, as it has so often in the past. But each time, it has also rebounded, and the ones who lost the most were the ones who pulled their money out at the bottom, not the ones who held on and followed their plans.

Conversely, the idea of working until old age is not exactly risk-free either:

 - In the case of a stock market collapse, companies will likely start laying off workers. Who is a more likely target for layoffs than older, less technologically advanced workers?
 - In the case of "rampant" inflation: the value of money would rapidly decline, as the value of assets increase. Thus those who have their money invested in assets, such as housing or the stock market will be greater hedged against the inflation than everyday workers on a salary.

The retirements you've seen "fail" are likely the result of lifestyle inflation or poor planning, rather than proof that planning itself is impossible. Again, the alternative is to work 9-5 your whole life: is that really what you want?

[Grateful Stache]

Not everyone here is seeking to retire early.

[sol]

I think many of us have weighed the probability of the terrible outcomes you mentioned against that of the terrible outcome of wasting your short life in a meaningless job or in the meaningless pursuit of material goods.

[Ozstache]

I have a retirement plan and it has enough contingency built in to deal with a depression-like scenario. I now not only sleep well at night under this plan, I sleep in everyday as long as I damn well please.

[babysnowbyrd]

I have a retirement plan and it has enough contingency built in to deal with a depression-like scenario. I now not only sleep well at night under this plan, I sleep in everyday as long as I damn well please.

+1

[londonbanker]

I have a retirement plan and it has enough contingency built in to deal with a depression-like scenario. I now not only sleep well at night under this plan, I sleep in everyday as long as I damn well please.

Love it

[Johnez]

I think many of us have weighed the probability of the terrible outcomes you mentioned against that of the terrible outcome of wasting your short life in a meaningless job or in the meaningless pursuit of material goods.

Well said.

One cannot predict a number of things. A guy 40 years old has lost a million in some horrific crash has more going for him than some sucker who slaved away till 65. That early retiree has learned how to spend less, probably has his own house paid off and spends his time doing whatever he wants, including learning new skills. A life not wasted.

[iluvzbeach]

^^^Love that. I wish the forums had a 'like' button!

[bacchi]

Too often I have seen early retirements result in a blue Walmart vest in old age.

Yes, that puts in a damper on ER dreams. How many early retirement people do you know? I only personally know my neighbor and he did it through inheritance rather than investing. He travels, plays his stereo loud, and just hangs around enjoying life.

[johnintaiwan]

What is wrong with working at walmart as a back up plan?

I miss the days when I worked at the gas station or grocery store. The money was no good, but the job itself was easy and enjoyable. Little to no stress, you can leave it all at the office, see new people everyday. I may up there by choice even if my fire plans all work out perfectly.

[vern]

What sol said...since the future is unknowable, why keep working?

[Ynari]

I'm really confused what Skyhigh was trying to achieve with this post, other than perhaps venting frustration at risk.  There was no real question or thought proposal other than "We don't know the future", which, of course, everyone usually agrees upon.  Skyhigh, are you interested in exploring a more conservative approach?  What causes you to think of risk in the way that you do, or what is your thought process behind it?

[Monkey Uncle]

I'm really confused what Skyhigh was trying to achieve with this post, other than perhaps venting frustration at risk.  There was no real question or thought proposal other than "We don't know the future", which, of course, everyone usually agrees upon.  Skyhigh, are you interested in exploring a more conservative approach?  What causes you to think of risk in the way that you do, or what is your thought process behind it?

I think he was baiting us...

[James]

What is wrong with working at walmart as a back up plan?

I miss the days when I worked at the gas station or grocery store. The money was no good, but the job itself was easy and enjoyable. Little to no stress, you can leave it all at the office, see new people everyday. I may up there by choice even if my fire plans all work out perfectly.

Definitely agree, dismissing a low wage job to make ends meet if needed isn't very mustachian.

If you save up X million and then lose it all, it isn't due to following mustachian ideas. Risk is always present, but OP question/comment is BS. You don't get to a set number, hit a switch to retire, and then spend without ever checking your account balance. If your portfolio balance starts dropping then you start spending less or earning something to make up the balance. You don't wait until the account is empty and then grab a low paying job, but certainly a low paying job might be on the table to avoid drawing down the accounts if needed.

Based on a few clues I do think this was a troll posting. The reference of a Money magazine article, "trickle of cash for subsistence", "economy could fail", etc. So I don't take it as a serious question, despite my attempt at a serious answer. :)

[slugline]

Related: Mr. Money Mustache vs. the Internet Retirement Police

[sirdoug007]

Looks like Andrea Coombes has a response to SkyHigh and other folks nervous about the long game.

8 secrets for success from early retirees http://on.mktw.net/1ftVXSq


Sent from my iPhone using Tapatalk

[BBub]

Achieving FI has no downside financially and has a great deal of upside both financially and in terms of the intangibles like peace of mind, sense of freedom, etc.

