Author Topic: Will FIREes die rich or broke?  (Read 3540 times)

nara

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Will FIREes die rich or broke?
« on: November 11, 2017, 09:36:53 AM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

ixtap

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Re: Will FIREes die rich or broke?
« Reply #1 on: November 11, 2017, 09:43:08 AM »
It depends on the stock market. The idea is not that you leave the principle untouched, but that you will usually have greater than 4% returns, so growth will usually cover your expenses.

Also, the 4% SWR is supported by a study that looked at 30 year intervals, not 50 year intervals. It is also based on historical data: past performance is not a guarantee of future returns.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #2 on: November 11, 2017, 09:46:32 AM »
That isn't necessarily what the 4% rule means. You may touch principal about half the time.

But we can't possibly predict future returns. Historically over 50% of the time at a flat 4% adjusted for inflation you will die with piles of money.  About 8-9% of the time you'll run out of money before you die.  About 10% you stick around what you retired with adjusted for inflation and the remainder is growing somewhere between extreme amounts of money and just keeping pace. 

Cfiresim is a good tool to look at how the 4% rule has worked historically.
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nereo

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Re: Will FIREes die rich or broke?
« Reply #3 on: November 11, 2017, 10:24:50 AM »
As said above, the "4% rule" is a bit different from how you are portraying it.  There's a lot of information and discussion about it here.

That said, regarding your question: [are you] likely to die with more money or no money at all??? - the answer is that historically, if you withdraw no more than 4% of your portfolio each year adjusted for inflation you are more likely to have MORE money than you started with vs running out of money entirely.  However, both possibilities are possible, depending on market conditions.

Some consider that point and choose a much lower WR (at a 3.25% WR no historical time period has resulted in running out of money after 30 years).  Others see a 4% WR as already "safe enough" and realize that the most likely scenario is they will die with a surplus of money, but are prepared to cut back in spending and/or earn some additional income should market conditions become truly abysmal, particularly in the first 6-8 years of retirement when it matters most (see: sequence of returns risk).
« Last Edit: November 11, 2017, 01:20:40 PM by nereo »
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MrThatsDifferent

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Re: Will FIREes die rich or broke?
« Reply #4 on: November 11, 2017, 12:29:34 PM »
Everyone is hedging their bets, but the answer is, yes, you should die rich. We all know, anything can happen and nothing is guaranteed but the whole premise is that the money you access is equivalent to what you need to live off and that money comes from a pot that perpetually gives. Thatís the goal. So, plan as if that will happen, make sure you have an updated will that addresses whatever legacy you plan to leave behind.

Sun Hat

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Re: Will FIREes die rich or broke?
« Reply #5 on: November 11, 2017, 02:15:35 PM »
Try playing with the http://www.cfiresim.com/ to have a look at different scenarios, as it illustrates the probability and risk well. The main risk is living much longer than anticipated and having that period coinciding with a prolonged period of poor market returns. If you know when you'll die and what market returns will be, then you're set ;)

marty998

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Re: Will FIREes die rich or broke?
« Reply #6 on: November 11, 2017, 04:44:43 PM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

Most FIREies will take corrective action when things start going amiss. e.g. it's quite easy to take a part time job even bringing in $10-$15k.

Being freed of work tends to open up more and more opportunities.

I'm yet to hear a FIRED person on the forum here run into trouble, and even if markets fall 30%, most have so much more above their baseline FIRE level after the latest market run-up that it probably wouldn't matter at all.

soccerluvof4

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Re: Will FIREes die rich or broke?
« Reply #7 on: November 12, 2017, 03:32:13 PM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

Most FIREies will take corrective action when things start going amiss. e.g. it's quite easy to take a part time job even bringing in $10-$15k.

Being freed of work tends to open up more and more opportunities.

I'm yet to hear a FIRED person on the forum here run into trouble, and even if markets fall 30%, most have so much more above their baseline FIRE level after the latest market run-up that it probably wouldn't matter at all.



True dat! ^
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aceyou

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Re: Will FIREes die rich or broke?
« Reply #8 on: November 12, 2017, 05:46:23 PM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

Most FIREies will take corrective action when things start going amiss. e.g. it's quite easy to take a part time job even bringing in $10-$15k.

Being freed of work tends to open up more and more opportunities.

I'm yet to hear a FIRED person on the forum here run into trouble, and even if markets fall 30%, most have so much more above their baseline FIRE level after the latest market run-up that it probably wouldn't matter at all.



