MMM Quoted in CNBC Article

[Yankuba]

http://www.cnbc.com/2017/02/09/that-4-percent-rule-could-spell-trouble-for-early-retirees.html

Critique of the 4% rule with quotes from MMM and other early retirees

[Retire-Canada]

One strategy I've read that's foolproof - keep saving for a super low WR until you die at your desk while still working. If you stick with the plan there is a 100% chance you will not run out of money in retirement. 100%!

[BlueHouse]

WTF is  " a professor of retirement income at the American College of Financial Services".  Is that a real thing? 

[pbkmaine]

Yes. It started out as an insurance school, then added financial planning. Wade Pfau is fairly well known to financial planning circles.

https://www.theamericancollege.edu/our-people/faculty/wade-pfau

[cpa cat]

The criticisms are the usual ones.

What if you suffer from losses in the early part of retirement? For early retirees, that sucks, but since you're young and only a couple of years into retirement, you could just go back to work if you happened to pick the wrong retirement year. Postpone early retirement two more years and try again.

You can't rely on Social Security or other sources of income! You can't? What about the fact that I have a functioning body and ability to earn income? That seems reliable. And if I did happen to become totally disabled upon early retirement, I could actually rely on Social Security as a safety net.

It's not 100% risk free. *snore* Again, this assumes I have zero ability to adjust over a 50 year retirement. Somehow I lock myself in at year 1 and am totally incapable of adjusting spending or income. It's like once you retire early, you're done making decisions about your finances. Better invest 100% of your assets in risk free treasuries and CDs. Oddly, Dogen mentions that you can just go back to work, but also seems to endorse the idea of living off a 2.4% withdrawal rate - which makes me wonder if something was lost in translation.

[Retire-Canada]

The criticisms are the usual ones.

Agreed. Also fails to acknowledge there are many ways to fail at FIRE that don't involve running out of money and that saving for some absurdly low WR may well cause you to experience one of these non-financial failures.

[swick]

A major failing of these articles is they don't ever go into "what" retirement actually means for people.

The idea is so ingrained that it means "doing nothing" but the reality is, most people who "retire" from the idea of a "traditional job" do other things that are income generating - because they are fun, or a challenge or just because they have the time.

Doing what you need to to get FIRE'd also gives you a whole host of skills that can be used either to weather a market downturn or that allows you to easily replace the income.

I don't think that traditional retirement articles want to acknowledge that it is a shift away from the consumeristic lifestyle that these publishers rely on that makes it all possible, and why the chance of failing for people who have gone down this route is much lower.

Yes, shit happens. But in the downturn of any economy, who is going to be better off, the person who has money and skills and the ability to adjust on the fly or someone who is beholden to their employer and needs to keep working to be paid?

[Drifterrider]

WTF is  " a professor of retirement income at the American College of Financial Services".  Is that a real thing?

Yes, it is a subsidiary of Trump U.

[AZryan]

swick,

'Retirement' means you 'no longer work for your income'. That's it. Plain, simple, clear.

Early retirement arguments are so solid that there's no reason to resort to twisting the definition of such a reasonable term, but I do have to blame MMM himself for starting that here and crying 'retirement police' when he got corrected.

You (and others -like myself- for like a decade now) have made plenty of great points as to what people in early (or typical) retirement can do if it starts to fail. But those fixes, as 'no big deal' as they are, do pull someone out of retirement if they go back to earning income.

And if someone wants to keep working once they have the freedom and money and time to do almost any job they want, that's fine, isn't it? Why lie about it and pretend it's still retirement just because it's not some 8-5, daily rush-hour, slave-wage nightmare?

It's just silly to screw up your otherwise good points against an article that is plenty screwed up on it's own.

If you think I'm wrong, imagine your own definition of 'retirement'... I think you'll see that you've attached too much to it, so it means almost anything you feel like.

We don't want to go down the same lazy, distorted road like these click-bait, fear-mongering writers, do we?

[AZryan]

Drifterrider,

As was pointed out above, it's a title given to a guy who's very highly respected in the early (and regular) retirement community. Why did you tar him with a 'Trump U' slam?

Was it just ignorance, failed attempt at humor, or do you really have something against W. Pfau??

[swick]

I fundamentally disagree with you. I think it IS worth having discussions about "What" retirement means and that it CAN have a variety of meanings and the "concept" can be interpreted differently.

Not only that, we are a community of people who don't always accept the status quo and redefine and create new meanings as we go all the time. There shouldn't be any sacred cows one way or the other, accepting anything blindly only damages yourself.

Merriam-Webster: Retirement: withdrawal from one's position or occupation or from active working life.

Dictionary.com: Retirement: the act of retiring, withdrawing, or leaving; the state of being retired.

2. The act of retiring or of leaving one's job, career, or occupation permanently, usually because of age

Investopedia: When a person chooses to leave the workforce.

Your definition is a valid one as well.

'Retirement' means you 'no longer work for your income'. That's it. Plain, simple, clear.

But then, my question for your definition would then be what is the definition of "work" and who gets to make the call for each of us what is considered work?

