Are some expectations here naive/unrealistic?

[chairman5]

I have been reading many posts and am struck about how many folks I see in their late 20s to early 40s indicating that they "want to save xxxx in the next 10 years and then retire."  I see numbers like 400k, 500k, and I'm thinking "am I missing something?"

As I have shared in another case-study post, I am 55 and looking to retire in a few years and am currently FI, with a NW about 3.5 million.  I get not everybody "needs" that much but by my calcs at a 4% withdrawal rate on 400k that is $16,000 per year before taxes?  Are people really planning to live on that?  Esp at that age when you may be starting a fam?  Are they planning to move back in with their parents?  That's about $1,333 per month, when in 10 years due to inflation, it will carry a present value of about 1,100 per month.

So should I be assuming, if posters are not indicating, that they really mean they are retiring from some regular job but still plan to augment?  Or is their a bit of naivete there?  I don't mean to Suzie Orman anybody, but just wondered how some here who plan to retire at a young age with 500k or less in savings plan to meet their expenses?

Also, for those of you who are living off of only savings (not pensions) are there any here willing to share how small of a nut they are living off of? 

Thanks!

[Freedomin5]

The 4% has inflation built into the calculations, so those retiring on $400k would have $1333/month in purchasing power theoretically forever. Also, for many, it is not a net worth of $400k. It is a nest egg/investments of $400k, which does not include a paid off house and cars.

I currently don’t pay for housing (no rent, no mortgage), and it’s definitely possible to live well on less than $1333/month, even with a family and a kid.

That being said, our lean FI goal is $1M. Full FIRE goal is $1.5M, not including primary residence.

[MrThatsDifferent]

OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?

[ChickenStash]

The expectations might be naive or unrealistic but so might the assumptions...

I wouldn't be surprised if some folks underestimate their income requirements as time passes by not leaving enough cushion for unforeseen repairs, medical issues, etc. but that doesn't mean one couldn't live on 1300/mo or some other low amount. It's surprising just how inexpensively people can live if they choose to and still have a pleasant time of it. A cozy, paid off house, inexpensive hobbies like gardening, hiking, volunteering, etc can easily fill up a life for very little money.

For me, that example wouldn't be enough as I've chosen to maintain some fairly expensive hobbies (cars, travel) so I'll have to go up a bit higher before I can check out of the rat race. On the plus side, I do have some cheap hobbies that I could easily turn to instead if I wanted to speed things up in the accumulation phase or lengthen the withdrawal phase. It's nice to have options.

[2Birds1Stone]

Howdy, we are a couple of DINKS living a kick ass life in HCOL area on ~$35k/yr.

The 4% rule accounts for inflation, so your point about inflation eroding the $1333/month is moot* (thanks @SwordGuy!)

It's very easy to do this, but takes a profound shift in thinking and lifestyle. You have to *gasp*, learn how the world works again, rather then relying on magic (technology), and money to solve all of your problems.

Most people sadly know how to do only one thing well enough where their entire capital is derived from this activity, and for everything else they pay someone else. Learn how to be good enough at many things, such that you don't have to pay for solutions, and maybe even diversify for that which you are able to trade capital (financial or human).

Here is a great book on the subject, but you may want to start with something a little more par for the course.......

[2Birds1Stone]

Bam

Sent from my SM-N950U using Tapatalk

[SwordGuy]

The 4% rule accounts for inflation, so your point about inflation eroding the $1333/month is mute.

The point was only mute because it's plain text on a web page.

It was, however, a moot point.   :)

And what's the name of the book and the author?

[2Birds1Stone]

The point was only mute because it's plain text on a web page.

It was, however, a moot point.   :)

And what's the name of the book and the author?

Whoops! Good catch :)

Early Retirement Extreme, by Jacob Lund Fisker

I'm reading through it for the 4th time right now, each time learning something new and gaining a Wheaton level

[Zikoris]

Those numbers sound fine to me, especially if a person wasn't big on travel - our annual spending for two people, minus going to Europe and Asia every year, would be in the ballpark of 16K, though we're not retiring on 400K (more like 600-700).

Rather than assume people are naive for planning to spend less than you, why not look at it as a learning experience in more badass living? If someone told you their running speed was higher than yours, would you assume they just didn't know how to use a timer and/or were cheating, or would you instead think maybe they have a more effective training regimen and see it as something to learn from?

I always wonder if the type of people who post things like this are trying to validate their own overspending. Like, if you can just write off the people who spend way less than you as naive, mistaken, living shitty lives, etc, then you don't have to look too hard at your own spending and wasteful choices.

[Villanelle]

I think in some cases, there is a paid off house implicit in those numbers.  Remove rent/mortgage from the equation, and $16,000 goes a lot further.  Also, plenty of people plan for a >4% withdraw rate.  It's riskier, but I wouldn't call it naive. 

If you don't want to do it, cool.  I don't either.  But I certainly believe I *could* and that others do, happily.