True dat! ^

Ok, I agree with the premise that people in this community will be able to handle bear markets and that we'll very likely die quite rich.  But...

I don't think the antidote that "'I'm yet to hear a FIRED person on the forum here run into trouble" is a fair justification.  This blog was formed in 2011.  It is now late 2017.  In those 6 years, we've gone on a terrific and almost uninterrupted bull market.  We won't be able to use personal antidotes until we go through a serious recession and the people on here are marching through it successfully. 

Again, I think we will march through it successfully, but in the meantime, we can't really use our success as a huge measuring stick.

JustGettingStarted1980

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Re: Will FIREes die rich or broke?
« Reply #9 on: November 12, 2017, 05:55:08 PM »
Die Rich or Broke?

Either way, I think they'll have a lot more stories to tell when their maker arrives than the average 9-5 PM Wage Slave who retires at 65

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Re: Will FIREes die rich or broke?
« Reply #10 on: November 12, 2017, 05:59:56 PM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

Most FIREies will take corrective action when things start going amiss. e.g. it's quite easy to take a part time job even bringing in $10-$15k.

Being freed of work tends to open up more and more opportunities.

I'm yet to hear a FIRED person on the forum here run into trouble, and even if markets fall 30%, most have so much more above their baseline FIRE level after the latest market run-up that it probably wouldn't matter at all.



True dat! ^

Ok, I agree with the premise that people in this community will be able to handle bear markets and that we'll very likely die quite rich.  But...

I don't think the antidote that "'I'm yet to hear a FIRED person on the forum here run into trouble" is a fair justification.  This blog was formed in 2011.  It is now late 2017.  In those 6 years, we've gone on a terrific and almost uninterrupted bull market.  We won't be able to use personal antidotes until we go through a serious recession and the people on here are marching through it successfully. 

Again, I think we will march through it successfully, but in the meantime, we can't really use our success as a huge measuring stick.

We have participants who have been FIRED far longer than the blog has been around. I appreciate their joining the community.
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Laura33

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Re: Will FIREes die rich or broke?
« Reply #11 on: November 13, 2017, 09:36:41 AM »
does this mean that you are likely to die with more money or no money at all???

Yes.

The 4% rule is based on averages and projections.  Therefore, it is highly likely that as real life plays out, some people will end up in each of those categories, and some will end up in-between ("not as much as you started with, in inflation-adjusted terms, but not broke").

However, if you go into it with a solid plan and are adaptable, the risk of dying broke is much, much lower than the likelihood that you end up with at least something left.
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boarder42

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Re: Will FIREes die rich or broke?
« Reply #12 on: November 13, 2017, 09:39:53 AM »
does this mean that you are likely to die with more money or no money at all???

Yes.

The 4% rule is based on averages and projections.  Therefore, it is highly likely that as real life plays out, some people will end up in each of those categories, and some will end up in-between ("not as much as you started with, in inflation-adjusted terms, but not broke").

However, if you go into it with a solid plan and are adaptable, the risk of dying broke is much, much lower than the likelihood that you end up with at least something left.

even if you arent adaptable based on historic market performance you're more likely to end up with a Sh@@! ton of money vs going broke.  5-6x more likely to have a crap ton sticking only to a 4% SWR vs going broke. with 0 flexibility.
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Acastus

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Re: Will FIREes die rich or broke?
« Reply #13 on: November 14, 2017, 11:01:36 AM »
To ensure that you will not run out of money, you need to save more than the theoretical, well behaved market allows. If the market were well behaved, we could spend (return - inflation)% every year and be OK. Unfortunately, the market drops 20-40% every decade or so. You need a strategy in place before that happens so you can still spend some of the money while the rest recovers over the next 2-5 years. By only spending 4% of the initial nest egg plus inflation adjustments every year, you can set aside the excess gains for when the market slaps you around.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #14 on: November 14, 2017, 11:34:10 AM »
To ensure that you will not run out of money, you need to save more than the theoretical, well behaved market allows. If the market were well behaved, we could spend (return - inflation)% every year and be OK. Unfortunately, the market drops 20-40% every decade or so. You need a strategy in place before that happens so you can still spend some of the money while the rest recovers over the next 2-5 years. By only spending 4% of the initial nest egg plus inflation adjustments every year, you can set aside the excess gains for when the market slaps you around.

you dont technically need a strategy in place as you described. 90+ % of the time you could go 100% stocks and 0% bonds and mindlessly withdraw an inflation adjusted 4% and be perfectly safe your whole life.
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clutchy

