Author Topic: GCC Talks About Time to FI Using Methods Similar to Trinity Study  (Read 6790 times)

Philociraptor

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GCC Talks About Time to FI Using Methods Similar to Trinity Study
« on: September 28, 2015, 09:59:06 AM »
See here - http://www.gocurrycracker.com/financial-independence-how-long-will-it-take/

Split by savings rate, asset allocation, real return, and desired withdrawal rate.

According to their charts, when using the same years as the Trinity Study, there is no year when allocating less than 100% to equities leads to earlier FI. Discuss.

powersuitrecall

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #1 on: September 28, 2015, 12:03:35 PM »
As someone with 75/25 equities, I'm now wondering why I'm bothering at all. 

Actually, I do know why - I thought 75/25 was the sweet spot for best outcomes with cFIREsim.  Hmm.

The other point is that if your savings rate is high (75%), it really doesn't matter what your stock/bond allocation is.

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #2 on: September 28, 2015, 12:14:38 PM »
Every time I read a GCC article he says something towards the beginning that is just completely wrong and calls into question the whole article - usually because he makes some assumption that's only valid for someone in his particular circumstances, and thus not at all broadly applicable.  In this case, it was this statement:
Quote
Nobody will be retiring, early or otherwise, with a 5% savings rate.

This is obviously and demonstrably false, and ignores the largest retirement program in history - Social Security.  Sure, it may not be important to extreme early retires, but it's this sort of bad assumption that puts so many of GCC's articles in the dustbin as irrelevant. 

As for the 100% equity allocation,this is also not surprising.  I'm not aware of any 10 year periods where an even investment in bonds each year outperforms an even investment in stocks, and bonds never reducing time to FI is just a logical consequence of that.

Indexmantra

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #3 on: September 28, 2015, 01:56:52 PM »
I liked his article, because it confirmed that if you save a lot, you can retire early. But I never thought about the fact that a 5% savings rate can help people retire - as in the case of SS

Tyler

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #4 on: September 28, 2015, 02:37:58 PM »
As for the 100% equity allocation,this is also not surprising.  I'm not aware of any 10 year periods where an even investment in bonds each year outperforms an even investment in stocks, and bonds never reducing time to FI is just a logical consequence of that.

An investor starting in 2000 by putting their money in a total stock market fund like VTI would have lost 2.73% per year 10 years later in compound real returns.  An investor putting their money in a total bond market fund like BND would have made 3.44% per year.  So while bonds beating stocks may be rare, it is not unprecedented.  There are also many more investing options out there than total stock funds and total bond funds.  Other portfolios would have fared differently. 

That said, the GCC post is fascinating.  I love that kind of analysis!

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #5 on: September 28, 2015, 03:08:27 PM »
As for the 100% equity allocation,this is also not surprising.  I'm not aware of any 10 year periods where an even investment in bonds each year outperforms an even investment in stocks, and bonds never reducing time to FI is just a logical consequence of that.

An investor starting in 2000 by putting their money in a total stock market fund like VTI would have lost 2.73% per year 10 years later in compound real returns.  An investor putting their money in a total bond market fund like BND would have made 3.44% per year.  So while bonds beating stocks may be rare, it is not unprecedented.  There are also many more investing options out there than total stock funds and total bond funds.  Other portfolios would have fared differently. 

That said, the GCC post is fascinating.  I love that kind of analysis!

That's if you invest once at the beginning of the period, which is neither what I said nor what the article addresses.  We are both talking about investing (an equal amount) every year for ten years.

brooklynguy

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #6 on: September 28, 2015, 03:17:50 PM »
Every time I read a GCC article he says something towards the beginning that is just completely wrong and calls into question the whole article - usually because he makes some assumption that's only valid for someone in his particular circumstances, and thus not at all broadly applicable.  In this case, it was this statement:
Quote
Nobody will be retiring, early or otherwise, with a 5% savings rate.

This is obviously and demonstrably false, and ignores the largest retirement program in history - Social Security.  Sure, it may not be important to extreme early retires, but it's this sort of bad assumption that puts so many of GCC's articles in the dustbin as irrelevant. 

That assessment is a bit harsh.  I think in the context of the article what the statement was intended to say (and what a reasonable reader would take it to mean) is something like "Nobody will be retiring [at a young enough age to enjoy a meaningfully lengthy retirement period], early or otherwise, [solely in reliance on a portfolio accumulated using] a 5% savings rate."