[Imma]

My FIRE number is €300k, which is €1000/month. That's more than I currently spend and by that time my home will be paid off. I am also planning to keep doing my side hustle that I enjoy a lot, which means my planned withdrawal rate would be anywhere from 0-2%. When we reach conventional retirement age pensions, retirement investments and social security will likely cover our expenses and then some. I'm in Europe where affordability of health care is not an issue. We don't have children.

I have also noticed that I spend way less during periods I'm not working. I don't have expensive hobby's, doing frugal things like gardening and canning and knitting is what I enjoy most. So I'm not worried about post-FIRE lifestyle inflation even though it would be possible.

[Zamboni]

It's hard for me to imagine a likely scenario in which I would need a $3.5MM nest egg . . .

[mistymoney]

I guess this can easily be explained by "different strokes for different folks".

[never give up]

I think the point about inflation that was trying to be made is that inflation is only accounted for once FIRE is reached. Someone counting 25X their expenses today to produce a FIRE target in ten years time need 25X what their expenses are at that point, not now. The shockingly simple maths isn’t quite that simple.

However despite the maths being quite complicated around all of this I think the people on these boards are generally very intelligent, or if like me, the investing/maths side doesn’t come naturally, they are willing to read and put the work in to learn more. So I don’t think many are naive or unrealistic no.

I’m in the UK and spent less than $13k last year. I won’t be able to always do this because of lumpiness around home maintenance etc. I also appreciate I don’t have health care to worry about. I also have a paid off home. As others have mentioned a budget without a mortgage or rent, combined with responsible choices regarding transportation and food means it is possible to live on extremely modest amounts.

Since I’ve found these forums I’ve slashed my food bill by 20% without too much effort. I’m just more efficient. I’ve more than halved my car mileage as I now ban myself from driving if the trip is less than five miles and I’ve banned myself from flying too. If the ultimate goal here is to minimise the impact on the environment and to feel that my footprint is as small as I can get it, then it actually becomes hard to spend money. I refuse to buy excessive amounts of stuff that will just end up in landfill.

For what is really possible read Early Retirement Extreme that 2Birds1Stone has mentioned. My $13k is really quite spendy!

[Metalcat]

Are we on wildly different forums? Because those are not the typical numbers I see around here at all.

Whenever someone comes here with concerns about people here being overly optimistic, that's when I know that they've spent absolutely no time actually reading or participating before they posted their "concern".

If anything, this forum is overwhelmingly packed with overly-conservative and overly-cautious people who know the math so well that they can argue for pages about different mathematical models.

I feel like I see far more cases of people aiming to save multiple millions AND have a 3% or less WR, AND have a paid off house AND not factor in SS AND worry about healthcare.

As for the few that I've actually seen retire on sub 1M, they seriously have their shit together, they know exactly what their numbers and options are, and I have no doubt that they have the skills and talent to pivot if they ever end up in a situation where they need more money.

I'm willing to concede that *some* people, very early on in their FIRE journey can be a little naive, but I don't worry about them because it takes years to get there, and if they're *here* early in their journey, they're already way ahead in terms of finding resources to help them actually execute their 10-year plan.

Chances are, in 10 years, they'll be here posting about working at least one more year to lower their withdrawal rate to a more statistically supported low-risk value after reading everything ever written or said by Big Ern and running no fewer than 800,000 simulations, and contemplating a bond-tent allocation to minimize sequence-of-withdrawal risk, and maybe also socking 2 years of expenses away in a cash account just to be safe.

So yeah, if you want to come into our house and tell us we're all naive/unrealistic, you might want to get to know us first.

[Imma]

I think the point about inflation that was trying to be made is that inflation is only accounted for once FIRE is reached. Someone counting 25X their expenses today to produce a FIRE target in ten years time need 25X what their expenses are at that point, not now. The shockingly simple maths isn’t quite that simple.

I set my FIRE goal in 2016 and so far it's still realistic (because I've lowered some expenses that compensate inflation) but I do review this number periodically and I expect 99,9% of the people on MMM to do that. I think the FIRE number isn't set in stone for most people. As Malkynn pointed out, I think there are waaaay more people doing OMY than jumping in this naively.

I'm not a super conservative person, if you RE at a young age and after a few years you find out you need a little more money than you can safely withdraw, it's not that hard to make some extra money. You can start a business or find a parttime job or even work fulltime a few years to add some money to the stash. I'd say that if you RE before the age of 30 and you find out you need to go back to a minimum wage job for a few years age 40 (assuming you didn't keep up your skills from your previous job) that's not the worst thing in the world. There are people who work those kind of jobs for 40 years.

[2Birds1Stone]

@Imma, exactly. If someone is retiring based on a 3% WR, then for every $3k per year they earn in income, they need $100K less saved.

In my situation, I'm pulling the plug ~$500k in investable assets, and plan on drawing 3% ($1265/month).

Between churning bank account bonuses, and travel rewards, we will earn an extra $1-2k/yr + fly for free or close to it.

Even a seasonal job for 3 months out of the year can turn that $1265/month into $2-2.5k a month if I suddenly felt the need to inflate my lifestyle.