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Re: Will FIREes die rich or broke?
« Reply #15 on: November 14, 2017, 11:40:24 AM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...


boarder42

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Re: Will FIREes die rich or broke?
« Reply #16 on: November 14, 2017, 11:54:37 AM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
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clutchy

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Re: Will FIREes die rich or broke?
« Reply #17 on: November 14, 2017, 12:31:17 PM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

nereo

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Re: Will FIREes die rich or broke?
« Reply #18 on: November 14, 2017, 12:36:31 PM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
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clutchy

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Re: Will FIREes die rich or broke?
« Reply #19 on: November 14, 2017, 02:56:58 PM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
 

Subsidized healthcare.
Subsidized income based repayment of school loans that goes to zero. 

that kind of stuff.  There was a guy awhile back named "RootofGood" and basically he suckled at the teat, made it and then stuck taxpayers with his school loan bill.  I'm not sure if he has mended his ways but last time I checked he had no plans to pay them back. 

things can be legal and still morally repugnant.

spartana

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Re: Will FIREes die rich or broke?
« Reply #20 on: November 14, 2017, 03:19:35 PM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

Most FIREies will take corrective action when things start going amiss. e.g. it's quite easy to take a part time job even bringing in $10-$15k.

Being freed of work tends to open up more and more opportunities.

I'm yet to hear a FIRED person on the forum here run into trouble, and even if markets fall 30%, most have so much more above their baseline FIRE level after the latest market run-up that it probably wouldn't matter at all.



True dat! ^

Ok, I agree with the premise that people in this community will be able to handle bear markets and that we'll very likely die quite rich.  But...

I don't think the antidote that "'I'm yet to hear a FIRED person on the forum here run into trouble" is a fair justification.  This blog was formed in 2011.  It is now late 2017.  In those 6 years, we've gone on a terrific and almost uninterrupted bull market.  We won't be able to use personal antidotes until we go through a serious recession and the people on here are marching through it successfully. 

Again, I think we will march through it successfully, but in the meantime, we can't really use our success as a huge measuring stick.

We have participants who have been FIRED far longer than the blog has been around. I appreciate their joining the community.
And some of us FIREd shortly before the Great Recession and saw our NW plummet by half yet survived comfortably without having to do much more than a bit of belt tightening and came out richer then before. One of the things most mustashians do compared to others is live on less for their basic expenses. They generally have a lot of fluff in their ER budgets that can be easily he cut when SHTF for a few years so as not to have to draw down much investments. We live leanly but comfortably and happily. We save our avocado toast and Paris vacations until things rebound and we've rebuilt the stash.
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boarder42

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Re: Will FIREes die rich or broke?
« Reply #21 on: November 14, 2017, 06:09:35 PM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
 

Subsidized healthcare.
Subsidized income based repayment of school loans that goes to zero. 

that kind of stuff.  There was a guy awhile back named "RootofGood" and basically he suckled at the teat, made it and then stuck taxpayers with his school loan bill.  I'm not sure if he has mended his ways but last time I checked he had no plans to pay them back. 

things can be legal and still morally repugnant.

So you think Warren Buffett and bill gates should attempt to not use any loop holes that gain them tax advantages as well. And should attempt to pay the most in taxes vs the least.  Do you itemize your deductions. Or do you give back the standard deduction and your personal exemptions and pay full tax on all your earnings. Do you only invest in taxable accounts and pay full income tax rate when you sell ltcgs.

I'm just trying to gauge how moral you are.
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aceyou

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Re: Will FIREes die rich or broke?
« Reply #22 on: November 15, 2017, 08:39:27 AM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

Most FIREies will take corrective action when things start going amiss. e.g. it's quite easy to take a part time job even bringing in $10-$15k.

Being freed of work tends to open up more and more opportunities.

I'm yet to hear a FIRED person on the forum here run into trouble, and even if markets fall 30%, most have so much more above their baseline FIRE level after the latest market run-up that it probably wouldn't matter at all.



True dat! ^

Ok, I agree with the premise that people in this community will be able to handle bear markets and that we'll very likely die quite rich.  But...

I don't think the antidote that "'I'm yet to hear a FIRED person on the forum here run into trouble" is a fair justification.  This blog was formed in 2011.  It is now late 2017.  In those 6 years, we've gone on a terrific and almost uninterrupted bull market.  We won't be able to use personal antidotes until we go through a serious recession and the people on here are marching through it successfully. 

Again, I think we will march through it successfully, but in the meantime, we can't really use our success as a huge measuring stick.