[Chris22]

Wasn't there a big trend a few years (or more) ago about "downshifting"?  It was a person leaving a high-stress job (say, Big Law lawyer) and entering a much lower-stress "hobby" job (like opening a pastry shop or being a handyman or teaching a couple community college classes).  The idea being you still have "a job" but you are not intending on living off of the wages from it (or you have significant backup resources) and you are trading high stress for low stress.  There's also "consulting" in the business world, which often means you leave your employer but they hire you back part time so you can come help out a few days a week or something. 

[Retire-Canada]

Wasn't there a big trend a few years (or more) ago about "downshifting"?  It was a person leaving a high-stress job (say, Big Law lawyer) and entering a much lower-stress "hobby" job (like opening a pastry shop or being a handyman or teaching a couple community college classes).  The idea being you still have "a job" but you are not intending on living off of the wages from it (or you have significant backup resources) and you are trading high stress for low stress.  There's also "consulting" in the business world, which often means you leave your employer but they hire you back part time so you can come help out a few days a week or something.

I'm about to do that and I have read about similar plans from a number of posters on this site. I won't consider myself "retired" until I'm earning 25% or less of my spending each year from working.

[Chris22]

My parents are FI but not RE, and even at 63 my dad talks about shifting to part time work at 65 or so.  He loves his job, and frankly where they live in New England there's just not that much to do from about October to April (my dad like outdoorsy stuff, and my mom isn't interested in moving south).  He figures as long as they keep paying him (well) to work he'd be happy to do it 2-3 days a week. 

[AZDude]

These articles always assume a person, once retired, is incapable of ever earning money again. Anyone with the self-discipline to retire early will be able to get a job, if necessary.

So worst case scenario is you retire for awhile and then end up needing to work again for a few more years down the road. Which is so much worse than just working the whole time...?

I wonder if these sorts of articles are made with the intention of steering people away from a low consumption lifestyle, believing that too many people living such a lifestyle would hurt the overall economy.

[Retire-Canada]

I wonder if these sorts of articles are made with the intention of steering people away from a low consumption lifestyle, believing that too many people living such a lifestyle would hurt the overall economy.

I don't think it's that deep or strategic. Fear sells maybe even better than sex....so posting content that is fear based grabs readers' attention. If you are successful professional you have been trained from a young age to work and spend. FIRE goes totally against this which is why we see so much OMY and as-soon-as-I-hit-0.001%SWR stuff going down. Those approaches are fuelled by fear and our natural resistance to change our lifelong programming.

[Chris22]

So worst case scenario is you retire for awhile and then end up needing to work again for a few more years down the road. Which is so much worse than just working the whole time...?

In many cases, I'd say, yes, it is worse.  When you don't need the money, or you already have a job, you can be much more picky and selective, plus it's easier to get a job when you already have a job.  The thought of not working for years and then having to claw my way back into the job market, taking god knows what role in order to have money to survive, is way worse to me than sitting in a job I'm already comfortable in.

[Retire-Canada]

In many cases, I'd say, yes, it is worse.  When you don't need the money, or you already have a job, you can be much more picky and selective, plus it's easier to get a job when you already have a job.  The thought of not working for years and then having to claw my way back into the job market, taking god knows what role in order to have money to survive, is way worse to me than sitting in a job I'm already comfortable in.

If you are on a LCOL MMM type FIRE plan you don't need to replace your previous high income to have a major impact on your FIRE investments. Making $10K or $20K working PT for a bit massively reduces your WRs for a period so your portfolio can respond to something like a sequence of returns risk. And that's only if you happen to have an issue. The odds are in your favour that you won't.

[AZDude]

Yep. Unless you are stupid, you will see far in advance that you will need to return to work and thus have time to find a decent P/T or other low stress job. Unless you wait until the very last moment and then panic-accept a job working 80 hours a week doing harsh manual labor, then I don't see it could possible be worse.

[Chris22]

In many cases, I'd say, yes, it is worse.  When you don't need the money, or you already have a job, you can be much more picky and selective, plus it's easier to get a job when you already have a job.  The thought of not working for years and then having to claw my way back into the job market, taking god knows what role in order to have money to survive, is way worse to me than sitting in a job I'm already comfortable in.

If you are on a LCOL MMM type FIRE plan you don't need to replace your previous high income to have a major impact on your FIRE investments. Making $10K or $20K working PT for a bit massively reduces your WRs for a period so your portfolio can respond to something like a sequence of returns risk. And that's only if you happen to have an issue. The odds are in your favour that you won't.

Sure, but I will tell you right now, being used to working a high income professional job and having all the "perks"* thereof, there's no way I would want to go try and make $10-20k working part time at a low end service job or something.  Maybe I could find the best $10-20k part time job in the world, but the odds are better that I'd have to take something like WalMart greeter or burger flipper or retail associate and I'd rather punch myself in the dick.

YMMV

 

*perks like managing my own workload, having relative autonomy, not getting screamed at if I show up at 815 instead of 800, taking my lunch when I want, etc etc etc.

[frugalnacho]

In many cases, I'd say, yes, it is worse.  When you don't need the money, or you already have a job, you can be much more picky and selective, plus it's easier to get a job when you already have a job.  The thought of not working for years and then having to claw my way back into the job market, taking god knows what role in order to have money to survive, is way worse to me than sitting in a job I'm already comfortable in.