Or go back to work in previous career for 3-4 years and double the nest egg.

There are so many things to fall back on, it would be crazy not to take some time off in our early 30's while we have the energy and zest for life to vagabond for a few years.

[MrThatsDifferent]

Are we on wildly different forums? Because those are not the typical numbers I see around here at all.

Whenever someone comes here with concerns about people here being overly optimistic, that's when I know that they've spent absolutely no time actually reading or participating before they posted their "concern".

If anything, this forum is overwhelmingly packed with overly-conservative and overly-cautious people who know the math so well that they can argue for pages about different mathematical models.

I feel like I see far more cases of people aiming to save multiple millions AND have a 3% or less WR, AND have a paid off house AND not factor in SS AND worry about healthcare.

As for the few that I've actually seen retire on sub 1M, they seriously have their shit together, they know exactly what their numbers and options are, and I have no doubt that they have the skills and talent to pivot if they ever end up in a situation where they need more money.

I'm willing to concede that *some* people, very early on in their FIRE journey can be a little naive, but I don't worry about them because it takes years to get there, and if they're *here* early in their journey, they're already way ahead in terms of finding resources to help them actually execute their 10-year plan.

Chances are, in 10 years, they'll be here posting about working at least one more year to lower their withdrawal rate to a more statistically supported low-risk value after reading everything ever written or said by Big Ern and running no fewer than 800,000 simulations, and contemplating a bond-tent allocation to minimize sequence-of-withdrawal risk, and maybe also socking 2 years of expenses away in a cash account just to be safe.

So yeah, if you want to come into our house and tell us we're all naive/unrealistic, you might want to get to know us first.

+1

[SwordGuy]

I think the point about inflation that was trying to be made is that inflation is only accounted for once FIRE is reached. Someone counting 25X their expenses today to produce a FIRE target in ten years time need 25X what their expenses are at that point, not now. The shockingly simple maths isn’t quite that simple.

Not really.   

There are a few assumptions in the shockingly simple maths.  One is that your wages keep pace with inflation.   So, the percentages mostly work out on newer savings.     For forward projections on my stock holdings I used the 7% (after inflation removed) historical average rate of return for the US market.   That way, when I get to the future and need those future dollars, they'll be probably be there at the 10% rate of return (average inflation included).

Each year I double-checked our current and planned expenses and our actual net worth and made adjustments along the way.   It really wasn't a big deal.

[never give up]

I agree it isn't a big deal, but the reason it wasn't a big deal for you was because you did the bit quoted below. The OP implied we didn't do this adjustment so we just simply hit our FIRE total from ten years previous.

Each year I double-checked our current and planned expenses and our actual net worth and made adjustments along the way.

The question this thread poses is are some expectations here naive/unrealistic? I think for the majority of cases the answer is no because generally the people on these boards do so much reading and research into the subject that they have all these aspects covered, safeguards built in, a full understanding of their relationship with money etc.

[Imma]

 @2Birds1Stone I would also feel totally comfortable pulling the plug in that situation. You already know how to live on a low budget and you can always work for a while later on if you think you need it. I also believe very few post-FIRE mustachians would spend all their money and end up broke, if you're clever enough to FIRE you're clever enough to adjust your withdrawal rate in time or find a way to earn some extra income before you're so broke you're back to fulltime work indefinitely. I'm sure you'll do just fine!

[Dicey]

So yeah, if you want to come into our house and tell us we're all naive/unrealistic, you might want to get to know us first.

^^This. So much this.^^

[Zikoris]

A lot of people's spending also doesn't really increase, or increases by such a miniscule amount (i.e. much less than inflation). We're about seven years into a ten year projection and our spending is still the same.

[Cassie]

I think that if you can afford to take a year or 2 off when young it’s awesome because when you retire older you can’t do as many things as when young. In the states I think it’s better to have at least a million.  We knew a few people that retired in their 40’s and were sorry by 60 because they couldn’t afford to do things like travel, etc. Don’t know them well enough to know the whole story. I do know that they unsuccessfully tried to restart their careers in their late 50’s.

[kei te pai]

There are far more naive/unrealistic expectations in the general population than here. Expectations of lottery wins, inheritances, magic money that will suddenly appear and fund foolish lifestyle choices.
Naive financial reckoning that thinks a car is an "investment" or an asset.
Aiming for financial independence, with or without early retirement, is in fact the opposite of naive and unrealistic.
It usually entails long hard scrutiny of financial reality!

[WhiteTrashCash]

Considering that I used to live on less than $14,000/year, it is possible to live like that, although I wouldn't recommend it. People should at least aim for a 'stache of $600,000, which would provide $24,000/year. Give yourself some breathing room in case of trouble. In our household, we're aiming for $1.25 million, because that would provide $50,000 and that would absolutely cover really good health insurance for us.

[chairman5]

OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?

Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.

I am not boasting but honestly seeking knowledge.  I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month.  Insurance alone is about 750 of that...at least.  Property taxes another 300/month and there you go.  $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else.  I believe it is being done, I am just trying to figure out how.