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #7 on: September 28, 2015, 03:37:24 PM »
Every time I read a GCC article he says something towards the beginning that is just completely wrong and calls into question the whole article - usually because he makes some assumption that's only valid for someone in his particular circumstances, and thus not at all broadly applicable.  In this case, it was this statement:
Quote
Nobody will be retiring, early or otherwise, with a 5% savings rate.

This is obviously and demonstrably false, and ignores the largest retirement program in history - Social Security.  Sure, it may not be important to extreme early retires, but it's this sort of bad assumption that puts so many of GCC's articles in the dustbin as irrelevant. 

That assessment is a bit harsh.  I think in the context of the article what the statement was intended to say (and what a reasonable reader would take it to mean) is something like "Nobody will be retiring [at a young enough age to enjoy a meaningfully lengthy retirement period], early or otherwise, [solely in reliance on a portfolio accumulated using] a 5% savings rate."

Someone who starts work at 21, who makes 80% of the median household wage, saves 5% of their salary, earns market returns, and retires at age 67 would be able to replace two-thirds of their income with that retirement savings.  With Social Security, they would have a retirement income equal to 120% of their working-years income!  And that's if it's just one earner - with a household of two, the benefits are more generous.

When a savings rate gives more than 100% income replacement at a normal retirement age, I think it's entirely reasonable to throw out any statement that says no one at that savings rate will ever be able to retire.

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #8 on: September 28, 2015, 03:40:29 PM »
Put another way, a 5% savings rate is enough for a large majority of Americans to retire at the normal retirement age.  GCC's comment that no one would be able to retire with a 5% savings rate is, as I said, obviously and demonstrably wrong.

brooklynguy

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #9 on: September 28, 2015, 03:44:57 PM »
When a savings rate gives more than 100% income replacement at a normal retirement age, I think it's entirely reasonable to throw out any statement that says no one at that savings rate will ever be able to retire.

Ok, fair enough (though my "solely in reliance on a portfolio..." qualification was intended to mean excluding sources of funds extraneous to the portfolio, like Social Security, but that's beside the point, because your point still holds true given that someone can in fact retire (probably on the late side) even under the parameters of my qualified version of the statement, which makes it untrue).  But let's not throw the baby out with the bathwater :)

milesdividendmd

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #10 on: September 28, 2015, 03:52:47 PM »
As for the 100% equity allocation,this is also not surprising.  I'm not aware of any 10 year periods where an even investment in bonds each year outperforms an even investment in stocks, and bonds never reducing time to FI is just a logical consequence of that.

An investor starting in 2000 by putting their money in a total stock market fund like VTI would have lost 2.73% per year 10 years later in compound real returns.  An investor putting their money in a total bond market fund like BND would have made 3.44% per year.  So while bonds beating stocks may be rare, it is not unprecedented.  There are also many more investing options out there than total stock funds and total bond funds.  Other portfolios would have fared differently. 

That said, the GCC post is fascinating.  I love that kind of analysis!

That's if you invest once at the beginning of the period, which is neither what I said nor what the article addresses.  We are both talking about investing (an equal amount) every year for ten years.

That's not true.  Here are US stocks, vs total bond, vs 10 year bonds for the 2000's, investing $1000 each year.  Spoiler alert:  stocks lose.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&TotalBond2=100&portfolio3=Custom&startYear=2000&portfolio2=Custom&portfolio1=Custom&endYear=2010&mode=2&TNotes3=100&s=y&inflationAdjusted=true&annualOperation=1&initialAmount=1000&rebalanceType=1&annualAdjustment=1000&TotalStockMarket1=100&annualPercentage=0.0

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #11 on: September 28, 2015, 04:01:19 PM »
That's if you invest once at the beginning of the period, which is neither what I said nor what the article addresses.  We are both talking about investing (an equal amount) every year for ten years.

Fair enough.

Adjusting for inflation, someone starting with nothing and investing $10k a year starting in 2000 would have ended with $96k ten years later using VTI and $117k using BND.  Stocks do have prolonged negative streaks.

I wanted to run the exact comparison you made, but I could only find information on VTI going back to 2001 instead of 2000.  So instead I used VTSMX, which should be nearly identical. 