We have participants who have been FIRED far longer than the blog has been around. I appreciate their joining the community.
And some of us FIREd shortly before the Great Recession and saw our NW plummet by half yet survived comfortably without having to do much more than a bit of belt tightening and came out richer then before. One of the things most mustashians do compared to others is live on less for their basic expenses. They generally have a lot of fluff in their ER budgets that can be easily he cut when SHTF for a few years so as not to have to draw down much investments. We live leanly but comfortably and happily. We save our avocado toast and Paris vacations until things rebound and we've rebuilt the stash.


Hmmm, valid points.  I'd like to retract my comment, thank you Spartana and Tom for changing my mind:)

clutchy

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Re: Will FIREes die rich or broke?
« Reply #23 on: November 15, 2017, 08:46:49 AM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
 

Subsidized healthcare.
Subsidized income based repayment of school loans that goes to zero. 

that kind of stuff.  There was a guy awhile back named "RootofGood" and basically he suckled at the teat, made it and then stuck taxpayers with his school loan bill.  I'm not sure if he has mended his ways but last time I checked he had no plans to pay them back. 

things can be legal and still morally repugnant.

So you think Warren Buffett and bill gates should attempt to not use any loop holes that gain them tax advantages as well. And should attempt to pay the most in taxes vs the least.  Do you itemize your deductions. Or do you give back the standard deduction and your personal exemptions and pay full tax on all your earnings. Do you only invest in taxable accounts and pay full income tax rate when you sell ltcgs.

I'm just trying to gauge how moral you are.
 


Just to follow your example: Our buddies Warren and Bill don't use programs that are designed for the poor and needy for their personal gain.  That's the morality part. 

Pay what you owe under the law just be aware that you are using resources that are there for the poor and disadvantaged.  Early retirees (the immoral kind) are "needy" by design not necessity.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #24 on: November 15, 2017, 09:01:47 AM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
 

Subsidized healthcare.
Subsidized income based repayment of school loans that goes to zero. 

that kind of stuff.  There was a guy awhile back named "RootofGood" and basically he suckled at the teat, made it and then stuck taxpayers with his school loan bill.  I'm not sure if he has mended his ways but last time I checked he had no plans to pay them back. 

things can be legal and still morally repugnant.

So you think Warren Buffett and bill gates should attempt to not use any loop holes that gain them tax advantages as well. And should attempt to pay the most in taxes vs the least.  Do you itemize your deductions. Or do you give back the standard deduction and your personal exemptions and pay full tax on all your earnings. Do you only invest in taxable accounts and pay full income tax rate when you sell ltcgs.

I'm just trying to gauge how moral you are.
 


Just to follow your example: Our buddies Warren and Bill don't use programs that are designed for the poor and needy for their personal gain.  That's the morality part. 

Pay what you owe under the law just be aware that you are using resources that are there for the poor and disadvantaged.  Early retirees (the immoral kind) are "needy" by design not necessity.

oh yeah totally agree they use programs that were designed to help the rich put in place by politicians to help their largest campaign donors.  completely moral. i see where your moral line is now.  If the intention of the law is to assist you then its morally ok regardless of how that law affects others but if the intention of the law is to assist others then you're morally obtuse for using it.
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Re: Will FIREes die rich or broke?
« Reply #25 on: November 15, 2017, 11:18:37 AM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
 

Subsidized healthcare.
Subsidized income based repayment of school loans that goes to zero. 

that kind of stuff.  There was a guy awhile back named "RootofGood" and basically he suckled at the teat, made it and then stuck taxpayers with his school loan bill.  I'm not sure if he has mended his ways but last time I checked he had no plans to pay them back. 

things can be legal and still morally repugnant.

So you think Warren Buffett and bill gates should attempt to not use any loop holes that gain them tax advantages as well. And should attempt to pay the most in taxes vs the least.  Do you itemize your deductions. Or do you give back the standard deduction and your personal exemptions and pay full tax on all your earnings. Do you only invest in taxable accounts and pay full income tax rate when you sell ltcgs.

I'm just trying to gauge how moral you are.
 


Just to follow your example: Our buddies Warren and Bill don't use programs that are designed for the poor and needy for their personal gain.  That's the morality part. 

Pay what you owe under the law just be aware that you are using resources that are there for the poor and disadvantaged.  Early retirees (the immoral kind) are "needy" by design not necessity.

oh yeah totally agree they use programs that were designed to help the rich put in place by politicians to help their largest campaign donors.  completely moral. i see where your moral line is now.  If the intention of the law is to assist you then its morally ok regardless of how that law affects others but if the intention of the law is to assist others then you're morally obtuse for using it.
 