[mistymoney]

I think that if you can afford to take a year or 2 off when young it’s awesome because when you retire older you can’t do as many things as when young. In the states I think it’s better to have at least a million.  We knew a few people that retired in their 40’s and were sorry by 60 because they couldn’t afford to do things like travel, etc. Don’t know them well enough to know the whole story. I do know that they unsuccessfully tried to restart their careers in their late 50’s.

That is a cautionary tale indeed!

I think if people want to restart careers after being off a number of years, the key is to have contacts/a current network because it will be the personal connection that can get you back in the door.

[APowers]

OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?

Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.

I am not boasting but honestly seeking knowledge.  I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month.  Insurance alone is about 750 of that...at least.  Property taxes another 300/month and there you go.  $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else.  I believe it is being done, I am just trying to figure out how.

[$11,300 = 3.5Mx4%/12]

Hm, how can I put this? I feel like I could say the exact same things from the opposite point-of-view as you.

I am not boasting but honestly seeking knowledge.  I realize with my low income I can retire but for the low prices I am seeing out there just for groceries/rent/reliable vehicles, etc. (we have no student loans or fancy health plans to inflate our expenses) I just can't imagine my wife and I living on over $11,300 per month.  Rent alone is about 750 of that...at most.  Property taxes aren't relevant when renting and there you go.  $10.5k left for mere utility bills, entertainment, groceries, car/home maintenance...everything else.  I believe it is being done, I am just trying to figure out how people can spend so much.

Sounds like culture shock to me. I think you'll find that life isn't so expensive when you trim out the unnecessaries and inordinate luxury.

It's very interesting to me that you come to the forums and are amazed by how many folks are making it with such low numbers, while I come to the forums and feel exactly the opposite-- almost every single case study on here are incomes and investment goals double, triple, or even 10 times higher than mine. It makes me feel poor and stupid sometimes (and my life is amazing and full of luxury at ~$30k income), just because the difference seems so vast that I feel like I will never even come close.

[Metalcat]

OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?

Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.

I am not boasting but honestly seeking knowledge.  I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month.  Insurance alone is about 750 of that...at least.  Property taxes another 300/month and there you go.  $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else.  I believe it is being done, I am just trying to figure out how.

Your initial post did not come off as "honestly seeking knowledge", it came off as judgemental about something that you clearly don't understand.

However, I'm willing to give you the benefit of the doubt that what you really want is to understand how people with so much less than you actually manage to feel secure even though you don't with a sum that most here would consider ample, or even excessive.

That said, most target numbers I've seen here are in the 1-2M range, usually including a paid off house, so several thousand a month to live on, not $1300.

As for those living on $1300, they're probably not paying $750/mo for insurance or $300/mo in property taxes. If you want to understand their budgets and how it works, then seek out their case studies, journals, etc. Just because you can't fathom how they do it doesn't mean it can't be done.

That said, that may not be the right path for your family. If you are trying to imagine owning a detached home in a medium to high cost area while maintaining a typical middle class lifestyle, then yeah, $1300/mo isn't likely to cover it.

It's not that people with those budgets are naive, it's that they're making different choices. Trying to apply their budgets to your lifestyle is nonsense. That's why the budgets of people living like you are significantly higher.

People who don't actually know this community at all like to think that it's a bunch of extreme people living off of cans of beans and retiring on unrealistic low savings and magical thinking, but it isn't.

The people here make appropriate, if overly conservative, budgets and plans that meet their particular needs, which is why so few retire on only $1300/mo.

The knowledge housed within this forum is astounding.
If you "honestly" want to learn, there is plenty here to learn from, and NONE of the regular contributors are naive or overly optimistic...except for maybe me. I don't actually have a savings target and regularly say "the money will work itself out", but I'm an oddity here, and if you knew me, you would know that my optimism isn't even remotely naive.

[APowers]

OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?

Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.

I am not boasting but honestly seeking knowledge.  I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month.  Insurance alone is about 750 of that...at least.  Property taxes another 300/month and there you go.  $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else.  I believe it is being done, I am just trying to figure out how.

Your initial post did not come off as "honestly seeking knowledge", it came off as judgemental about something that you clearly don't understand.

However, I'm willing to give you the benefit of the doubt that what you really want is to understand how people with so much less than you actually manage to feel secure even though you don't with a sum that most here would consider ample, or even excessive.

That said, most target numbers I've seen here are in the 1-2M range, usually including a paid off house, so several thousand a month to live on, not $1300.

As for those living on $1300, they're probably not paying $750/mo for insurance or $300/mo in property taxes. If you want to understand their budgets and how it works, then seek out their case studies, journals, etc. Just because you can't fathom how they do it doesn't mean it can't be done.

That said, that may not be the right path for your family. If you are trying to imagine owning a detached home in a medium to high cost area while maintaining a typical middle class lifestyle, then yeah, $1300/mo isn't likely to cover it.