It was convenient to do investments every month, so I used $100 per month invest in both, starting Jan 3, 2000, and ending December 2009.

VTSMX had an ending value of $13,354, 11% more than what was invested.

VBMFX had an ending value of $15744, 31% more than what was invested.

Hey, look at that - it turns out that that time period was still more advantageous for stocks than bonds, even when investing every month, at least using those two investments.  I was wrong on this one.

As a sidenote, using the S&P 500 instead of Total Stock gets you pretty close to the bond fund, with an ending value of $14,775.

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #12 on: September 28, 2015, 04:04:38 PM »
When a savings rate gives more than 100% income replacement at a normal retirement age, I think it's entirely reasonable to throw out any statement that says no one at that savings rate will ever be able to retire.

Ok, fair enough (though my "solely in reliance on a portfolio..." qualification was intended to mean excluding sources of funds extraneous to the portfolio, like Social Security, but that's beside the point, because your point still holds true given that someone can in fact retire (probably on the late side) even under the parameters of my qualified version of the statement, which makes it untrue).  But let's not throw the baby out with the bathwater :)

Honestly, I probably would have let it pass, except there's always something like this with GCC.  The other one that really bugs me is that he says Roth IRAs suck, but he can only reach that conclusion because he completely ignores state taxes.  He runs numbers that are relevant to him, and then extrapolates his situation to everyone, when it's his situation that is unusual.  It obviously bugs me more than others, but I think someone needs to speak up about his mistakes.

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #13 on: September 28, 2015, 04:09:03 PM »

That's not true.  Here are US stocks, vs total bond, vs 10 year bonds for the 2000's, investing $1000 each year.  Spoiler alert:  stocks lose.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&TotalBond2=100&portfolio3=Custom&startYear=2000&portfolio2=Custom&portfolio1=Custom&endYear=2010&mode=2&TNotes3=100&s=y&inflationAdjusted=true&annualOperation=1&initialAmount=1000&rebalanceType=1&annualAdjustment=1000&TotalStockMarket1=100&annualPercentage=0.0

You beat me to it, and you used a better tool to visualize it too.  But yes, your conclusion is correct, and there are 10 year periods where bonds beat stock, even when contributing new funds every year.

Tyler

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #14 on: September 28, 2015, 04:09:41 PM »
That's if you invest once at the beginning of the period, which is neither what I said nor what the article addresses.  We are both talking about investing (an equal amount) every year for ten years.

Fair enough.

Adjusting for inflation, someone starting with nothing and investing $10k a year starting in 2000 would have ended with $96k ten years later using VTI and $117k using BND.  Stocks do have prolonged negative streaks.

I wanted to run the exact comparison you made, but I could only find information on VTI going back to 2001 instead of 2000.  So instead I used VTSMX, which should be nearly identical. 

It was convenient to do investments every month, so I used $100 per month invest in both, starting Jan 3, 2000, and ending December 2009.

VTSMX had an ending value of $13,354, 11% more than what was invested.

VBMFX had an ending value of $15744, 31% more than what was invested.

Hey, look at that - it turns out that that time period was still more advantageous for stocks than bonds, even when investing every month, at least using those two investments.  I was wrong on this one.

As a sidenote, using the S&P 500 instead of Total Stock gets you pretty close to the bond fund, with an ending value of $14,775.

BTW -- sorry for deleting my post you quoted (I did that before you posted).  I was confident in the results but not the exact numbers.  Thanks for double-checking them. 

milesdividendmd

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #15 on: September 28, 2015, 04:11:15 PM »
I think the correct time frame up to now for the US stock market vs bonds is 20 years,  Which of course does not mean that stocks cant be beat for a 20 year period in the future.

brooklynguy

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #16 on: September 28, 2015, 05:21:00 PM »
The other one that really bugs me is that he says Roth IRAs suck, but he can only reach that conclusion because he completely ignores state taxes. 

Yeah, I know that one is your pet peeve (and it got fleshed out in the comments to that post and in the threads discussing it here, and I always try to highlight it whenever that topic comes up).  But he'd probably argue that virtually everyone is free to move to an income-tax-free state and otherwise replicate the aspects of his situation that make it unusual, so his extrapolation isn't really a "mistake" but the whole point (though I do agree that there should be better disclosure about the obvious and easily overlookable ones, like ignoring state taxes for purposes of the Roth analysis).