Traditional work route:  Depend on the solvency of 1 company to support living expenses.  Keep 6 months cash on hand.  When shit hits the fan this person must immediately scramble to find more paid work.  He is beholden to what the labor market will pay for his skills and may be forced to settle for lower wages or learn an entirely new trade.

FIRE option: Support living expenses by drawing down 4% from a portfolio diversified across the capital structure of hundreds (thousands?) of different corporations and governments, with risk spread geographically around the entire world.  If income does not meet needs in a given year she has 20-25 yrs to make adjustments to spending/saving.  In a horriffic case of 50% loss this person still has 12 or so years worth of expenses on hand plus the option to pursue paid work.  If she implements generally accepted guidelines for ER asset allocation, she likely has 18-24 months cash on hand to ride out the storm.  She's mitigated a great deal of risk by having both an income stream and asset base to support the lifestyle, and additionally she has every option the traditional worker guy has in dire economic times.

There is a continuum of scenarios in between and beyond the two presented - ranging from abject poverty to forbes 100 wealth.  But this simple dichotomous example is meant persuade you that pursuing FI is undeniably far more conservative than not seeking to obtain it at all.  The fact that risk is involved is not a good reason to entirely dismiss the idea.

[AJDZee]

Keeping with OP point - you don't know what will happen in the future... but in my experience knowing several old people, I can think of more examples where terrible personal, health, or other unforeseeable things (unrelated to money/savings) happened to good people. I'm sure if they knew what would happen to them they would have 'retired' long before and enjoyed life earlier.

So in my opinion the OP isn't wrong, but it's heavily bias to the money/paranoid side. Perhaps needs to be reminded that your days on this earth are just as finite as the balance in your account.

Obviously there is a balance - all of us should first strive to be happy TODAY with our work and life, which is unrelated to our end goals of being financially independent... which is not necessarily related to 'retiring' (i.e. not working).

[Daisy]

The economy could fail. Unexpected health issues could consume the nest egg. Runaway inflation could negate the value of savings. Too often I have seen early retirements result in a blue Walmart vest in old age. The conservative approach might be to keep working even a little bit to maintain professional viability in case it is needed.

Well others have covered the topic of the security of FI vs. living paycheck to paycheck (even on a high salary) and dependant on one employer.

My view is that there is a peak time for FIRE where you can enjoy life the most. I guess it depends on your genetics/lifestyle/life expectancy. For me, I expect to live into my late 80s and early 90s. I am currently in my mid 40s. I think I want to FIRE soon to really enjoy the 50-70 years. After that, I may or may not have the health, wealth, or interest to do the things I want to do while 50-70. So if I spend the last 15-20 years of my life after turning 70 just sitting on my front porch eating PB&J sandwiches and telling great stories because that's all I can afford, but had spent 50-70 travelling, kayaking, hiking the beautiful trails in the world...well I would call that a huge win.

Of course I am in my 40s and not my 30s, so I can see my continually shortening time left on this earth more clearly than I did in my 30s. I think the 40s are the best time to FIRE. I, too, would be a little leary of prematurely retiring in my 30s knowing that I could pad the stash a little more. But then, I didn't start thinking about FIRE seriously until I hit about 40. I had a nice stash then, but hadn't worked out the numbers needed to FIRE. A bad job will help kickstart those FIRE engines though.

I suspect this will be heresy on an early retirement forum, but oh well.

And one more thing, I am a minimalist when it comes to health care. I don't think I want to spend huge amounts of money to keep myself alive, so I am fine with accepting what comes my way. If my healthy late-80-year-old aunts are any indication though, I don't have much to worry about. I also don't have children so I am OK with thinking this way.

[BBub]

Daisy - I don't think your thoughts are heresy at all.   Many members of this forum are very conservative in their approach to ER planning.  Suggesting that one work a few extra years to pad the stash, or shoot for 3 instead of 4 SWR is not unreasonable.  It's the mentality of the OP that draws fierce criticism - the idea that one should dismiss the idea of ER and hold on to the "security" of paid employment to mitigate against improbable doomsday scenarios.  There's a stark difference between identifying risks then taking proactive action to reduce exposure versus writing off the entire FIRE concept due to an uncertain future.

[dmn]

OP pretty much sums up the criticism I hear from my family concerning my high savings rate. Several of my family members expect our economic system to collapse in the next decades, so they infer that saving and investing is probably useless. I think they believe I waste my salary buying worthless stocks, whereas sensible people should spend it on cars and stuff.

On the other hand, my father spent his recent years working and saving very hard, because his original retirement plan of either dying young or waiting for the collapse of capitalism has not worked out. He now has enough capital to cover the existential minimum during retirement, but he will have to work for several more years until he can retire comfortably.