If you are on a LCOL MMM type FIRE plan you don't need to replace your previous high income to have a major impact on your FIRE investments. Making $10K or $20K working PT for a bit massively reduces your WRs for a period so your portfolio can respond to something like a sequence of returns risk. And that's only if you happen to have an issue. The odds are in your favour that you won't.

Sure, but I will tell you right now, being used to working a high income professional job and having all the "perks"* thereof, there's no way I would want to go try and make $10-20k working part time at a low end service job or something.  Maybe I could find the best $10-20k part time job in the world, but the odds are better that I'd have to take something like WalMart greeter or burger flipper or retail associate and I'd rather punch myself in the dick.

YMMV

 

*perks like managing my own workload, having relative autonomy, not getting screamed at if I show up at 815 instead of 800, taking my lunch when I want, etc etc etc.

Yes I would prefer my professional job much more than being a walmart greeter, but that's not exactly the question.  It's a 100% chance you work longer in your professional job vs a 10% chance of working a future year at walmart.  As much as I prefer my job over walmart greeter I would happily take that risk.  Mostly likely you don't need to work either job.

[MilesTeg]

You can't rely on Social Security or other sources of income! You can't? What about the fact that I have a functioning body and ability to earn income? That seems reliable. And if I did happen to become totally disabled upon early retirement, I could actually rely on Social Security as a safety net.

Hmmm.. it's amazing how extremely quickly you can go from "functioning body" to "non-functioning body". It's not as reliable as you think. And not necessarily in ways that would make you eligible for disability (yet still prevent you from earning decent money).

For example, one of my college classmates who was near the top of our class was hit by a drunk driver and had significant neurological damage (mostly memory issues). Overnight she went from being near the head of the class to barely finishing school she finished only because the school was flexible with her given her medical issues and it was her last semester anyway). Given that she was planning to enter a career where such abilities are absolutely required (software engineering) that was no longer an option. But, her issues didn't grant her any sort of disability or other compensation, because it was only high cognitive function jobs she couldn't do (i.e. the types of jobs that only a very small percentage of the population can do in the first place).

What the SSA has to say about it:

"In order to collect disability benefits on the basis of memory loss, you must be able to demonstrate, through medical records, that you have a physical or mental condition that causes memory loss, and that this condition is severe enough not only to prevent you from using skills needed to perform your prior job, but is also severe enough to prevent you from adjusting to a less mentally demanding job or learning new skills that could help you obtain gainful employment in a new position to which you may be suited."

http://www.disabilitysecrets.com/resources/social-security-disability-benefits-and-memory-loss.htm

She was told that she could definitely still work at Best Buy, so tough luck. (not a direct quote, but Best Buy was definitely mentioned and she was definitely shown the door).

[Retire-Canada]

Yes I would prefer my professional job much more than being a walmart greeter, but that's not exactly the question.  It's a 100% chance you work longer in your professional job vs a 10% chance of working a future year at walmart.  As much as I prefer my job over walmart greeter I would happily take that risk.  Mostly likely you don't need to work either job.

Agreed and it's not like the only two options in life are CEO or greeter. The fact a job may not be what you've done your whole career nor at the exact same level doesn't mean it will be awful. FIRE portfolios do not fail in the course of weeks. If you conclude you are in one of the few unlucky FIRE start years you have lots of time to take corrective action including spending time getting some work you don't hate. In most cases it's not going to be required and you can just continue to sip drinks on the beach.

Personally having had high responsibility management jobs my whole life when I had the opportunity to work retail in an outdoors shop for 6 months it was a nice change of pace. I didn't hate it and it was an easy way to make a few bucks between high paying contracts. I got paid to chat with people about their trip plans and recommend gear. I didn't have to balance a budget, hire or fire anyone and I never met my sales goals because I didn't like the process of giving my employee number to the customer so they could register the sale against me. You know what happened? Nothing because I was a useful person to have around just like I am currently in my high paying career. That's not going to change when I am FIREd.

People get so fearful of the "what ifs" they chain themselves to their desks for extra years. 

[Laura33]

One strategy I've read that's foolproof - keep saving for a super low WR until you die at your desk while still working. If you stick with the plan there is a 100% chance you will not run out of money in retirement. 100%!

Snort.  :-)

Honestly, the 4% rule has been around forever -- it's this "you can take out 4% the first year, and then increase that sum every year by inflation and you'll never run out of money" version that dates to the mid-'90s.  The version I learned growing up long before then was just to take 4% out of your portfolio forever (so you're naturally taking more when the markets go up and less when they go down).  It wasn't a guarantee (if you're spending it down, at some point you're going to have to take a lot more than 4%); it was just the target withdrawal amount that would on average provide the smoothest income over the course of retirement.

I do think, though, that Monte Carlo simulations may understate market risks for the ER crowd.  IIRC, those calculations usually assume historical variations in market performance, but with different scenarios of when the "good" and "bad" years hit; not surprisingly, the "unfavorable" outcomes happen when the "bad" years hit early on in retirement and you keep pulling out the same amount.  I think this works reasonably for standard retirement, because most people retire based on age, and they're equally likely to hit that age at any part of the economic cycle. 