It's not that people with those budgets are naive, it's that they're making different choices. Trying to apply their budgets to your lifestyle is nonsense. That's why the budgets of people living like you are significantly higher.

People who don't actually know this community at all like to think that it's a bunch of extreme people living off of cans of beans and retiring on unrealistic low savings and magical thinking, but it isn't.

The people here make appropriate, if overly conservative, budgets and plans that meet their particular needs, which is why so few retire on only $1300/mo.

The knowledge housed within this forum is astounding.
If you "honestly" want to learn, there is plenty here to learn from, and NONE of the regular contributors are naive or overly optimistic...except for maybe me. I don't actually have a savings target and regularly say "the money will work itself out", but I'm an oddity here, and if you knew me, you would know that my optimism isn't even remotely naive.

^This.

When my living expenses were below $1,300/month, I couldn't even get on the ACA exchange to pay for insurance-- they just automatically slotted us for medicaid. Insurance = $0. We were living in a small house in a rural county that we bought cheap because it needed work-- mortgage was <$300, taxes even less, of course. We didn't even buy cans of beans, because they are expensive, lol! Healthy, homecooked food for two can relatively easily be done for less than $100/month. We had 2 cars-- reliable little Honda Civics ('95, and '96), each bought for <$2k, and only needed basic liability ins. Gas is cheap when your cars get 35-45mpg. No car payment or high insurance or maintenance costs. Other people might moan about how "basic" or "beaters" they were, but to me, they're pretty fancypants (they had heaters that worked, and were so quiet, lol! I grew up driving a '71 VW that barely defrosted the windshield and was l.o.u.d.).

My lifestyle even today is SO different from other, "normal" folks my age, that I find it hard to relate sometimes.

[Villanelle]

You state it as though $300 in property taxes and $750 a month is som inescapable reality.  I feel fairly confident that the people living on $1300.mo don't have those expenses.  You could not have them, too, if you choose.  It is a CHOICE to have a Cadillac health plan (though admittedly, some factors like age and health issues aren't a choice).  It is a choice to live in a place with moderate to high property taxes, or even to own a home.  You also mention home maintenance, which is nearly zero is someone rents, and car maintenance when, shockingly, some people don't have a car or drive very little and DIY nearly all maintenance.

I'm not super frugal like many here.  But I recognize that wanting to travel 2x/year, for example, is a CHOICE and a luxury and a privilege, not some inescapable money suck that is out of my control. 

Even things like cell phone plans, cable, going to restaurants, etc. are all active choices.  If you want to sell more years of your labor to make them cool. But you do yourself and your family a gross disservice by not at least recognizing that most of what you spend is entirely optional. 

[Zikoris]

Oh, so it's for educational purposes and you're wondering how the breakdown looks for people with lower spending? Cool. Here's our August spending - we're probably done now since we have all our food until September and I'm heading out into the woods in a few days, where there aren't exactly any places to spend money.

• $826 - Housing (renting a cheap apartment)
• $349 - Food (skewed high due to annual Costco renewal)
• $101 - Cat (had to buy both his expensive food and litter in the same month, which is rare)
• $95 - Bills (Two basic cell phone plans and home internet)
• $60 - Public transit
• $130 - Misc (beach umbrella, board game, a roll of duct tape, a dental cleaning, allergy meds, a few toiletries, and a movie at the theater)

Total= $1561

That's a pretty normal month for us, though we are frequently in the $1400s. And that's for two people. $1,300 should be a breeze for one person.

[Cassie]

If we don’t include travel we live on 47k/year.  Our retiree health insurance costs 12k/year. We live in a MCOL area.  That does include fun money.  Our mortgage, taxes and insurance are 650/month and our cars are paid for.

[chairman5]

I assume that when you mentioned long term disability insurance, what you meant was funds for long-term care should you or your spouse require assisted living or nursing home care.

For me, helping my mom find an assisted living facility was an enlightening process.  The one she ended up in had a policy of allowing anyone who ran out of their own funds to switch to medicaid payment + a guaranteed supplement from a local charity (sisters of providence - not sure whether this is just local or something more widespread geographically) as long as they had paid themselves for at least one year.  It was a pretty bare bones kind of place, not luxurious, but the staff were good(especially the director of nursing -- she was an angel) and the community warm and welcoming.  Also, my mom's condition was such that she was not likely to ever need really long term care (congestive heart failure, declining pretty rapidly). 

Anyway, my point is that there are ways you can plan for your late days care WITHOUT sinking tons of money into LTC policies -- many of which are pretty much a scam anyway, as they often dramatically raise the cost of premiums year on year and force people out.  Also, you can make the decision to utilize things like a POLST or death with dignity laws to ensure your life isn't extended past the point of meaningfulness to you.   

As half of a married couple it is worth considering how you will protect assets for the use of a surviving spouse, should one half of the couple need to spend things down for their care.  A simple 20-30 year term life policy on each person with a solid 1-2 million payout would be much cheaper than LTC, assuming you don't have pre-existing conditions that would preclude purchasing such coverage. 