My own plans (saving and investing for FIRE) are built on the premise that we will have no qualitatively worse crises than throughout the 20th century, i.e. I expect financial capitalism to last. I do not think that we can really prepare for the less likely case that the system does break down. The OP suggested that it might be safer for us to not quit work. Would sticking to our corporate jobs really help us in the case of a communist revolution or a nuclear world war?

Anyway, I think financial capitalism is likely to last, not least because many powerful people and organizations profit from it, so they will try to stabilize the system whenever the situation gets too bad.

[babysnowbyrd]

It is common to see people and articles produce a number in regards to what they expect to need in retirement. It seems to me to be a risky approach since the future is unknowable. To cease work efforts early because a Money magazine article says you have enough to last the next 35 years seems foolish to me. A lot can happen in that time. To pull the plug early and expect to be able to carefully meter a trickle of cash for subsistence seems to be inviting fate to deal a blow.

Is one million enough? Three million? To me these answers are unknowable. The economy could fail. Unexpected health issues could consume the nest egg. Runaway inflation could negate the value of savings. Too often I have seen early retirements result in a blue Walmart vest in old age. The conservative approach might be to keep working even a little bit to maintain professional viability in case it is needed.

I also just met someone who had saved enough for retirement and is now working full-time with his own business to pay the bills. I didn't get the whole story, but I'm pretty sure with him and with Blue Walmart Vests, it wasn't a "failed" economy (you're talking mass-failure, bottoms-out type stuff right?) or runaway inflation. It wasn't nuclear war. Most likely, it was planning or lack of it, though I agree financial catastrophes can happen.

[franklin w. dixon]

I'm really confused what Skyhigh was trying to achieve with this post, other than perhaps venting frustration at risk.  There was no real question or thought proposal other than "We don't know the future", which, of course, everyone usually agrees upon.  Skyhigh, are you interested in exploring a more conservative approach?  What causes you to think of risk in the way that you do, or what is your thought process behind it?

I think he was baiting us...

He's been baiting since he registered, and prior to baiting here he baited on a forum for airline pilots, which is where his name came from. "I didn't choose the troll life; the troll life chose me." -skyhigh

[Bob W]

I'm really confused what Skyhigh was trying to achieve with this post, other than perhaps venting frustration at risk.  There was no real question or thought proposal other than "We don't know the future", which, of course, everyone usually agrees upon.  Skyhigh, are you interested in exploring a more conservative approach?  What causes you to think of risk in the way that you do, or what is your thought process behind it?

I think he was baiting us...

He's been baiting since he registered, and prior to baiting here he baited on a forum for airline pilots, which is where his name came from. "I didn't choose the troll life; the troll life chose me." -skyhigh

that's funny.  The irony is that pilots are now earning just a tad more than walmart managers due to competition.   Talk about changing economy!  Unfortunately pilots are aged out so this is perhaps why the OP has so many friends who transitioned from piloting to Walmart.

[Monkey Uncle]

My view is that there is a peak time for FIRE where you can enjoy life the most. I guess it depends on your genetics/lifestyle/life expectancy. For me, I expect to live into my late 80s and early 90s. I am currently in my mid 40s. I think I want to FIRE soon to really enjoy the 50-70 years. After that, I may or may not have the health, wealth, or interest to do the things I want to do while 50-70. So if I spend the last 15-20 years of my life after turning 70 just sitting on my front porch eating PB&J sandwiches and telling great stories because that's all I can afford, but had spent 50-70 travelling, kayaking, hiking the beautiful trails in the world...well I would call that a huge win.

I hate to keep feeding the troll, but I just have to say: Amen, sister!  I've known far too many relatives and acquaintances who slaved away their entire lives and then suffered declining health (or outright death) within a few years of retiring.  My family health history is a real mixed bag, so my own fate might range anywhere from dying in my early sixties to living past a hundred.  Given those options, I'd much rather be on Medicaid when I'm 99 than die with a pile of money left over without ever retiring.

[desk_jockey]

I find the fallacy to be in this statement:

Is one million enough? Three million? To me these answers are unknowable. The economy could fail. Unexpected health issues could consume the nest egg. Runaway inflation could negate the value of savings.

Most of us want a safety margin but with all reasonable probablity the answer is not unknowable.    Some here are fine with 4% SWR and others may have a goal of 3% or 3.5%.   But at some point the fear of the thoretical possibility leads one to try to hedge against the unprotectable.   

I believe working until you have less than a 2% withdrawal rate might be OK if you goal is leaving a large endowment, but is pointless if your goal is freedom and retirement.   

Having a million or three beyond your ER needs will not do much to hedge against the extreme outlier events.   If 80s Brazil- or 00s Zimbabwe-like hyper inflation ever hits here, there will be little difference in a stash that planned for a 4% withdrawal rate from one that planned for a 1% withdrawal rate.