But if you are looking for ER, though, you will likely decide to pull the trigger based on a number -- e.g., when your investments hit 25X expected RE.  The problem, though, is that you are more likely to hit this number when the market is rising, not when it is falling (because otherwise you'd probably have already hit the number on the way up before the market went down again).  And since the market tends to be cyclical, that means you're more likely to run into a downturn within a year or two after you retire (the Monte Carlo "run out of money" scenario), vs. retiring at the tail end of a bear right before it turns bullish again (the Monte Carlo "retire with millions" scenario).   Not that that means anything -- there are many ways to protect your downside risk (CD ladders, investment properties, etc.), and this is exactly the crew that plans ahead and is prepared to be flexible anyway.  It just reaffirms that that flexibility is a critical component of any ER plan.

In fact, I suspect the 4% rule will end up being too conservative, all things being equal.  DH and I just redid our [his] spreadsheet two ways -- one using the standard 4% rule, the other using the "bucket" approach I read here last month (basically, figuring out how much income I need to cover specific periods in retirement, all the way from "still have kids in the house" to "living in a home," and then back-calculating what I need to have put aside today to cover each of those buckets).  That figure was significantly smaller than the figure we'd need under the 4% rule.  So based on that, I think the 4% rule would allow us sufficient fluff to cover a few hard early years.

[Eric]

These articles always assume a person, once retired, is incapable of ever earning money again. Anyone with the self-discipline to retire early will be able to get a job, if necessary.

I kind of think it's the opposite.  Or at least, I don't think that's the driving assumption.  Instead the assumption baked into these articles is that once retired, you will never be able to spend less money than planned.  Because for most people, while working, they spend every cent that comes into their hands.  Okay, maybe they put away 10 or 15% into their 401k, but they never really see that money.  All the money that they see disappears into the consumer abyss.  They can't really comprehend having a flexible budget or spending less voluntarily.

[AZryan]

I fundamentally disagree with you.

You don't really. Or at least you didn't here.

I think it IS worth having discussions about "What" retirement means and that it CAN have a variety of meanings and the "concept" can be interpreted differently.

You desire to define things however you feel like and are hiding that behind the notion that you're just being an independent thinker.

As you noted in various dictionary definitions... the term is clear, simple and conforms to what I already wrote...

"Merriam-Webster: Retirement: withdrawal from one's position or occupation or from active working life."

As I said -it means you stopped working for income (occupation/active working life all fit this).

"Dictionary.com: Retirement: the act of retiring, withdrawing, or leaving; the state of being retired."

This is simply an entirely vague version of the term which can be used for things like, "She retired to the drawing room after tea."

"-2. The act of retiring or of leaving one's job, career, or occupation permanently, usually because of age-"

Again, as I said... leaving work. The 'usually because of age' is actually an added flaw. Not 'wrong', but since it's only 'sometimes true', it shouldn't be part of a definition.

"-Investopedia: When a person chooses to leave the workforce.-"

HOW DO YOU NOT SEE... all of these are exactly how I defined it. And you have yet to define the word, but how you used it does NOT conform to ANY of these definitions!?

It's just bizarre that you posted all those as if they helped make your case?

...what is the definition of "work" and who gets to make the call for each of us what is considered work?

I shouldn't have to define 'work' for you. It's pretty simple as well. Physics has done it in general. In more casual use, it's basically 'actively doing something of effort' to make something happen.
In more specific use (as we're obviously using it here), you can add the idea of the 'something' being done to 'make money'. This is how everyone uses the term. If you don't do work for money, people typically define that work as a 'hobby' to differentiate that one financial difference.

I'm fairly certain you know this already, so it ticks me off that you're going down this shifty rhetorical road.

You better not ask me what 'something' means. I mean, jesus... every word has to be defined with other words, so you can literally question any definition to infinity (if you're trying to be dishonest or a dick).

Can you just admit now that my definition makes clear sense, is backed-up 100% by your own quick research, and none of it matches your idea that someone's still retired if they go back to work?

[Eric]

HOW DO YOU NOT SEE... all of these are exactly how I defined it. And you have yet to define the word, but how you used it does NOT conform to ANY of these definitions!?

It's just bizarre that you posted all those as if they helped make your case?

And how do you not see that YOU interpreted all of these definitions to fit your own personal definition, when in fact, they are all different.  Those all make Swick's case perfectly, since they're all different, and we all get to define retirement however we please.  Sounds like you'll be filling your days running around yelling at the top of your lungs YOU'RE NOT RETIRED to everyone you meet.  Sounds pretty boring and lacks imagination for me, but hey, if it's your definition of retirement, who are we to argue?

[swick]

It would appear I have hit a nerve. My background is in English specifically language acquisition, limitations of language usage and communication, cultural development and impact of language evolution.

I love seeing how language usage and general and cultural acceptance plays a role in communication and (mis)understanding. I think it is always worth having these discussions. We assume a basic level of literacy, be it financial, educational, even just with communication. This isn't always the case and where a lot of the disagreements stem from.  I'll just bold my responses.

You desire to define things however you feel like and are hiding that behind the notion that you're just being an independent thinker.


HOW DO YOU NOT SEE... all of these are exactly how I defined it. And you have yet to define the word, but how you used it does NOT conform to ANY of these definitions!? I did state your definition is correct. There are subtle shades of differences that I find interesting and it is worth having conversations around it's how you get to know people and exchange ideas. I'm more interested in everyone else's reasoning and definitions then my own, I was just trying to point out there are differences.