Ends justify the means huh?  I think you've just proven my point on morality. 

Well wishes!

nereo

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Re: Will FIREes die rich or broke?
« Reply #26 on: November 15, 2017, 12:00:21 PM »
I'm curious what you think of my own situation and experience clutchy
I took out student loans starting over a decade ago.  Factoring in my decision to take out these loans in the first place was the explicit condition that they would be subsidized, and would continue to be subsidized should my career continue in a certain direction (e.g. continuing education, employment within certain sectors of academia).

I have not and have no plans on paying the interest on those loans.  This is the deal that I made upon signing.  Certainly i have enough assets to pay back the loans, but I have not.  As I see it the terms of my loan (you might call them 'loopholes' - i'd disagree) offer a financial reward for sticking within a fairly narrow employment path (namely academia). I could make far, far more working in the private sector, and I've weighed the pros and cons of deviating from my strategy and having to pay off my loans, but ultimately this is what i want to do.
I do not consider this immoral or unethical. Both my lenders and I understood the terms, and the federal government has provided this path to promote teaching and research.
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FINate

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Re: Will FIREes die rich or broke?
« Reply #27 on: November 15, 2017, 12:27:09 PM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
 

Subsidized healthcare.
Subsidized income based repayment of school loans that goes to zero. 

that kind of stuff.  There was a guy awhile back named "RootofGood" and basically he suckled at the teat, made it and then stuck taxpayers with his school loan bill.  I'm not sure if he has mended his ways but last time I checked he had no plans to pay them back. 

things can be legal and still morally repugnant.

So you think Warren Buffett and bill gates should attempt to not use any loop holes that gain them tax advantages as well. And should attempt to pay the most in taxes vs the least.  Do you itemize your deductions. Or do you give back the standard deduction and your personal exemptions and pay full tax on all your earnings. Do you only invest in taxable accounts and pay full income tax rate when you sell ltcgs.

I'm just trying to gauge how moral you are.
 


Just to follow your example: Our buddies Warren and Bill don't use programs that are designed for the poor and needy for their personal gain.  That's the morality part. 

Pay what you owe under the law just be aware that you are using resources that are there for the poor and disadvantaged.  Early retirees (the immoral kind) are "needy" by design not necessity.

oh yeah totally agree they use programs that were designed to help the rich put in place by politicians to help their largest campaign donors.  completely moral. i see where your moral line is now.  If the intention of the law is to assist you then its morally ok regardless of how that law affects others but if the intention of the law is to assist others then you're morally obtuse for using it.
 

Ends justify the means huh?  I think you've just proven my point on morality. 

Well wishes!

I'm a multimillionaire FIRE, and make full use of the ACA subsidies for my family of 4. I have no qualms about it. The ACA mandates, under pain of penalty, purchasing of a product from a private third party (unless you qualify for medicaid) which meets a minimum level of coverage, which includes a lot of stuff I'd rather just pay out of pocket. Before the ACA I would have just bought a high deductible catastrophic plan because I want insurance, not what is essentially pre-paid healthcare. Because of the mandate, we can no longer do this, so I'm happy to take the subsidies. I think it's stupid and inefficient, but I'm not going to fall on my sword because the government creates bad laws.

talltexan

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Re: Will FIREes die rich or broke?
« Reply #28 on: November 15, 2017, 01:12:11 PM »
I'm confused... if the theory behind FIRE is to withdraw no more than 4% of your portfolio each year without ever touching your initial investment--does this mean that you are likely to die with more money or no money at all??? In other words is your initial investment still growing or does it eventually get factored into the FIRE equation at some point?

Most FIREies will take corrective action when things start going amiss. e.g. it's quite easy to take a part time job even bringing in $10-$15k.

Being freed of work tends to open up more and more opportunities.

I'm yet to hear a FIRED person on the forum here run into trouble, and even if markets fall 30%, most have so much more above their baseline FIRE level after the latest market run-up that it probably wouldn't matter at all.

In today's environment, I'd think that a negative health shock would have much more to do with this than long life/low market returns outcome.

Another possibility would be ruinous legal troubles or divorce.

Schaefer Light

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Re: Will FIREes die rich or broke?
« Reply #29 on: November 15, 2017, 02:09:27 PM »
If the last $10k I have in my name pay for my funeral, I'll be okay with that.  Can't take it with me ;).

clutchy

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Re: Will FIREes die rich or broke?
« Reply #30 on: November 15, 2017, 02:12:03 PM »
I'm curious what you think of my own situation and experience clutchy
I took out student loans starting over a decade ago.  Factoring in my decision to take out these loans in the first place was the explicit condition that they would be subsidized, and would continue to be subsidized should my career continue in a certain direction (e.g. continuing education, employment within certain sectors of academia).