[arebelspy]

Too often I have seen early retirements result in a blue Walmart vest in old age.

I doubt that's true.  It's much more likely those people are there because they had no retirement plan at all (and eventually were laid off, with no stache to provide income).

People who are financially savvy, frugal, and smart enough to ER are likely smart enough to have backup plans, adjust when necessary, and weather any storms that happen.

I think many of us have weighed the probability of the terrible outcomes you mentioned against that of the terrible outcome of wasting your short life in a meaningless job or in the meaningless pursuit of material goods.

Hell yes.

[Miss Prim]

Those older people in the Walmart vests may also be people who have enough money to live on, but need something to do with their time.  They may be lonely or bored and need the social aspect of working at some job.

 I am going to retire next year, but I am going to try to work out a switch to working reserve/casual at my job because I love the work (microbiologist) but, also want to have the time off to travel for extensive periods of time.  To me that is the best of both worlds, working a little bit at something you love, but also having enough money saved to do what you want.

[Skyhigh]

My point is that no matter how well one plans the future holds ability to outstrip most anything we prepare for. To retire in ones 40's only to discover that changes beyond ones control have greatly shifted circumstances is a bummer.  Lastly often in life we are our own worst enemies. We are able to fool ourselves into thinking that our future selves can maintain the same frugal approach or that boredom will not tip the cart.

I don't think it is wise to fully retire until well into the sunset of our working lives. If one retires early there could be many decades of life ahead to throw all kinds of things at the plan. I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

[matchewed]

My point is that no matter how well one plans the future holds ability to outstrip most anything we prepare for.

Happens regardless of FIRE or not. So why is it particular to retirement? Why not just move forward the best you can.

To retire in ones 40's only to discover that changes beyond ones control have greatly shifted circumstances is a bummer.

Same as above, it's just as easy to say that to retire in ones 50's, 60's, or 70's and have changes that go beyond your control. Why aren't you worried about normal retirement? Or are you and plan to work until you die?

Lastly often in life we are our own worst enemies. We are able to fool ourselves into thinking that our future selves can maintain the same frugal approach or that boredom will not tip the cart.

Don't know about you but I'm not bored with life. And I do not view my life as shoehorning frugality. I just am who I am. I can live within my means. If that means I'm frugal so be it. But that doesn't mean I'm suddenly going to get sick of it. Any more so than suddenly getting sick of any other aspect of my life. I don't believe that actually happens to people. Nobody wakes up one day sick of their life. Those things develop over time, the individual just might not be aware of it. It may be presumptuous but I think I'm aware of how happy I am and what makes me happy.

I don't think it is wise to fully retire until well into the sunset of our working lives. If one retires early there could be many decades of life ahead to throw all kinds of things at the plan. I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

Why does where the money comes from matter? If I work and earn 25k a year for living expenses or I have my money generate 25k a year for living expenses, what's the difference?

And I (and I'm not perfect at it) decided I won't live my life based off of the fear of some vague undefinable thing in the future. I live my life in the now that's happening and the potentials I can see and control. Worrying about what you can't is a useless exercise. All the worries you outline, some big event which changes your circumstances, are regardless of all the things you want to maintain just in case that even happens. You seem to not see that point and drape yourself in the "protection" a job/business/real estate has. That protection is at as much risk as investment income. They all have risks. Why is FIRE risky and all the other things you've mentioned not?

In short you've tricked yourself into thinking this fallacy of yours, as you've put it, is something unique to retirement. It is not. It is life in general. Regardless of working or not you have to come to terms with the unknown. Some people will wring their hands and rely on systems they feel comfortable with. Others will not and develop their own system using information from several other systems. I'd argue most "Mustachians" are of the latter. The people who "see" fallacies in that are generally of the former.

[BBub]

My point is that no matter how well one plans the future holds ability to outstrip most anything we prepare for. To retire in ones 40's only to discover that changes beyond ones control have greatly shifted circumstances is a bummer.  Lastly often in life we are our own worst enemies. We are able to fool ourselves into thinking that our future selves can maintain the same frugal approach or that boredom will not tip the cart.

I don't think it is wise to fully retire until well into the sunset of our working lives. If one retires early there could be many decades of life ahead to throw all kinds of things at the plan. I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

Ok now I'm convinced, and having adopted skyhigh's logic, have decided to allocate my entire stash to construction of a bunker.  I'll also exclusively wear hazmat suits.  This plan will undeniably increase my odds of surviving a terrorist attack or biological outbreak.  If, at the sunset of my life, the big bomb has not yet been activated I may consider opening the hatch and spending some time outdoors with my great grandchildren... but, don't worry I haven't lost my marbles - I'll always stay at least within sight of the bunker just in case. 