It's just bizarre that you posted all those as if they helped make your case?

...what is the definition of "work" and who gets to make the call for each of us what is considered work?

I shouldn't have to define 'work' for you. It's pretty simple as well. Physics has done it in general. In more casual use, it's basically 'actively doing something of effort' to make something happen.
In more specific use (as we're obviously using it here), you can add the idea of the 'something' being done to 'make money'. This is how everyone uses the term. If you don't do work for money, people typically define that work as a 'hobby' to differentiate that one financial difference. I'm pretty sure many stay at home parent would take exception to that definition.  I don't understand how you can be so offended. Word definitions change and can evolve based on cultural and generally accepted usage. If we aren't willing to examine the limitations of language or our understanding, or ability to communicate, what's the point? 

I'm fairly certain you know this already, so it ticks me off that you're going down this shifty rhetorical road.

You better not ask me what 'something' means. I mean, jesus... every word has to be defined with other words, so you can literally question any definition to infinity (if you're trying to be dishonest or a dick). Yes you can. I don't think it is a matter of being shifty, dishonest or a dick, it's (in my case) curiosity and seeking to understand and get conversation going. If you have a problem with that, feel free to not engage. I was that kid to asked "why?"  over and over and over again, the opportunity for going deeper is why I felt the original article and many like it totally miss the mark.

Can you just admit now that my definition makes clear sense, is backed-up 100% by your own quick research, and none of it matches your idea that someone's still retired if they go back to work? Yes I can, I did in my response, and where was it that I stated it is my idea that "someone's still retired if they go back to work"? I don't think I did, but that is why I feel the definition of "work" needs examining.

ETA: Wouldn't it be cool if we could get over the nit-picking and our rigid definitions and use the words and language as a jumping off point to ask "what if"? If the current culturally accepted definitions of retirement or work or any other word are not working for us, why don't we strive to problem solve and create new definitions and explore what else is possible? That is kind of the whole premise of this community. To explore and redefine and come up with alternative ideas.

What if "work" wasn't generally seen a bad word and something you have to escape from?

What if "work" was a calling, or vocation or something that was personally fulfilling?

What if we explored the ideas around "work" and could figure out how to make it more fun or enjoyable though changing expectations, or time requirements, or job satisfaction, or company culture or...or...or...

[accolay]

Early retirement arguments are so solid that there's no reason to resort to twisting the definition of such a reasonable term, but I do have to blame MMM himself for starting that here and crying 'retirement police' when he got corrected.

My reading of the MMM definition of "Internet Retirement Police" were people who said he's not retired since he decided to do other types of work to fill his days instead of doing absolutely nothing since doing nothing is apparently the only way they defined retirement.

[cpa cat]

Point being - a bad market is not a FIRE killer. It could be a FIRE hiccup. It could be a FIRE delayer. But early retirees have time to adjust. I have a lot more luxury of time if I'm 40 years old and retiring than if I'm 80 years old and retiring.

Yes, something super extra bad could happen, like I get hit by a car and need long term care. And boy if that happens when I'm 40, that's a heck of a lot worse for my finances than if it happens at 80. But the idea that we should prepare for every eventuality by working years longer to cover every possible "bad thing" that could happen is ridiculous.

The main "bad thing" is an unpredictable market. What if there's a recession early in ER? What if there's a historically improbable period of very low growth? What if? What if? What if?

So what? You'll be there, living through it, adjusting. Worse case scenario (other than getting hit by a car) is that you go back to work for a couple of years - long before you actually run out of money. Fire FAIL. Try again later. Maybe it's reasonable to build in a couple of years' worth of expenses to your plan.

Would most of us prefer to work another year now than work at the grocery store? Sure (although I'm kind of confused about why FIRE'ing makes you lose all of your skills and education. There are a lot of jobs between Walmart and wherever you work now) - but would I rather take a chance than work for an extra ten years so that I can meet some ultra-conservative withdrawal rate and die rich? No thanks!

What I did for real was FIRE and then start my hobby job working for myself, which turned into a real job and now I mysteriously run a successful accounting firm. Fire FAIL. Now we have more money than we'll ever need. Oops. Could still be hit by a truck. And it would still suck.

[Dicey]

Wow, AZryan, you are a relative newb here, yet you're trash talking a Global Moderator with a lot bigger contribution to the greater good that is the MMM Forum than you have earned. Your lack of appreciation for a fellow forum member is generally apparent. Your choice of target is puzzling. I'm tempted to report you to a moderator, but you've pretty much done that yourself.

If you plan on sticking around long enough to learn from the masters, consider a quick read here:

http://forum.mrmoneymustache.com/forum-information-faqs/forum-rules/

Back on topic: Resiliency and flexibility are key to making early retirement work. With mad mustachian skillz, a bad year or even several will not put you on the bread lines or even in a blue vest. In times of need, a mustachian can always get by on less or find ways to earn more. Because you're PAYING ATTENTION, you will have plenty of time to make the small corrections needed to successfully stay the course.

I completely understand that shit can happen, but it's less likely to happen to someone who has developed a black belt in life skills and amassed somewhere around 25x annual expenses. Of course, we all know that's impossible.  [Insert sarcasm and eye rolling here.]

