A teacher once laughed at me for saying I could live off of 1 mill forever...

[l2jperry]

I remember being a sophomore in high school and arguing with my Chemistry teacher that I could easily live off of one million dollars for the rest of my life. He told me that it was impossible to do that, and since that day I have had the biggest desire to prove him wrong. I wish I had his contact information because I would send him this site.

I've been out of high school 8 years now, half way to a million, and thanks to this site and all of you on the forum, I don't think I even need to make it to one million.

Chemistry and Personal Finance don't mix I guess? :P

Thought you all would get a kick out of that story!

[nereo]

shrug.  Some people won't get it - their world view is too entrenched in the idea that one needs to work until their late 50s/early 60s and only fabulously wealthy individuals could retire any sooner.

Forget them and move on.

I'm glad that you are making such great promise in your quest to FI, and at such an early age.  You might want to check out Early REtirement Extreme for a subset of people that retire on less than the half-million you currnetly have.   Most people in the world will never earn 500k over their entire lifetime, and most of them manage to live happy lives just fine.

[Retire-Canada]

He's a semi-expert on chemistry not personal finance so cut him some slack. ;)

[prognastat]

No one has universal knowledge.

Unfortunately, in our current society finding good financial information is much harder than acquiring other kinds of knowledge. The only way to find it is to spend a lot of time looking for it specifically. Many people are never pushed to do this.

Someone can be very well educated in a specific field, but never really put thought and research in to other fields. Worse yet our culture actively argues against the lifestyle things like MMM advocate for.

[runewell]

Your chemistry teacher isn't necessarily wrong. 

One choice Mustachians must make is the standard of living they can afford by retiring early. 
A retirement stash of $1M means an income of $40K assuming a 4% withdrawal rate.  Your chemistry teacher might be assuming something higher than that, in which case your chemistry teacher was right under his set of assumptions.  He might also be considering a wife and kids, that increases costs considerably.

I also think that people on this site tend to underestimate the potential risk for (1) high healthcare costs, and (2) future increases in taxes to cover governmental costs.
My workplace shells out considerable money for my healthcare, and it doesn't even factor into account that it will be more expensive to insure me as I get nearer to retirement. 

There are a lot of factors that will affect retirement calculations, so to consolidate the retirement decision into a single number brings with it a number of unspoken assumptions.

[l2jperry]

Sure - some people may decide that they need more than one million, and under different preferences I would agree that one million isn't enough, but the point was that one million was possible. Certainly, for many people, even those with families, one million dollars is plenty possible to live off of.

[Chris22]

Also housing; I would assume that $1M ($40k/yr) is easy if you own a paid-off house (which would require more than the $1M), but otherwise I wouldn't want to bank on having to cover a house and/or rent in that $40k/yr indefinitely.  Rent or property tax increases would probably eat your budget alive 20-30 years in.

[nereo]

Also housing; I would assume that $1M ($40k/yr) is easy if you own a paid-off house (which would require more than the $1M), but otherwise I wouldn't want to bank on having to cover a house and/or rent in that $40k/yr indefinitely.  Rent or property tax increases would probably eat your budget alive 20-30 years in.

why would this not track with inflation?  For those following a 4% WR, they don't take out $40k every year, they take out $40k + inflation.

[Fomerly known as something]

I think it's that most people think of that $1 million as a finite number.  One that does not grow and one that will be depleted.  They think about that $1 million is being it.  And taking into account housing and other normal necessary expenses they just don't see how it could last.   

[solon]

You're lucky to have had a teacher that was so inspiring! Would you have $500,000 today if not for that teacher?

[dandarc]

Also housing; I would assume that $1M ($40k/yr) is easy if you own a paid-off house (which would require more than the $1M), but otherwise I wouldn't want to bank on having to cover a house and/or rent in that $40k/yr indefinitely.  Rent or property tax increases would probably eat your budget alive 20-30 years in.

why would this not track with inflation?  For those following a 4% WR, they don't take out $40k every year, they take out $40k + inflation.

My short-term sample of 1 house - since buying in 2014, our property taxes have only gone down.  In spite of increased appraisals.  A confluence of the "Save our homes" caps on appreciation of homestead property and a ton of new development and commercial property = our share of the bill is less than it was 2 years ago.

[Reynold]

why would this not track with inflation?  For those following a 4% WR, they don't take out $40k every year, they take out $40k + inflation.

Property taxes have gone up faster than inflation everywhere I've ever lived, since government tends to both give themselves "cost of living increases" and find ways to expand.  Rent in relatively desirable places to live has also been going up faster than inflation.  If you want to retire to update New York, on the other hand, rent has probably gone up less than inflation.  Finally, medical care costs have definitely gone up faster than inflation. 

[Polish_Hammer]

You're lucky to have had a teacher that was so inspiring! Would you have $500,000 today if not for that teacher?

Sounds like an old bit from Christopher Titus, where his dad took credit for all of his success. If I weren't such, a mean, unsupportive A-hole you would never had made it

[Much Fishing to Do]

I'm guessing he at least implicitly meant that you can't live the way he would want to live off of $1M forever.  Seems like every day someone says you "can't" retire on just social security, yet most people in fact do, so there's obviously more being meant....

[mamagoose]

You're lucky to have had a teacher that was so inspiring! Would you have $500,000 today if not for that teacher?

Sounds like an old bit from Christopher Titus, where his dad took credit for all of his success. If I weren't such, a mean, unsupportive A-hole you would never had made it

My biggest accomplishments all came out of a desire to prove someone wrong. Maybe the teacher knew what they were doing (i.e. "I double dog dare you to try to retire on $1M").

[solon]

You're lucky to have had a teacher that was so inspiring! Would you have $500,000 today if not for that teacher?