[Rezdent]

My point is that no matter how well one plans the future holds ability to outstrip most anything we prepare for. To retire in ones 40's only to discover that changes beyond ones control have greatly shifted circumstances is a bummer.  Lastly often in life we are our own worst enemies. We are able to fool ourselves into thinking that our future selves can maintain the same frugal approach or that boredom will not tip the cart.

I don't think it is wise to fully retire until well into the sunset of our working lives. If one retires early there could be many decades of life ahead to throw all kinds of things at the plan. I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

Ok now I'm convinced, and having adopted skyhigh's logic, have decided to allocate my entire stash to construction of a bunker.  I'll also exclusively wear hazmat suits.  This plan will undeniably increase my odds of surviving a terrorist attack or biological outbreak.  If, at the sunset of my life, the big bomb has not yet been activated I may consider opening the hatch and spending some time outdoors with my great grandchildren... but, don't worry I haven't lost my marbles - I'll always stay at least within sight of the bunker just in case.

BBub
This certainly will keep one safer than most, albeit at the cost of your freedom.  The only flaw I see in your plan is that it is devilishly difficult for one to determine the sunset of their life - how will you be able to mitigate the risk of miscalculating? /sarcasm
Truthfully there is risk inherent in life.  The future may hold anything, and the best laid plans will go astray - planning to work until my later years is just as much if not more, a gamble than planning FIRE.  I may not be able to work that long, and I could wind up destitute.  I may die young and planning was a moot point.

The risk is not disproportionately weighed against FIRE - it is equal in both scenarios. But in my mind, the rewards are heavily tilted towards FIRE.

[Zikoris]

A few thoughts on that:

You can choose to live in a country with a sensible health care system. This eliminates the risk of medical bankruptcy or blowing through all your money to pay for cancer treatment.

You can also limit the effects of outside forces tremendously by working towards self-sufficiency. My boyfriend and I have had zero inflation in the years we've been tracking, and I strongly suspect that's a result of eliminating entire categories of spending altogether (cars, meat and animal products, most restaurants, most consumer goods). In 2015 we're going to start making attempt at growing our own produce as best we can. I took sewing lessons on 2013 and can now repair things I would have had to toss before, and make things I would have had to buy. These sorts of things add a huge amount of stability to your plans.

Lets say worst case scenario we somehow had to work again - our expenses are so low that we could work VERY part time minimum wage jobs, probably doing something fun, and easily sustain our lifestyles. That's absolute worst case scenario. It just doesn't sound that bad to me.

[Daisy]

My point is that no matter how well one plans the future holds ability to outstrip most anything we prepare for. To retire in ones 40's only to discover that changes beyond ones control have greatly shifted circumstances is a bummer.  Lastly often in life we are our own worst enemies. We are able to fool ourselves into thinking that our future selves can maintain the same frugal approach or that boredom will not tip the cart.

I don't think it is wise to fully retire until well into the sunset of our working lives. If one retires early there could be many decades of life ahead to throw all kinds of things at the plan. I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

Ok now I'm convinced, and having adopted skyhigh's logic, have decided to allocate my entire stash to construction of a bunker.  I'll also exclusively wear hazmat suits.  This plan will undeniably increase my odds of surviving a terrorist attack or biological outbreak.  If, at the sunset of my life, the big bomb has not yet been activated I may consider opening the hatch and spending some time outdoors with my great grandchildren... but, don't worry I haven't lost my marbles - I'll always stay at least within sight of the bunker just in case.

Sounds like a decent plan, but then you overlook the devastating effects of lack of sunlight and vitamin D on your bones. You may be too frail to climb yourself out of your bunker. A hug from your great grandchildren (assuming they recognize you after you hiding in the bunker for so long) will probably crush what little bone mass you have left. Then you will collapse onto yourself and not be able to get up and reenter the bunker.

I watched a documentary show once on CNBC (during my cable days) about people preparing for the acopalypse. Some people thought there was going to be a huge flood, so they build their bunkers on tops of mountains. Others thought the continental plates would collide and wanted water based structures. Others thought there would be a nuclear holocaust so they build their bunkers way underground.

So if the flooders were wrong and a nuclear holocaust happened instead, they would be screwed. If the  nuclear holocausters were wrong and a flood happened instead, well then maybe their bunker would be submerged under water and they'd never make it out. It didn't seem like there was one fool-proof way to prepare for every possibility.

My conclusion from watching that show was if something that drastic happened, I would rather die in the acopalypse than have to hang out with those crazy people (the only ones left to survive) and have to eat freeze dried food. I mean...we've all got to go sometime, right?

[Daisy]

A few thoughts on that:

You can choose to live in a country with a sensible health care system. This eliminates the risk of medical bankruptcy or blowing through all your money to pay for cancer treatment.