Anecdote, not data: well before MMM, a friend of mine retired early to pursue her dream of becoming an artist. In her first year of retirement, she managed to burn through 10% of her nest egg. Then she was diagnosed with breast cancer. She didn't panic. She got through the treatment, adjusted her budget, and stayed focused on her goal. She began teaching Art part-time to cover her supply costs. Ten years later, she's a well-respected artist and teacher who loves her life. She still lives in the same house, so her overall style of living has not suffered. Her nest egg recovered and her finances are completely  back on track. Her health is excellent and all is well. It's all about resilience and flexibility.

[FiveSigmas]

Anecdote, not data: well before MMM, a friend of mine retired early to pursue her dream of becoming an artist. In her first year of retirement, she managed to burn through 10% of her nest egg. Then she was diagnosed with breast cancer. She didn't panic. She got through the treatment, adjusted her budget, and stayed focused on her goal. She began teaching Art part-time to cover her supply costs. Ten years later, she's a well-respected artist and teacher who loves her life. She still lives in the same house, so her overall style of living has not suffered. Her nest egg recovered and her finances are completely  back on track. Her health is excellent and all is well. It's all about resilience and flexibility.

Diane, it may not be data, but I love the anecdote.

[Dicey]

Anecdote, not data: well before MMM, a friend of mine retired early to pursue her dream of becoming an artist. In her first year of retirement, she managed to burn through 10% of her nest egg. Then she was diagnosed with breast cancer. She didn't panic. She got through the treatment, adjusted her budget, and stayed focused on her goal. She began teaching Art part-time to cover her supply costs. Ten years later, she's a well-respected artist and teacher who loves her life. She still lives in the same house, so her overall style of living has not suffered. Her nest egg recovered and her finances are completely  back on track. Her health is excellent and all is well. It's all about resilience and flexibility.

Diane, it may not be data, but I love the anecdote.

Me too. I'm very proud of her. She's a respected plein air artist, living a great life. I grabbed these two examples from her website. Enjoy! Fingers crossed that they attach right side up, especially the boat.

[RecoveringCarClown]

In many cases, I'd say, yes, it is worse.  When you don't need the money, or you already have a job, you can be much more picky and selective, plus it's easier to get a job when you already have a job.  The thought of not working for years and then having to claw my way back into the job market, taking god knows what role in order to have money to survive, is way worse to me than sitting in a job I'm already comfortable in.

If you are on a LCOL MMM type FIRE plan you don't need to replace your previous high income to have a major impact on your FIRE investments. Making $10K or $20K working PT for a bit massively reduces your WRs for a period so your portfolio can respond to something like a sequence of returns risk. And that's only if you happen to have an issue. The odds are in your favour that you won't.

 I agree with Chris22, I would rather work another year with an income at an order of magnitude greater than a greeter than have to ever become a greeter.  That said, I do think the folks that claim you need 3% or lower SWR to be way too conservative. -RCC

[AZryan]

Swick -"A major failing of these articles is they don't ever go into "what" retirement actually means for people.-"

It started with this. And you keep not bothering to define it yourself. Instead, it seems like you want words to mean whatever anyone feels like. That's totally different than an honest debate(argument) about what a specific word means on a site specifically about that word.

"-The idea is so ingrained that it means "doing nothing" but the reality is, most people who "retire" from the idea of a "traditional job" do other things that are income generating - because they are fun, or a challenge or just because they have the time.-"

How do you know that most people who retire do other things to make income? I've never heard of any research that actually shows that. Are you sure you're not just saying whatever you feel is true?

This article (and others) are just saying 'retirement' means you're not earning money anymore. Which shows again how most financial writers are actually using the word consistently. You can argue that they should talk about semi-retirement and things to make sure retirement doesn't fail, but that's not my point. You're not early 'retired' if you're still doing shit to earn money. To claim that's still retired destroys any logical meaning of the word.

And you didn't 'hit a nerve'. Or -"I don't understand how you can be so offended."
You don't actually know 'how offended' I am. You're pretending you know. Why not just ignore your imagination and focus on the argument of defining 'retirement'? You muddy this so badly.

That thing about 'stay at home parent' is -
1) kind of a strawman. We are both talking about in the realm of finance blogs/articles about work, money, retirement, investing, etc.
2) and typically 'parenting' isn't regarded as 'work' in typical use. Only in the 'technical' sense. We all see this whenever someone asks 'What do you do?'. We know the answer 'I parent' or 'I do the laundry' is not what people mean. And that's a legitimate flaw for society to deal with (mostly an anti-feminist bias). But again, housework is not what any of these financial articles are ever referring to, and you know that full well. It just seems like someone trying to muddy the argument.

"-I was that kid to asked "why?" over and over and over again-"

Maybe that's the problem. Not in the wanting to know 'why', since I think that's super important, too. It's that some kid asking 'why' over and over and over is neither thinking or participating; they're just annoying the shit out of some grown-up. As I said, you kept not defining 'retirement', yet claimed the article's writer (and others) use a definition they don't actually use. Then you started questioning the definition of plain words within my definition, instead of giving your own definition. That's exactly the annoying 'But why??' kid.