Jeremy

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #17 on: September 28, 2015, 08:30:47 PM »


Someone who starts work at 21, who makes 80% of the median household wage, saves 5% of their salary, earns market returns, and retires at age 67 would be able to replace two-thirds of their income with that retirement savings.  With Social Security, they would have a retirement income equal to 120% of their working-years income!  And that's if it's just one earner - with a household of two, the benefits are more generous.

When a savings rate gives more than 100% income replacement at a normal retirement age, I think it's entirely reasonable to throw out any statement that says no one at that savings rate will ever be able to retire.

Here are the numbers for a 4% wr replacing 67% of income


With asset allocation of 50% stock / 50% bonds, after 60 years the portfolio never exceeds 25x 67% of annual spending.  This is true for all years going back to 1872 up to 1955.  In theory some portfolios that began after 1955 could still grow to sufficient size given investment returns post 2015

With 75% stocks, the 2 decades leading up to the Great Depression and 12 years around WWI / WWII had a portfolio grow to sufficient size.  1948 and 1949 were the fastest years, requiring working until the age of 73 (52 years total)

With 100% stocks, more years were successful.  The two fastest were 1951 and 1952, requiring 48 years of work to the age of 69.  Still a few years longer than SS full retirement age, but perhaps close enough

With a high allocation of equities, it is therefore possible with low probability to retire on a 5% savings rate with social security income.  I stand corrected and have removed the "or otherwise" from the statement in question.

Note that the methodology use mirrors the Trinity Study, so income is constant when adjusted for inflation over the accumulation period.  It would be fair to expect income to grow faster than inflation at least for the first couple of decades out of school, which could boost savings as long as lifestyle inflation occurred at a slower pace.


beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #18 on: September 28, 2015, 08:51:46 PM »


Someone who starts work at 21, who makes 80% of the median household wage, saves 5% of their salary, earns market returns, and retires at age 67 would be able to replace two-thirds of their income with that retirement savings.  With Social Security, they would have a retirement income equal to 120% of their working-years income!  And that's if it's just one earner - with a household of two, the benefits are more generous.

When a savings rate gives more than 100% income replacement at a normal retirement age, I think it's entirely reasonable to throw out any statement that says no one at that savings rate will ever be able to retire.

Here are the numbers for a 4% wr replacing 67% of income

With asset allocation of 50% stock / 50% bonds, after 60 years the portfolio never exceeds 25x 67% of annual spending.  This is true for all years going back to 1872 up to 1955.  In theory some portfolios that began after 1955 could still grow to sufficient size given investment returns post 2015

With 75% stocks, the 2 decades leading up to the Great Depression and 12 years around WWI / WWII had a portfolio grow to sufficient size.  1948 and 1949 were the fastest years, requiring working until the age of 73 (52 years total)

With 100% stocks, more years were successful.  The two fastest were 1951 and 1952, requiring 48 years of work to the age of 69.  Still a few years longer than SS full retirement age, but perhaps close enough

With a high allocation of equities, it is therefore possible with low probability to retire on a 5% savings rate with social security income.  I stand corrected and have removed the "or otherwise" from the statement in question.

Note that the methodology use mirrors the Trinity Study, so income is constant when adjusted for inflation over the accumulation period.  It would be fair to expect income to grow faster than inflation at least for the first couple of decades out of school, which could boost savings as long as lifestyle inflation occurred at a slower pace.

Can you link to the annual return data that you used?  My calculation used a real return of 7%, and came up with an answer faster than the fastest in your data set, so either I made a mistake  or there's something wonky in your data (mistake on my end more likely).

However, there are two other points that are important here:

1) Social Security replaces a large percentage of income for most Americans. In my example for a single person, Social Security replaces 46% of pre-retirement income.  If this person is married and the spouse never worked, Social Security would replace 69% of pre-retirement income.  This effect obviously drops off for higher-income earners, but for workers around the median, it's a percentage that cannot be ignored.

2) As these numbers indicate, even if I'm wrong about how much 5% savings would add up to, most people don't need to replace 67% of their pre-retirement income.  Instead, they only need to replace 25-50% of their income.