You can also limit the effects of outside forces tremendously by working towards self-sufficiency. My boyfriend and I have had zero inflation in the years we've been tracking, and I strongly suspect that's a result of eliminating entire categories of spending altogether (cars, meat and animal products, most restaurants, most consumer goods). In 2015 we're going to start making attempt at growing our own produce as best we can. I took sewing lessons on 2013 and can now repair things I would have had to toss before, and make things I would have had to buy. These sorts of things add a huge amount of stability to your plans.

Lets say worst case scenario we somehow had to work again - our expenses are so low that we could work VERY part time minimum wage jobs, probably doing something fun, and easily sustain our lifestyles. That's absolute worst case scenario. It just doesn't sound that bad to me.

You guys sound awesome - and resilient.

My grandparents had to start their lives over twice - once as young adults and once as 60 year olds. Both times immigrating to a new country. My parents did it once in their early 30s. And no amount of buffer building would have helped during that last move.

I've absorbed these lessons and know I can come out of whatever is thrown my way. If that means wearing a Walmart vest, well then so be it. I've had a pretty cushy life compared to them, so it's no big deal.

[Dicey]

I've absorbed these lessons and know I can come out of whatever is thrown my way. If that means wearing a Walmart vest, well then so be it. I've had a pretty cushy life compared to them, so it's no big deal.

Exactly. Since I achieved FIRE by earning it, I have no doubts in my ability to retain it. I learned many skills along the way and those skills won't just disappear. The confidence that comes along with being in this position is mind-blowing, not money-blowing.

And seriously, Skyhigh, exactly how many people do you know personally that used to be FIRE, but now work at WalMart because they have to? I'd guess between slim and none.

[Johnez]

I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

For a simple cautionary statement this receives inane replies detailing bomb shelter plans? Seriously?

For the people so certain they're going to be fine, that's fine really. I am currently digging for the Trinity Study's raw numbers to see if it works out as dandily as some claim. One thing that kind of piques my interest is this fact-the study merely measures the lack of complete drawdown of funds in a certain time frames, most notably the 30 year periods. Yes, its 98% successful that you won't have zero dollars at the end of 30 years, but tell me how easy you're going to sleep with 200k in stocks in the middle of a protracted bear market in your sixties. That 4% rule still says your successful, would it feel that way then?

[MrsPete]

Conversely, the idea of working until old age is not exactly risk-free either:

 - In the case of a stock market collapse, companies will likely start laying off workers. Who is a more likely target for layoffs than older, less technologically advanced workers?
 - In the case of "rampant" inflation: the value of money would rapidly decline, as the value of assets increase. Thus those who have their money invested in assets, such as housing or the stock market will be greater hedged against the inflation than everyday workers on a salary.

I agree with your general idea:  Working 'til you're X age may not be an option.  Your company might decide to get rid of you. 

However, I disagree with your details.  In my own department we've talked frankly about "Who'd be likely to go first /last if we were hit with layoffs?"  And we're all fairly well in agreement:  Those of us who have "a specialty" would be last to go -- specifically, three of us are qualified to do things that aren't particularly easy to replace -- we're safest. 

Also, I find two problems with your comment about "older, less technologically advanced workers".  Not all jobs are tech-heavy, and not all older people are ignorant of the latest technology. 

As for "rampant inflation", I think the person who's most safe is the person who has a paid-for house and tools and skills that will allow him to be self-sufficient.  Money in the bank may become devalued, but knowing how to fix your own plumbing and cook from scratch will be valuable -- both in terms of your own family's comfort and in trading/bartering with others.

I doubt that's true.  It's much more likely those people are there because they had no retirement plan at all (and eventually were laid off, with no stache to provide income).

The only Walmart employee I know personally (other than a few of my high school students who've worked part-time) is my grandmother's slightly-younger cousin, who must be in her 90s by now.  She worked in the mills most of her life, and she would've had a small pension . . . but she was one of the casualties of the mill's bankruptcy.  I don't think she's working as a Walmart greeter to keep herself active.  I think it's real money to her. 

I don't think her problem was lack of planning.  I think it was that she put her faith in the idea that her company could not fail, her pension could not disappear -- she had all her eggs in one basket.  I'm sure she never made much money, so perhaps this was what was available to her. 

Personally, I'd be fine with working at an hourly job, though I'd have to be pretty desperate to go to Walmart.  The benefit, of course, is that you don't take work home with you.  My husband and I have talked about some jobs -- especially seasonal jobs -- that we'd enjoy on a part-time basis; however, we're rock-solid on this thought:  We want any paid work we take on to be A CHOICE, not a necessity because we planned poorly.

[shuffler]

Tell me how easy you're going to sleep with 200k in stocks in the middle of a protracted bear market in your sixties. That 4% rule still says your successful, would it feel that way then?