I have not and have no plans on paying the interest on those loans.  This is the deal that I made upon signing.  Certainly i have enough assets to pay back the loans, but I have not.  As I see it the terms of my loan (you might call them 'loopholes' - i'd disagree) offer a financial reward for sticking within a fairly narrow employment path (namely academia). I could make far, far more working in the private sector, and I've weighed the pros and cons of deviating from my strategy and having to pay off my loans, but ultimately this is what i want to do.
I do not consider this immoral or unethical. Both my lenders and I understood the terms, and the federal government has provided this path to promote teaching and research.
 

100% ok with your situation. 

boarder42

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Re: Will FIREes die rich or broke?
« Reply #31 on: November 15, 2017, 02:16:59 PM »
I'm curious what you think of my own situation and experience clutchy
I took out student loans starting over a decade ago.  Factoring in my decision to take out these loans in the first place was the explicit condition that they would be subsidized, and would continue to be subsidized should my career continue in a certain direction (e.g. continuing education, employment within certain sectors of academia).

I have not and have no plans on paying the interest on those loans.  This is the deal that I made upon signing.  Certainly i have enough assets to pay back the loans, but I have not.  As I see it the terms of my loan (you might call them 'loopholes' - i'd disagree) offer a financial reward for sticking within a fairly narrow employment path (namely academia). I could make far, far more working in the private sector, and I've weighed the pros and cons of deviating from my strategy and having to pay off my loans, but ultimately this is what i want to do.
I do not consider this immoral or unethical. Both my lenders and I understood the terms, and the federal government has provided this path to promote teaching and research.
 

100% ok with your situation.

can you please start a thread so everyone can get moral guidance from clutchy.  so none of us make moral mistakes in our lives according to your standards. b/c right now i currently have no F'ing clue what your standards of morals are other than the minimal gray postings you've made.
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TheWifeHalf

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Re: Will FIREes die rich or broke?
« Reply #32 on: November 15, 2017, 02:21:45 PM »
The plan TheHusbandHalf and I have is to use 2% for basics, some splurges here and there, and whatever is left goes to the kids. I've read that there are ways to simplify transferring the money when we die, and we're going to seriously look into that when husband retires.

The plan is to not be broke, but I suppose that could happen.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #33 on: November 16, 2017, 06:03:38 AM »
The plan TheHusbandHalf and I have is to use 2% for basics, some splurges here and there, and whatever is left goes to the kids. I've read that there are ways to simplify transferring the money when we die, and we're going to seriously look into that when husband retires.

The plan is to not be broke, but I suppose that could happen.

you're gonna have piles left if you're at 2% for the basics with minor splurges. i hope you're 100% stock AA with that plan.  unless a splurge hear and there are over 1.25% annually.  you have 0 histrical chance of being broke
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BTDretire

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Re: Will FIREes die rich or broke?
« Reply #34 on: November 16, 2017, 06:33:43 AM »
  Some like Cfiresim, I like Firecalc. I just ran Firecalc with $1,000,000 NW and $40,000 WR.
(4% withdrawal rate)
It shows, 6 failures, and then after 30 years a leftover stache of $400,986 to $5,679,475m
all depending on market returns.
 The 6 failures occur between years 24 and 29.
Firecalc is pretty easy to use, but the more you look into it the more adjustments you find you can make.
https://www.firecalc.com/

robtown

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Re: Will FIREes die rich or broke?
« Reply #35 on: November 16, 2017, 04:04:04 PM »
I am 61 years old and retiring around 63.5 years old.   I have a spreadsheet with my 401k, social security and my wife's pension as income.  The default return on the 401k is 4%.    The social security and pension cover our needs, the 401k anything else   (entertainment, gift, traveling, eating out, etc)      My wife will have 200k in her Roth equivalent and we have a small investment in a distillery that I reserve as backup funds.  The mortgage will be retired next May.   I may get an inheritance from my 91 year old mother or, hopefully, she'll live to 101 like her sister.

My spreadsheet has us down to $0 in the 401k when we reach 99 years old.    If we die earlier our children will have something.

So, we may die w/o wealth but not broke due to the income stream.