Jeremy

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #19 on: September 29, 2015, 09:03:25 AM »
The error was mine (typo when modifying the spreadsheet to seek a retirement income of less than 100% of annual spending)

I'm using the Shiller data
http://www.econ.yale.edu/~shiller/data.htm

With the correct formula and replacing only 50% of income, the results are similar.
With 50% equities, in no year would the portfolio grow to sufficient size by Age 65.  With 75% equities, about 25% of the years do.  With 100% equities, 7 out of 10 years do.  I'm not sure what percentage of members of the 5% club are willing to put 100% of their retirement fund into equities for 45 years, with 70% confidence level for success, but maybe

In any case, point conceded. I still like my tongue in cheek version of the intro better, but what can you do? 
Thanks for the discussion, I learned a bit about SS today

For future reference, the number of median income earners who plan to save only 5% of income, work until full retirement age, live in a state with an income tax, plan to remain there post retirement, and who read my blog is 100% guaranteed to be zero.  But if they do I'll do my best to help them become an outlier like us.  Brooklynguy summarized it well

The other one that really bugs me is that he says Roth IRAs suck, but he can only reach that conclusion because he completely ignores state taxes. 

Yeah, I know that one is your pet peeve (and it got fleshed out in the comments to that post and in the threads discussing it here, and I always try to highlight it whenever that topic comes up).  But he'd probably argue that virtually everyone is free to move to an income-tax-free state and otherwise replicate the aspects of his situation that make it unusual, so his extrapolation isn't really a "mistake" but the whole point (though I do agree that there should be better disclosure about the obvious and easily overlookable ones, like ignoring state taxes for purposes of the Roth analysis).

To this I would add FAFSA applications and ACA subsidies


beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #20 on: September 29, 2015, 10:10:31 AM »
The error was mine (typo when modifying the spreadsheet to seek a retirement income of less than 100% of annual spending)

I'm using the Shiller data
http://www.econ.yale.edu/~shiller/data.htm

With the correct formula and replacing only 50% of income, the results are similar.
With 50% equities, in no year would the portfolio grow to sufficient size by Age 65.  With 75% equities, about 25% of the years do.  With 100% equities, 7 out of 10 years do.  I'm not sure what percentage of members of the 5% club are willing to put 100% of their retirement fund into equities for 45 years, with 70% confidence level for success, but maybe

Thanks for the update.  To add to that, my estimate is that it'll take about 45 years for someone saving 5% of their salary to replace 25% of their income.  Alternatively, to replace 25% of your income over 55 years of savings, you only need to save 2-4% depending on your asset allocation.

Quote
In any case, point conceded. I still like my tongue in cheek version of the intro better, but what can you do? 
Thanks for the discussion, I learned a bit about SS today

For future reference, the number of median income earners who plan to save only 5% of income, work until full retirement age, live in a state with an income tax, plan to remain there post retirement, and who read my blog is 100% guaranteed to be zero.  But if they do I'll do my best to help them become an outlier like us.  Brooklynguy summarized it well

Well that's fair enough.  I certainly understand taken some literary license, and writing for your audience. To be fair, though, the vast majority of states (43 plus DC) and the vast majority of Americans are subject to state income taxes.  Some want to move in retirement, others are willing to at least consider it, but many others wouldn't want to move just to save, say, 5% on taxes.

Quote
To this I would add FAFSA applications and ACA subsidies

Sorry, I'm confused.  What are you adding FAFSA applications and ACA subsidies to?  Things that you're ignoring state taxes?

Lastly, thank you as well for the discussion.  This has been a good one!

Jeremy

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #21 on: September 29, 2015, 10:24:52 AM »
The error was mine (typo when modifying the spreadsheet to seek a retirement income of less than 100% of annual spending)

I'm using the Shiller data
http://www.econ.yale.edu/~shiller/data.htm

With the correct formula and replacing only 50% of income, the results are similar.
With 50% equities, in no year would the portfolio grow to sufficient size by Age 65.  With 75% equities, about 25% of the years do.  With 100% equities, 7 out of 10 years do.  I'm not sure what percentage of members of the 5% club are willing to put 100% of their retirement fund into equities for 45 years, with 70% confidence level for success, but maybe

Thanks for the update.  To add to that, my estimate is that it'll take about 45 years for someone saving 5% of their salary to replace 25% of their income.  Alternatively, to replace 25% of your income over 55 years of savings, you only need to save 2-4% depending on your asset allocation.