Most of use use other tools/formulas to measure our chances of success.  CFireSim is popular, and it allows simulation beyond 30 years of retirement.
    http://www.cfiresim.com

Most of us would also plan to react to an unfavorable environment through various means of reducing our consumption or increasing our income.  And we'd take corrective action long before the 60yo/$200k crisis you envision.
    http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/

[matchewed]

I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

For a simple cautionary statement this receives inane replies detailing bomb shelter plans? Seriously?

For the people so certain they're going to be fine, that's fine really. I am currently digging for the Trinity Study's raw numbers to see if it works out as dandily as some claim. One thing that kind of piques my interest is this fact-the study merely measures the lack of complete drawdown of funds in a certain time frames, most notably the 30 year periods. Yes, its 98% successful that you won't have zero dollars at the end of 30 years, but tell me how easy you're going to sleep with 200k in stocks in the middle of a protracted bear market in your sixties. That 4% rule still says your successful, would it feel that way then?

The scenario you paint about having 200k in your 60's is exactly why I feel some people don't grok all the variables. A) you don't mention expenses and B) you don't talk about social security. Phrasing it how you do is a poor framing of an ultra specific scenario. I would argue that a person who has FIRE'd would be financially wavy enough to have built mitigation into their plan and would have executed it.

[BBub]

I believe that it might be a good idea to maintain professional currency or to have non-passive streams of income, such as a business or investment real estate, and not assume that we have the future all nailed down.

For a simple cautionary statement this receives inane replies detailing bomb shelter plans? Seriously?

For the people so certain they're going to be fine, that's fine really. I am currently digging for the Trinity Study's raw numbers to see if it works out as dandily as some claim. One thing that kind of piques my interest is this fact-the study merely measures the lack of complete drawdown of funds in a certain time frames, most notably the 30 year periods. Yes, its 98% successful that you won't have zero dollars at the end of 30 years, but tell me how easy you're going to sleep with 200k in stocks in the middle of a protracted bear market in your sixties. That 4% rule still says your successful, would it feel that way then?

Im personally shooting for a 3% swr to mitigate against the very scenario you describe.  I'm admittedly an ultra conservative wuss.  Having acknowledged this about myself I'm crafting my plans to suit my temperament.  So assuming my annual expenses were under $6k I'd feel fine with 200k at 60.  The bunker comments were made after making an earnest attempt to explain the rationale behind FIRE and lay out some very clear examples.  The OP was completely unwilling to budge from what, in my view, is a silly and irrational stance.  Besides, I have a hunch the OP is trolling us all anyway so figured I'd give him some crow to eat.

[steveo]

I think many of us have weighed the probability of the terrible outcomes you mentioned against that of the terrible outcome of wasting your short life in a meaningless job or in the meaningless pursuit of material goods.

Sounds about right to me.

[Skyhigh]

 
My mother is in a difficult situation. She has macular degeneration. Every month she takes a shot in her eyes or else she will go blind. The medication is still new and not covered by insurance. The cost is something like $1500 out of pocket. There is no way she could have predicted this and as a result she is burning through her savings at a fantastic pace. My father and mother retired well at 47 thinking that they had life figured out. Many surprises and mistakes later and she is going to be broke long before her expected life span.

I have seen a of of people who retire early only to regret it. The future is unknowable. The day will come when we can not work anymore. Until then regardless of ones financial situation it seems a more conservative approach is to save considerably more than you "think" you will need to survive the next 40 years on.

Another question is; are we her to take up space and to consume resources or do we owe a contribution of some kind? Regardless of ones financial situation it seems unhealthy to merely exist. In my experience it also is a leading cause of why financial plane go astray. People who are too young to retire can lose a sense of purpose, connection to the outside world, and become bored as a result premature idleness. Actions to remedy that condition often is painfully expensive and devastating to the plan.

Maintaining some sort of work function can prevent a lot of surprises as the years drag on.

[Skyhigh]

I've absorbed these lessons and know I can come out of whatever is thrown my way. If that means wearing a Walmart vest, well then so be it. I've had a pretty cushy life compared to them, so it's no big deal.

Exactly. Since I achieved FIRE by earning it, I have no doubts in my ability to retain it. I learned many skills along the way and those skills won't just disappear. The confidence that comes along with being in this position is mind-blowing, not money-blowing.

And seriously, Skyhigh, exactly how many people do you know personally that used to be FIRE, but now work at WalMart because they have to? I'd guess between slim and none.

I am a property manager and frequently encounter people who retired early only to be in a bad way due to unexpected events. There is no way one can accurately predict the needs of the future. To abandon productive work years is risky.

[Skyhigh]

I think many of us have weighed the probability of the terrible outcomes you mentioned against that of the terrible outcome of wasting your short life in a meaningless job or in the meaningless pursuit of material goods.