Strongly encourage everyone considering early retirement to at least do a minimal amount of research into what the care options are in your community.  Some places have long waiting lists, especially the better ones -- you don't necessarily need to get on those lists immediately, but knowing how long the wait might be helps with future planning.  One way to do this in a more meaningful way would be to assist a friend or loved one with their choice of a community -- that way you help them in a time of major stress, and you get something out of it, too.  And you can visit them in their chosen community and see if the initial research proves it was a good choice (though like with schools, there will be issues in any community that you only see after being involved for awhile, so you have to remember that no place is perfect).

I agree with this.  My Mom entered a assistance living facility couple years ago - not top of line, basic average community but she needs pretty much constant care to dress herself, help her eat, etc.  Costs $10k per month.  She entered with 400K in assets.  Called Medicaid and they laughed when asked we filed for assistance and said "call us back when her assets run out."  Called back last month when her assets were down to 4k.  They laughed and said call back when $0.  That is the way our wonderful system works and why you probably see a lot of fraud by elderly trying to pass down wealth.  In any case, poof, a couple years of required assisted living and poof - life-saving gone.  perhaps it is situations like this that skew me about amount of money. It isn't just about what I can live on right now, but what about planning for older age and not wanting to be a burden on family? Remember, with no assets you won't get that initial entry into a decent facility and will need to rely on the state or your kids.  Once in, then Medicaid will pick it up once you are bled dry. 

[Cassie]

Some states let you keep a bunch of your money and the person goes on Medicaid if you have a lawyer that knows what to do. The surviving spouse should not be impoverished but my friend got a big inheritance even though her mom was on Medicaid for 10 years. This is wrong.

[Bernard]

I am 55 and looking to retire in a few years and am currently FI, with a NW about 3.5 million.  I get not everybody "needs" that much but by my calcs at a 4% withdrawal rate on 400k that is $16,000 per year before taxes? . . . .

The 4% rule of the Trinity study never was a 4% rule. It was a 4.3% rule (if memory serves me), simplified. Realistically, unless someone retires very early in life, right when the next great depression hits this country and has no hope of any traditional retirement income, a withdraw of up to 7% is viable.

You, Sir, are 55 years of age. To make a point, I simply assume that you have a paid off home and will receive $2K from SS per month once you hit age 62. When I deduct $500K from your NW for the home, you're left with $3M. Deduct 5% of that per year, and you'll have $150K per year. Seven years from now, you can add another $24K to the total. To spend $174K in retirement annually requires serious effort. The wife and I spend $100K per year, including our HCOL mortgage, including retirement savings, and I have calculated that -- based on that number -- we should not be spending more than $25K per year, with a paid off home and no further retirement savings.

I'd love for someone here to post a retirement budget that reaches in the 6 figures.

Related, I am asking an honest question: what percentage of retirees do you think have $3.5M to their name? I don't have the answer to that, but it definitely must be in the single digits.

[Cassie]

The OP can certainly retire anytime he wants to. Our HI is our biggest expense with premiums at 1k/month.  I was hoping that when we both are on Medicare that things would be cheaper but my sister spends 600/month just for herself.

[BicycleB]

I have been reading many posts and am struck about how many folks I see in their late 20s to early 40s indicating that they "want to save xxxx in the next 10 years and then retire."  I see numbers like 400k, 500k, and I'm thinking "am I missing something?"

 

Probably. Obviously the big factor is they're planning to live on a much lower spending rate than what you're used to. Have you read these posters' journals, case studies or other posts to determine whether their spending levels are similar to their planned FIRE spend?

Selected examples from Case Studies section:

$14k annual budget, "been tracking expenses for 5 years and never gone over" - quote is from OP when other posters questioned his plan to retire on 375k. You could ask him about family plans, but who says he/she has to have children?
https://forum.mrmoneymustache.com/case-studies/can-i-retire-in-early-2020/msg0/#new

$12k annual spending, family of 5. Unusual and mindblowing, but reports past data, therefore shows it's possible in the short term. Includes several special factors that wouldn't apply to all cases, such as a food pantry partnership from his workplace that cut their grocery costs. Does have the reproducible feature of two well known factors that affect some low income families with children: EITC and Medicaid. Ignore the move-to-Israel parts, focus on the current spending...though you can argue "it won't be sustainable" if you wish to assume bad things will happen to their family later. I would argue that their current thrift implies that moderately lesser thrift could be sustainable. Naive, or merely bold?
https://forum.mrmoneymustache.com/case-studies/large-family/msg0/#new

by my calcs at a 4% withdrawal rate on 400k that is $16,000 per year before taxes?  Are people really planning to live on that?  Esp at that age when you may be starting a fam?  Are they planning to move back in with their parents?  That's about $1,333 per month, when in 10 years due to inflation, it will carry a present value of about 1,100 per month.

So should I be assuming, if posters are not indicating, that they really mean they are retiring from some regular job but still plan to augment?  Or is their a bit of naivete there?  I don't mean to Suzie Orman anybody, but just wondered how some here who plan to retire at a young age with 500k or less in savings plan to meet their expenses?