Quote
In any case, point conceded. I still like my tongue in cheek version of the intro better, but what can you do? 
Thanks for the discussion, I learned a bit about SS today

For future reference, the number of median income earners who plan to save only 5% of income, work until full retirement age, live in a state with an income tax, plan to remain there post retirement, and who read my blog is 100% guaranteed to be zero.  But if they do I'll do my best to help them become an outlier like us.  Brooklynguy summarized it well

Well that's fair enough.  I certainly understand taken some literary license, and writing for your audience. To be fair, though, the vast majority of states (43 plus DC) and the vast majority of Americans are subject to state income taxes.  Some want to move in retirement, others are willing to at least consider it, but many others wouldn't want to move just to save, say, 5% on taxes.

Quote
To this I would add FAFSA applications and ACA subsidies

Sorry, I'm confused.  What are you adding FAFSA applications and ACA subsidies to?  Things that you're ignoring state taxes?

Lastly, thank you as well for the discussion.  This has been a good one!


FAFSA and ACA subsidies are reasons someone may benefit from a Roth.  With a triumvirate of Brokerage / Roth / Traditional, you have the most control over your AGI.  (For the years between early retirement and RMDs, I love Roth IRAs.  Just not for the accumulation phase)

I agree moving to save a 5% tax is something few people would probably do, although it's probably less than 5% in practice.  But you don't do it for the tax savings, you do it for the itinerant lifestyle and the tax advantages are a bonus.  I'm from Minnesota originally, so in the simplest form I think of it as the Snow Birds who winter outside the frozen tundra... and if you are going to do that, you might as well setup your legal tax base as Texas or Florida or wherever you go.  We just extend that Internationally


Are you using constant annual growth for your estimates of 45 years, etc...?




beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #22 on: September 29, 2015, 10:31:58 AM »
FAFSA and ACA subsidies are reasons someone may benefit from a Roth.  With a triumvirate of Brokerage / Roth / Traditional, you have the most control over your AGI.  (For the years between early retirement and RMDs, I love Roth IRAs.  Just not for the accumulation phase)

I agree moving to save a 5% tax is something few people would probably do, although it's probably less than 5% in practice.  But you don't do it for the tax savings, you do it for the itinerant lifestyle and the tax advantages are a bonus.  I'm from Minnesota originally, so in the simplest form I think of it as the Snow Birds who winter outside the frozen tundra... and if you are going to do that, you might as well setup your legal tax base as Texas or Florida or wherever you go.  We just extend that Internationally


Are you using constant annual growth for your estimates of 45 years, etc...?

Ah, okay, got it on FAFSA and ACA subsidies.  Thanks.

And the state taxes also makes sense with that scenario.  Although I should say that many (but not all!) states don't charge you state income taxes if you become an international resident.  So you may not need to move to a no-tax state in order to avoid state taxes if you're living abroad (though this depends on establishing residency someone for at least a year, I think).

Yes, I was just using constant growth for my long-term projections.  They're less than ideal, but they're reasonable estimates over such long timeframes.

kendallf

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #23 on: September 29, 2015, 11:05:03 AM »
Lastly, thank you as well for the discussion.  This has been a good one!

Jeremy, I also wanted to post and tell you that I enjoy your graphical analyses and find them valuable.  Your example (and a few others) has me thinking about an overseas job for the last few years of my career.  I have some things (a house) to get rid of before I consider it, but I'm thinking!

sirdoug007

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #24 on: September 29, 2015, 11:48:27 AM »
Nobody retires on a 5% savings rate if they take social security.

If SS is in the picture, the minimum savings rate by federal law is 12.4% from the employee and employer contribution to Social Security. 

So 5% savings in addition to SS is really 17.4% total.

beltim

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Re: GCC Talks About Time to FI Using Methods Similar to Trinity Study
« Reply #25 on: September 29, 2015, 04:37:06 PM »
Nobody retires on a 5% savings rate if they take social security.

If SS is in the picture, the minimum savings rate by federal law is 12.4% from the employee and employer contribution to Social Security. 

So 5% savings in addition to SS is really 17.4% total.

From context it's pretty clear that Jeremy is not including Social Security in the savings percentages.