I agree. The other side of risk is that one can accumulate a small fortune only to be hit by a bus on the first day of their retirement. Life is a risk. In our modern world it is possibly that someone in their 30's could live into their 90's and beyond. It stinks to have to work a sole sucking job but I believe that it wold be worse to be old and wish you could be working a sole sucking job because poverty in old age is far worse.

[shuffler]

My mother is in a difficult situation. She has macular degeneration.

Ugh.  That sucks.

Regardless of ones financial situation it seems a more conservative approach is to save considerably more than you "think" you will need to survive the next 40 years on.

Ok, sounds like you're saying less that it's a "fallacy" and more that people (in general) don't include a wide enough safety margin in their calculations?

Another question is; are we her to take up space and to consume resources or do we owe a contribution of some kind? Regardless of ones financial situation it seems unhealthy to merely exist. In my experience it also is a leading cause of why financial plane go astray. People who are too young to retire can lose a sense of purpose, connection to the outside world, and become bored as a result premature idleness. Actions to remedy that condition often is painfully expensive and devastating to the plan.

Like many people, I don't derive sense-of-purpose from my job.  In fact, I'd say that I have less sense-of-purpose because of my job, due to the time that it takes away from other pursuits.
When I FIRE, I do plan to stay engaged with the world, and not merely exist.  But the engagement won't come with a paycheck.

[EDSMedS]

For me, ER means working.  That may seem counter-intuitive but is well-supported by MMM's life.

I currently have 4 income streams, one HUGE, one sufficient, one small, and one tiny.  ER (when I'll be ~33, w/~15x annual expenses) means getting rid of the HUGE stream b/c it is the most stressful, least satisfying, and least supportive of my personal choices (like living according to the wildly vascillating natural emotions accompanying creativity).  I may increase some of the others or may add a few more.  WHO KNOWS?!  I can tell you that 1) if I can't make money doing shit I enjoy, I can make some doing shit I can tolerate, ESPECIALLY enough to support my low expense requirements; 2) it is unhealthy to determine your life by negative potentials; 3) bad, unpredictable shit happens to people that hate every day of their lives even when they are stuck in secure cubicles and debt; 4) if you are so afraid of negative potential, I hope you also support strong social safety nets.

I agree with OP that wiping your hands clean of potential for income is foolish, but so is relying on the promise of steady income from a company that is more interested in profit/loss than your well-being.

[Skyhigh]

My mother is in a difficult situation. She has macular degeneration.

Ugh.  That sucks.

Regardless of ones financial situation it seems a more conservative approach is to save considerably more than you "think" you will need to survive the next 40 years on.

Ok, sounds like you're saying less that it's a "fallacy" and more that people (in general) don't include a wide enough safety margin in their calculations?

Another question is; are we her to take up space and to consume resources or do we owe a contribution of some kind? Regardless of ones financial situation it seems unhealthy to merely exist. In my experience it also is a leading cause of why financial plane go astray. People who are too young to retire can lose a sense of purpose, connection to the outside world, and become bored as a result premature idleness. Actions to remedy that condition often is painfully expensive and devastating to the plan.

Like many people, I don't derive sense-of-purpose from my job.  In fact, I'd say that I have less sense-of-purpose because of my job, due to the time that it takes away from other pursuits.
When I FIRE, I do plan to stay engaged with the world, and not merely exist.  But the engagement won't come with a paycheck.

It is possible that a bad job can push someone out of the workforce too early. The daily grind can alter our sense of judgement to over assume and make a poor decision.

[Skyhigh]

For me, ER means working.  That may seem counter-intuitive but is well-supported by MMM's life.

I currently have 4 income streams, one HUGE, one sufficient, one small, and one tiny.  ER (when I'll be ~33, w/~15x annual expenses) means getting rid of the HUGE stream b/c it is the most stressful, least satisfying, and least supportive of my personal choices (like living according to the wildly vascillating natural emotions accompanying creativity).  I may increase some of the others or may add a few more.  WHO KNOWS?!  I can tell you that 1) if I can't make money doing shit I enjoy, I can make some doing shit I can tolerate, ESPECIALLY enough to support my low expense requirements; 2) it is unhealthy to determine your life by negative potentials; 3) bad, unpredictable shit happens to people that hate every day of their lives even when they are stuck in secure cubicles and debt; 4) if you are so afraid of negative potential, I hope you also support strong social safety nets.

I agree with OP that wiping your hands clean of potential for income is foolish, but so is relying on the promise of steady income from a company that is more interested in profit/loss than your well-being.

My main point is that while one is capable of working they should. People in America today hold the possibility of living an incredibly long time. Even if a person is able to work until 65 they could have another 40 years of life to pay for. It seems unlikely to me that a plan to retire at 40 can stand the test of time that long without suffering a major complication. Better to spend your working years hiding as many nuts as you can. You never know when the day will come when you can't work anymore but wish you could.