Sounds like an old bit from Christopher Titus, where his dad took credit for all of his success. If I weren't such, a mean, unsupportive A-hole you would never had made it

My biggest accomplishments all came out of a desire to prove someone wrong. Maybe the teacher knew what they were doing (i.e. "I double dog dare you to try to retire on $1M").

Me too. The best way to get me to do something is to tell me it can't be done - especially by someone like me.

[Prairie Stash]

Also housing; I would assume that $1M ($40k/yr) is easy if you own a paid-off house (which would require more than the $1M), but otherwise I wouldn't want to bank on having to cover a house and/or rent in that $40k/yr indefinitely.  Rent or property tax increases would probably eat your budget alive 20-30 years in.

why would this not track with inflation?  For those following a 4% WR, they don't take out $40k every year, they take out $40k + inflation.

It tracks wages (and other factors) in the area, not inflation (inflation is a rough approximation of the countries market, there's a big difference between New York and Fargo ND though). Inflation also tracks wages, hence the confusion.

You could make that argument for any category that it will outpace inflation (or disproportionally grow or shrink); food costs will rise/fall, gasoline, clothing etc. Its just crystal ball gazing. Once you start going down the path you get into conjecture and speculation.

On average though the cumulative basket of expenses people face rise/fall with inflation. On average the typical MMM isn't an average person though...inflation applied to the MMM philosophy is a wonderfully thought provoking exercise.

[aceyou]

Unfortunately, in our current society finding good financial information is much harder than acquiring other kinds of knowledge. The only way to find it is to spend a lot of time looking for it specifically. Many people are never pushed to do this.

Right, and not only is there a lack of good info, there is a glut of intentionally bad information.  It's in the finance industry's best interests for people to hold misconceptions about money so that

a) people feel they need to take the advice of their sales people, and
b) so they don't realize how bad the advice they are being given really is. 

There camp that wants people to be dumb has way more money at stake than the camp that want's everyone to be FI. 

[dougules]

Technically he's right; you can't live off $1M forever.  But you can live forever off investments that are worth $1M.  It's kind of a nitpick but it makes a total difference in how people look at it.  When you phrase it in terms of living off of company profits, bond interest, and/or rental income, it's easier for people to grasp.

[l2jperry]

I should add that that it was implicitly stated and understood that the 1 million could be used for yearly expenses as well as being invested. It was a small class with only around 25 graduating students so the issue remained discussed throughout my sophomore and senior year with other students and teachers. The following year the calc teacher even considered turning into a project for the class to decide on. Never happened though :(

And of course being younger I was prepared to live in a box if not necessary to prove a point. I know now that I wouldn't do that, I would at the very least upgrade that to a van. Haha.

[soupcxan]

Your chemistry teacher isn't necessarily wrong. 

One choice Mustachians must make is the standard of living they can afford by retiring early. 
A retirement stash of $1M means an income of $40K assuming a 4% withdrawal rate.  Your chemistry teacher might be assuming something higher than that, in which case your chemistry teacher was right under his set of assumptions.  He might also be considering a wife and kids, that increases costs considerably.

I also think that people on this site tend to underestimate the potential risk for (1) high healthcare costs, and (2) future increases in taxes to cover governmental costs.
My workplace shells out considerable money for my healthcare, and it doesn't even factor into account that it will be more expensive to insure me as I get nearer to retirement. 

There are a lot of factors that will affect retirement calculations, so to consolidate the retirement decision into a single number brings with it a number of unspoken assumptions.

+1

I'm also guessing that the teacher has a lot more life experience than a 26 year old already knows everything. Plan all you want, but sometimes shit happens.

[Retire-Canada]

I should add that that it was implicitly stated and understood that the 1 million could be used for yearly expenses as well as being invested. It was a small class with only around 25 graduating students so the issue remained discussed throughout my sophomore and senior year with other students and teachers. The following year the calc teacher even considered turning into a project for the class to decide on. Never happened though :(

And of course being younger I was prepared to live in a box if not necessary to prove a point. I know now that I wouldn't do that, I would at the very least upgrade that to a van. Haha.

$1M given some of your assumptions above is probably saving/investing far too much. At 4% WR a ton of future versions of you are wondering what to do with all the money they have.

[l2jperry]

Your chemistry teacher isn't necessarily wrong. 

One choice Mustachians must make is the standard of living they can afford by retiring early. 
A retirement stash of $1M means an income of $40K assuming a 4% withdrawal rate.  Your chemistry teacher might be assuming something higher than that, in which case your chemistry teacher was right under his set of assumptions.  He might also be considering a wife and kids, that increases costs considerably.

I also think that people on this site tend to underestimate the potential risk for (1) high healthcare costs, and (2) future increases in taxes to cover governmental costs.
My workplace shells out considerable money for my healthcare, and it doesn't even factor into account that it will be more expensive to insure me as I get nearer to retirement. 

There are a lot of factors that will affect retirement calculations, so to consolidate the retirement decision into a single number brings with it a number of unspoken assumptions.

+1

I'm also guessing that the teacher has a lot more life experience than a 26 year old already knows everything. Plan all you want, but sometimes shit happens.

You say that, but think how much more of a know it all I was at 16. :D I'm not naive, I know shit happens... and I understand one million might not necessarily give me the quality of life I want, but I feel pretty damn confident that you can certainly sustain yourself on it for a lifetime if you are able to make sacrifices during bad times.

[Eric]

Technically he's right; you can't live off $1M forever. 

Technically he's right because no one lives forever.

[nereo]

Technically he's right; you can't live off $1M forever. 

Technically he's right because no one lives forever.

... well there's about 7 billion people that, so far, have failed to die.