TheWifeHalf

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Re: Will FIREes die rich or broke?
« Reply #36 on: November 16, 2017, 04:31:12 PM »
The plan TheHusbandHalf and I have is to use 2% for basics, some splurges here and there, and whatever is left goes to the kids. I've read that there are ways to simplify transferring the money when we die, and we're going to seriously look into that when husband retires.

The plan is to not be broke, but I suppose that could happen.

you're gonna have piles left if you're at 2% for the basics with minor splurges. i hope you're 100% stock AA with that plan.  unless a splurge hear and there are over 1.25% annually.  you have 0 histrical chance of being broke

I hope so. I have to consider that my paternal Grandfather, and my maternal grandmother and her 2 sisters lived to 95 or more.

I like the idea of having piles left. We have 3 good, hardworking ~30 kids, and imo, kids have it harder today that we, as their parents did.  Though I won't be around to see it, I think they would make wise choices with the $.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #37 on: November 16, 2017, 04:59:40 PM »
The plan TheHusbandHalf and I have is to use 2% for basics, some splurges here and there, and whatever is left goes to the kids. I've read that there are ways to simplify transferring the money when we die, and we're going to seriously look into that when husband retires.

The plan is to not be broke, but I suppose that could happen.

you're gonna have piles left if you're at 2% for the basics with minor splurges. i hope you're 100% stock AA with that plan.  unless a splurge hear and there are over 1.25% annually.  you have 0 histrical chance of being broke

I hope so. I have to consider that my paternal Grandfather, and my maternal grandmother and her 2 sisters lived to 95 or more.

I like the idea of having piles left. We have 3 good, hardworking ~30 kids, and imo, kids have it harder today that we, as their parents did.  Though I won't be around to see it, I think they would make wise choices with the $.

The age you live to does not really come into play with anything sub 3.25 and won't really affect a 4% in over 90% of cases
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frugalnacho

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Re: Will FIREes die rich or broke?
« Reply #38 on: November 16, 2017, 10:44:59 PM »
I think the FIRE kids who plan well and don't plan for improperly using social services because of low income will probably do fine. 

I think the morally dubious group is going to have a rough go.  The increases in the ACA will cause them to drop coverage and then they roll the dice...

its not morally dubious to use the system thats in place.  warren buffett and bill gates dont pay extra taxes b/c they think they should they follow the rules and pay what the govt tells them they owe. same with those planning to use ACA sercices etc.
 


While I agree with you in fact in theory the practice is not even morally dubious it's despicable and should be looked down on.  The law hasn't caught up yet, but it will.

Can you be a bit more specific clutchy?  what "practice" do you assert is despicable?
 

Subsidized healthcare.
Subsidized income based repayment of school loans that goes to zero. 

that kind of stuff.  There was a guy awhile back named "RootofGood" and basically he suckled at the teat, made it and then stuck taxpayers with his school loan bill.  I'm not sure if he has mended his ways but last time I checked he had no plans to pay them back. 

things can be legal and still morally repugnant.

So you think Warren Buffett and bill gates should attempt to not use any loop holes that gain them tax advantages as well. And should attempt to pay the most in taxes vs the least.  Do you itemize your deductions. Or do you give back the standard deduction and your personal exemptions and pay full tax on all your earnings. Do you only invest in taxable accounts and pay full income tax rate when you sell ltcgs.

I'm just trying to gauge how moral you are.
 


Just to follow your example: Our buddies Warren and Bill don't use programs that are designed for the poor and needy for their personal gain.  That's the morality part. 

Pay what you owe under the law just be aware that you are using resources that are there for the poor and disadvantaged.  Early retirees (the immoral kind) are "needy" by design not necessity.

How do you have any idea what warren and bill take advantage of?

I'm not sure what your problem is with people playing by the rules.  I didn't make the rules, and neither did those "immoral" early retirees you speak of, we all had them imposed on us.  If the law makers think early retirees are immorally gaming the system, then why did they set up the rules like that in the first place, and why don't they change them?

As far as I can tell you are the only one saying these people are "improperly" using social services.  According to most everyone else (including the government that made the laws) they are not.

Acastus

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Re: Will FIREes die rich or broke?
« Reply #39 on: November 17, 2017, 11:31:46 AM »
To ensure that you will not run out of money, you need to save more than the theoretical, well behaved market allows. If the market were well behaved, we could spend (return - inflation)% every year and be OK. Unfortunately, the market drops 20-40% every decade or so. You need a strategy in place before that happens so you can still spend some of the money while the rest recovers over the next 2-5 years. By only spending 4% of the initial nest egg plus inflation adjustments every year, you can set aside the excess gains for when the market slaps you around.

you dont technically need a strategy in place as you described. 90+ % of the time you could go 100% stocks and 0% bonds and mindlessly withdraw an inflation adjusted 4% and be perfectly safe your whole life.