 

Yes, 4% of 400k is $16k before taxes. Are you aware that federal income tax on 16k is really low, and that federal tax on $16k of capital gains and qualified dividends is zero?

You'd have to ask the people involved if they plan to live on that...but if they're posting their plans at that pace, the probably are!

Re moving back in with their parents... pretty offensive remark IMHO. I will grant you the courtesy of believing it's an honest question, not a sarcastic one, because I have a brother in law who in moments of worry thinks my secret plan is to move in with him and my sister. Said BIL has a several times larger stash than me, buys new trucks as daily drivers every few and spends more than I do, but is also frugal in many respects. Despite his truck habit, he and Sis have combined spending that AFAIK is a smaller percentage of their likely investment income than mine is. Both of them have shared rough numbers with me over time. It seems clear that he could retire right now and she could stay retired and they could live until the end of their days on investments they already have, even if they never reduce spending by a penny. He isn't quitting now because he ALSO will get a pension in 3 years, so he is going to do that. He can't grasp that my spend fits into my stash safely because my gross numbers are smaller, so he just...doesn't deep down believe it. His own fear of quitting and feeling that he Might Need More Money is irrationally making him afraid for himself AND for me. I was shocked when my sister told me of his fears/assumptions, because it had never occurred to me to even imagine living with them. Presumably you too haven't quite grasped other people's lives, and honestly want to know. Unless they say otherwise, probably the posters in this forum are independent careful planning types who have backup plans for their backup plans. I know I do, even if my stash is 500k instead of 3500k.

PS. Your inflation math is wrong in the sense of not understanding the assumptions of the 4% "rule" (it's really just a rule of thumb). The 4% "rule" means income of 4% that adjusts upward over time with inflation. If inflation rises by 25% over the next decade, the $1333 per month would rise to a nominal $1600 per month...which would have the buying power of today's $1333.

That's one of so many details that this forum is dedicated to mapping out. Keep reading.

[Cassie]

The family of 5 soon to be 6 is naive. Kids get more expensive as they age. Plus vehicles need to be replaced, house maintenance, illnesses, etc.  The dad is highly educated yet relying on Medicaid which is meant for poor people. As a former social worker he is taking advantage of it and this type of thing is what turns people against social programs.  In my opinion they are not living with integrity.  I do admire how thrifty they are. They don’t have the money to relocate by family which they want to do.

[BicycleB]

They may be naive, and you may be right about the social programs. But the OP has a stash providing $140,000 year pretax income using the 4% rule and appears afraid to retire on it because he might run out of money. Instead he is asking whether people with $16k income per person are going to move back in with their parents. That a family exists in apparent happiness living on $2,400 per person year in America while not living with their parents, and while at least one member studies at the doctoral level, suggests in my mind that $16,000 per year per person can be sustainable without living a parent's basement.

I think OP probably should focus on his own expenses more than other people's.  I am not claiming that $2,400 is sustainable. But since this thread is exploring others' expenses, the point is that $16k to $20k per person can be sustainable.

Does the doctoral family need a $3.5 million stash to thrive? Or does their expense level suggest that a smaller amount might provide safe harbor?

[optimusprimal]

I know for me if I had tried to predict what I would be spending now ten years ago I wouldn't have gotten it right.  Life is long and things change.  When I was 22 I wanted to save 250k and live in a van by the river on 10k a year.  Once I had 250k I found I wanted a bit more.  I think people make choices and then they live with those choices.  If you retire with a small stash and find you're not satisfied you go back to work.  I did that... but I think the experience of taking some time off was great.  Don't burn bridges because you never know what comes next.  Live and learn.  Live and evolve.  We all course correct and find our way.  Best to stay upbeat and roll forward!  But better to take a chance and learn something then live in fear and regret.

[Cassie]

The OP can definitely afford to retire. No doubt about it. The guy with 6 kids never said what his PhD was in so who knows if he will make any additional money versus a master’s.   They are living on the financial edge which is not a good idea with that many kids.  I would never presume to know someone’s finances and presume they would have to move back home.

[SwordGuy]

I agree it isn't a big deal, but the reason it wasn't a big deal for you was because you did the bit quoted below. The OP implied we didn't do this adjustment so we just simply hit our FIRE total from ten years previous.

Each year I double-checked our current and planned expenses and our actual net worth and made adjustments along the way.

The question this thread poses is are some expectations here naive/unrealistic? I think for the majority of cases the answer is no because generally the people on these boards do so much reading and research into the subject that they have all these aspects covered, safeguards built in, a full understanding of their relationship with money etc.

Yes, but inflation has been so low and the market so good that there really weren't any serious adjustments to make... :)

Other than deciding I wanted to go stronger into real estate rental properties in our area because, as I learned more, I realized I could cut a couple of years off our FIRE date by doing so.   Plus it lowered our sequence of returns risk, too.   