"-Yes I can, I did in my response, and where was it that I stated it is my idea that "someone's still retired if they go back to work"? I don't think I did, but that is why I feel the definition of "work" needs examining."

Are you saying you agree with what I wrote or not? Part of what I wrote there was that your definition is not logical. But you seem to still disagree. But you don't actually define (or 'examine') it. I can only infer your definition based on what you first complained about and what you wrote after.
Hell, I still defined 'work' for you, too. And you never defined or 'examined' it yourself.

This is not nit-picking. My complaint was over the definition of the word 'retirement' on a retirement forum. If it doesn't mean 'no longer doing work for income/money', then it must have some cloudy, pointless definition to you. And that ruins words that actually have clear meanings -like this one.
You might as well argue 'alternative facts' next.

I agree with your other points, but it's nothing new, so it's why I don't post much. Usually people are just saying shit we all heard already a dozen times over.


Accolay -"My reading of the MMM definition of "Internet Retirement Police" were people who said he's not retired since he decided to do other types of work to fill his days instead of doing absolutely nothing since doing nothing is apparently the only way they defined retirement.-"

It's that people were pointing out that he keeps doing things to 'make money' that are clearly 'jobs/income'. Or like the fact that his wife still sells houses. That's semi-retired. Why is it a crime to just admit that? It's 'cuz it's a big difference in how it sounds, and that his blog, reputation, interviews makes a lot of money off of the claim that he 'retired at 30'.

No one can 'do nothing' in retirement. If you just play golf, you're retired. If you sometimes work giving golf lessons for money and have to list it as income on your taxes... you're not retired. You could argue it's 'close enough' based on how little work you might do and/or how insignificant the income might be, but that's about the only logical argument there.


Diane C,

Sorry you got so upset with me. On a site where the owner talks about giving people face punches for doing shit he doesn't like, you might want to not get upset so easily and focus more on the actual points being made. Also, daffy to assume I'm a newb based on when I joined the forum or how often I post (or your imagination?). I was largely living MMM's philosophy long before his website existed. When I first saw it, I was like, 'Hey, he's like us. I didn't know there were other people who think like this!' and showed it to my wife. But didn't bother to join his site 'til I happened to feel like it years later.
I think ~95% of what he says is dead-on, but have learned almost nothing from him 'cuz I was largely doing the exact same things -investing in mutual finds and real estate in high school, riding my bike most places instead of using my car, moved where it was cheap to buy/live. Hell... I even go further than his recommendations on what to set the thermostat to heh.
I assume you just wanted to call me a name.

[accolay]

By "Do nothing" I meant not working at all. The whole argument stems from people who said he's not retired because he chooses to do work and surprise, things he likes to do makes him money. He still doesn't have to work but he's found something that is meaningful to him. It's pretty clear, but I'll let the guy explain itself again:

http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-the-internet-retirement-police/

Sure, he agrees with you:

Retired means you no longer have to work for money, and you are aware of this fact. You can then proceed to do whatever you want, as long as you do it consciously and of your own accord. If you meet this condition, and you feel retired, congratulations, you are.you're basically arguing against yourself.]“Retired” means you no longer have to work for money, and you are aware of this fact. You can then proceed to do whatever you want, as long as you do it consciously and of your own accord. If you meet this condition, and you feel retired, congratulations, you are.you're basically arguing against yourself.

But that's not what Swick was talking about. I feel like you're arguing semantics about what "work" means.

And it's like you're devolving this conversation into Monty Python's Argument Clinic
https://www.youtube.com/watch?v=kQFKtI6gn9Y

[Chris22]

Anecdote, but as an example:

My dad likes to buy damaged cars, fix them up, and resell them.  It's a hobby.  Sometimes he breaks even, sometimes he doesn't, and he doesn't really care either way, it's just about the enjoyment he gets from doing the work.  So if this hobby suddenly starts making a profit due to a change in the resale market, does that suddenly turn his hobby into work?  Just because he's earning money?  Is he not allowed to consider himself retired anymore, because his leisure activity is now "work?"

He also likes to garden, and has a very prolific blueberry hedge on his property.  If he's getting too many blueberries to pick himself, or he's too busy with other things, and sets up a $1/lb pick-your-own stand in the yard, does that mean he's not retired anymore?  Is it only an acceptable hobby activity if it's free?

That's the part of your definition that a lot of people here have a problem with.  Just because something happens to make money doesn't mean it was done for the sake of earning money.  Even if it was expected to make some profit, if you're doing it because you enjoy it and not because you need the money, what's wrong with that?

I think the problem people have with this is that the ER crowd sometimes likes to have it both ways.  As in, "I'm retired and financially independent" and then someone mentions risk or what have you, and they reply "well I'm still doing things to make money so I'm not worried about money, I'm still making it."

That's when you get into a bit of a "well which is it?" scenario.  To me, true retirement is you don't need any more active income.  I would say MMM is probably actually retired.  But I'd also say he runs a "hobby business", just like your dad.  WHICH IS FINE.  I think the debate comes when people are trying to claw into FIRE, and then are told "well you can still do things to make money if you need to"; to me if you still need to make money (not passive investment money) you can't really consider yourself retired.  You might be "downshifted" or "part time" or "semi-retired" or "retired from corporate life to work on something more fulfilling" but it doesn't strike me as truly retired unless you can support your lifestyle even if you just sat on your ass all day. 