I don't think of 1929 or 2008 as the worst time for the 4% rule. I think of 1965-1975. Stocks went essentially nowhere for 10 years straight. With 100% stocks and a mindless 4%+inflation withdrawal method, a nest egg would drop in half over that time. The 4% rule is itself a strategy, and I think everyone needs to think it through for various scenarios.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #40 on: November 17, 2017, 05:27:56 PM »
Where did I say 1929 or 2008. The worst of the years in the 9% are in the era you speak of. That doesn't magically make it more likely.
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TheWifeHalf

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Re: Will FIREes die rich or broke?
« Reply #41 on: November 17, 2017, 06:15:12 PM »
The plan TheHusbandHalf and I have is to use 2% for basics, some splurges here and there, and whatever is left goes to the kids. I've read that there are ways to simplify transferring the money when we die, and we're going to seriously look into that when husband retires.

The plan is to not be broke, but I suppose that could happen.

you're gonna have piles left if you're at 2% for the basics with minor splurges. i hope you're 100% stock AA with that plan.  unless a splurge hear and there are over 1.25% annually.  you have 0 histrical chance of being broke

I hope so. I have to consider that my paternal Grandfather, and my maternal grandmother and her 2 sisters lived to 95 or more.

I like the idea of having piles left. We have 3 good, hardworking ~30 kids, and imo, kids have it harder today that we, as their parents did.  Though I won't be around to see it, I think they would make wise choices with the $.

The age you live to does not really come into play with anything sub 3.25 and won't really affect a 4% in over 90% of cases

I am sorry, I do not have enough education to understand what you wrote.  I was commenting on your 'piles' comment and trying to show you that I have to save enough money to live until 95, whether I live that long or not. I was also trying to tell you that if the $ is left to my kids, I think they will make good decisions with it.

The age I live to does come into play with how fast the pile decreaes.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #42 on: November 17, 2017, 06:38:22 PM »
No the age you live to does not factor into it at all with a large stock allocation and a sub 3% withdrawal rate.  Jlcollins stock series would be a good start then using either of the two calculators above would help you learn how historically you should have nothing to fear.  The worst thing you could do is have too low an equity allocation and that would lead to you running out of money at an old age.
« Last Edit: November 18, 2017, 03:55:45 AM by boarder42 »
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PhilB

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Re: Will FIREes die rich or broke?
« Reply #43 on: November 18, 2017, 04:46:45 AM »
Getting back to the original question, assuming we are all going into FIRE with very high equity allocations, then one of the key factors will be how we react when the inevitable stock market crashes happen.  I would identify three key groups:
1 Laid-Back Optimists:
Blithely continue taking 4% plus inflation.  Odds are strong that they will die rich, but small probability of dying broke if the wrong combination of poor returns and unlucky timing hits them.
2 Headless chickens:
Panic after a crash and sell most of their equities at knock down prices to move to something 'safer'.  Will die broke (or go back to work).
3 Tin Hatters:
Get spooked in a crash and cut expenditure to the bone whilst they wait it out.  Will almost certainly die very rich indeed.

Hopefully most of us will be some blend of 1 and 3.

boarder42

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Re: Will FIREes die rich or broke?
« Reply #44 on: November 18, 2017, 05:39:52 AM »
Getting back to the original question, assuming we are all going into FIRE with very high equity allocations, then one of the key factors will be how we react when the inevitable stock market crashes happen.  I would identify three key groups:
1 Laid-Back Optimists:
Blithely continue taking 4% plus inflation.  Odds are strong that they will die rich, but small probability of dying broke if the wrong combination of poor returns and unlucky timing hits them.
2 Headless chickens:
Panic after a crash and sell most of their equities at knock down prices to move to something 'safer'.  Will die broke (or go back to work).
3 Tin Hatters:
Get spooked in a crash and cut expenditure to the bone whilst they wait it out.  Will almost certainly die very rich indeed.

Hopefully most of us will be some blend of 1 and 3.

Yeah. Only rather than cut you could earn. Play with the variable withdrawal strategy on cfiresim. I plan to use this for the first 8-10 years to adjust up to 10k down as needed. Or more likely earn 10k. If you don't have to adjust down for the first 10 years or so it's highly likely your money will have grown and will last forever.
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