[ontheway2]

It might already be posted, but read the post "First retire...Then get rich"

https://www.mrmoneymustache.com/2012/05/14/first-retire-then-get-rich/

Also, it seems you might jive more with the bogleheads

Edit: Taxes on 16k is no more than $30/month if single or nothing if married

Edit2: Sample budget on 500k

housing $200 (taxes, insurance)
utilities $150
car insurance $35
health expenses $55 ($28/month for silver or $0 for bronze plan)
phone $25
internet $45
haircuts $15 if you're spendy
clothes $20
gas $30
food $220
general spending $100
car replacement $125
travel/entertainment $250
gifts $20
car maintenance $30
home maintenance $150
home improvement $40
taxes $25
excess $150

So many edits: oh, and mentioning retiring at those amounts when you are at the age when you might be starting a family (late 20s to early 40s) - everyone is on different timelines. My son will be graduating high school when I am 37

Personally, I am going for a higher number, but I do see how a budget like that can be possible. I know plenty of retirees living on SS alone in that range. I'm shooting for 1.1 in todays dollars with a ~3.5% withdrawal. That will give me ~2500/month plus taxes and sinking funds for car replacement/maintenance, home maintenance/improvement

[2Birds1Stone]

@ontheway2, wouldn't that be over the 4% rule?

[ontheway2]

@ontheway2, wouldn't that be over the 4% rule?

You're right. The excess would be $131 instead of $150

[ChpBstrd]

What’s up with all the defensiveness? I read the OP as honestly asking how $12k-16k household budgets could possibly be a good FIRE plan. I’m sure in hindsight the OP regrets posting their NW, age, and the fact they are still working because it was superfluous information that seems to have distracted most people from the question.

Also, what’s up with all the certainty? The “4% rule” is based on the historical returns of the US markets during the 20th century AND the historical inflation experienced by the USD during that time. Does that make a “rule” that will certainly apply between 2020 and 2080 like some law of nature? In other countries or eras, not even a 2% WR would have survived a 30y retirement. In other times/places, a 10% WR might have worked. If US inflation runs 10% for, say, 7-8 years in the near future, there will be few early retirees who stay retired.

Here’s the News:

Retirement, like surviving another day, is probabilistic. We all trade years of our lives to increase our historically calculated percentage of portfolio success (which is not the same as the actual outcome). There is insufficient information to determine the optimal time to quit, portfolio size, or the optimal amount of happiness derived from controlling our own time vs. being able to buy things. We’re ALL winging it. Certainty is a MYTH. Accepting this, we can accept each other’s decisions.

[ChpBstrd]

Given that we face a trade off of losing with certainty years-of-youthful-life versus gaining some probability of higher long-term prosperity, consider the following scenario.

As a 55 year old worth 3.5M you find a lamp, rub it, and out pops a genie. Instead of 3 wishes, the genie offers you 3 options:

1) Remain in your current age and wealth.
2) Trade your 55 year old body for your 40 year old body, but your net worth is now only $1M. You must live solely off the portfolio for the rest of your life.
3) Trade in your 55 year old body for your 30 year old body, but your net worth is now $450k. You must live solely off the portfolio for the rest of your life.

I would choose #3 without a second thought. Yea, it’s poverty, but that’s still great money in 90% of the world and I would have half an adult lifetime back in exchange for sewing my own socks when they rip. Plus there’s no rule against the portfolio increasing, which it has a chance of doing despite my withdrawals.

[Villanelle]

What’s up with all the defensiveness? I read the OP as honestly asking how $12k-16k household budgets could possibly be a good FIRE plan. I’m sure in hindsight the OP regrets posting their NW, age, and the fact they are still working because it was superfluous information that seems to have distracted most people from the question.

Also, what’s up with all the certainty? The “4% rule” is based on the historical returns of the US markets during the 20th century AND the historical inflation experienced by the USD during that time. Does that make a “rule” that will certainly apply between 2020 and 2080 like some law of nature? In other countries or eras, not even a 2% WR would have survived a 30y retirement. In other times/places, a 10% WR might have worked. If US inflation runs 10% for, say, 7-8 years in the near future, there will be few early retirees who stay retired.

Here’s the News:

Retirement, like surviving another day, is probabilistic. We all trade years of our lives to increase our historically calculated percentage of portfolio success (which is not the same as the actual outcome). There is insufficient information to determine the optimal time to quit, portfolio size, or the optimal amount of happiness derived from controlling our own time vs. being able to buy things. We’re ALL winging it. Certainty is a MYTH. Accepting this, we can accept each other’s decisions.

I think comments like the one about planning on moving in with parents drip with condescension, intended or not, and contributed to some of the backlash.  Also, the info on how people plan to live on these low budgets is all over this site.  With even a tiny bit of poking around, the OP could have found them, so it seems clear s/he didn't read much before questioning people's approaches. 

It definitely didn't come off as "hey, is this really possible?  How do people do this?  What do their budgets look like?" inquiry.  Maybe that's inference rather than intended implication, but clearly I'm not the only one who inferred it (and I'm not even a low-budget person).