I think there's also potentially a third bucket, where you are truly retired, but you have a hobby that you support monetarily.  I'm thinking like someone who plays golf and pays for it by teaching lessons, or someone who is a private pilot and pays for it by, um, teaching lessons, or someone like your dad who is into cars and pays for it by fixing them up and flipping them.  This is the boat I'll probably find myself in eventually; my hobbies trend towards more expensive by MMM standards, and I wouldn't give them up to retire, but if I could retire and make the hobby self-funding that would be fine by me. 

At the end of the day, it's all semantics, but I do see how people can get riled up when MMMers say "retire early" "what if I run out of money" "well then just go back to work"...  unless the "ran out of money" was due to some black swan event (breast cancer example above), "just go back to work" doesn't seem like a plan to me, it seems like the early retirement thing sorta failed.

[rtrnow]

In many cases, I'd say, yes, it is worse.  When you don't need the money, or you already have a job, you can be much more picky and selective, plus it's easier to get a job when you already have a job.  The thought of not working for years and then having to claw my way back into the job market, taking god knows what role in order to have money to survive, is way worse to me than sitting in a job I'm already comfortable in.

If you are on a LCOL MMM type FIRE plan you don't need to replace your previous high income to have a major impact on your FIRE investments. Making $10K or $20K working PT for a bit massively reduces your WRs for a period so your portfolio can respond to something like a sequence of returns risk. And that's only if you happen to have an issue. The odds are in your favour that you won't.

 I agree with Chris22, I would rather work another year with an income at an order of magnitude greater than a greeter than have to ever become a greeter.  That said, I do think the folks that claim you need 3% or lower SWR to be way too conservative. -RCC

This is just another example of everyone is different. I didn't hate my job, but I was tired of sitting behind a desk, not feeling challenged, and working large projects where I never really got to see the end result. I hit FI about 1.5 years ago. I took some time to travel and enjoy life. I always daydreamed about being a chef. Now, I work in a fine dining kitchen for $10/hr. I work harder than I ever did in an office, but I get immediate results and enjoy what I'm doing. The little bit of income is just a bonus.  It's also a great feeling to know that if I hate it, then I'll quit.

[cpa cat]

"just go back to work" doesn't seem like a plan to me, it seems like the early retirement thing sorta failed.

My point is that yes, it failed. But is it really that big of a deal?

The most likely source of failure is financial hardship (usually due to market conditions) in the early years of retirement, is "failure" such a big deal? If a recession happens at the wrong moment, you haven't had a catastrophic failure if you decide to go back to work, you just ER'd a little too early. Go back to work and try again in a couple of years when market conditions are more favorable. Why would anyone live in fear of what might be a two-year break from the workforce? You're not ending up at Walmart at that point, you were just on a sabbatical.

At a 4% withdrawal rate, failure is unlikely but possible, but since the model really only fails due to conditions in early years, why do we assume that early retirees can't simply adapt, when they are extremely well positioned to adapt. That adaptation might mean going back to their old career or a new one or a part time job or it may a reduction in standard of living - that choice is theirs. They don't have to just march on to failure - they're not locked in.

[bugbaby]

In the article, Mr Pfau  "His research found that portfolio losses in the early years of retirement would make use of the rule unsafe for many retirees. That's especially problematic for those who plan to be retired for a half century or more"

In addition, Mr McCarthy:
"Based his calculations, using historical investment returns and a 100,000 simulations, early retirees with at least 80 percent of their portfolios invested stocks and a starting withdrawal rate of 2 percent would have an 85 percent chance of success over a 50-year retirement."

I don't see anything wrong with these statements. MMM's income in his early days was primarily from the rental property. That's actually a business in a sense. Earning income from Web activity is also usually a business unless it becomes passive income.

If we can't stick to a conventional definition of key terms, then really we can make any claims based on any idiosyncratic definition we think up, and discussion becomes meaningless. If you have to go back to work for money then you've un-retired. That's OK, but let's also call it what is it, failure to sustain retirement.


Sent from my Nexus 5 using Tapatalk

[prognastat]

I don't know why it's such a hard concept.

In my opinion:
If you live of your stache, you have a hobby that happens to make money I wouldn't say you are suddenly retired less. I would actually even say it is immoral to give away your skills for free since this is actively lowering the value of wages for people doing the same thing that are not FIRE.
If however you have a stache that is too small to cover your spending and you have to work consistently to cover the gap then you are not retired.

The bigger difference is whether you do something you enjoy either for learning a new skill, staying in shape, pure enjoyment, you don't need the money to cover your expenses and you just happen to be able to make money with it then it is no different than having a hobby in retirement. If however you couldn't just stop doing without it impacting your lifestyle then you aren't.

[NESailor]

Me too. I'm very proud of her. She's a respected plein air artist, living a great life. I grabbed these two examples from her website. Enjoy! Fingers crossed that they attach right side up, especially the boat.

Seems like this thread is off on a "let's define retirement" tangent so I'll start another tangent - that boat is BEAUTIFUL!  I'm a boat person (own 4 watercraft...and want more...how unmustachian!).  Would your friend be OK with sharing her page?

Thanks!