Retirement goal changed due to inflation?

[AvidIndoorsman]

I think that is what was very eye opening to me about the FIRE movement was the notion of frugality (notice I didn't say being cheap) and it's impact on your savings vs spending rate. There are frequent writeups in the FIRE community about Average Joe &Jill who are both public school teachers each making $50k/year who were able to live (and live comfortably) on only 1/2 their income (and invest the other half in low-cost index funds) and be retired after 15 years. It doesn't take ramen noodle style living, rather choices about housing, transportation, and food that end up eating away at our income when the majority of those things are wants, rather than needs.

It's an analysis of whether or not a newer car(or 2), more expensive house, or eating out for multiple meals per week creates greater happiness in your life over the opportunity to be required to work less at your job.

It isn't rooted in the notion of "you millennials need to give up your Starbucks because that is what's making you poor". Just the idea that all purchase decisions are small, but cumulative, impacts on our ability to creat wealth.

For just a basic thought exercise, a $5 coffee 5x per week everyday on your way into the job, everyday for 30 years could have become $225,000 had it been invested in a low fee index fund. That's the ability to withdraw $10,000 per year in perpetuity. Not ramen noodle type changes. Rather a decision on what is more important, this purchase or my freedom from forced work.

That just sounds like a miserable existence to me… no way I’d want to retire at 40 or whatever.

 

[AlaskaHunter]

Another consideration is expenses...when you retire will you have no monthly mortgage? Will the kids be out of the house and no college expenses? Any substantial medical expenses likely? Will travel expenses increase? I retired in 2019 and our expenses our substantially less than when I was working. Also more time now that I'm retired I tend to fix things more than when I was working when I would immediately call someone (plumber, electrician, carpenter, mechanic).

 

[SAJ-99]

I think that is what was very eye opening to me about the FIRE movement was the notion of frugality (notice I didn't say being cheap) and it's impact on your savings vs spending rate. There are frequent writeups in the FIRE community about Average Joe &Jill who are both public school teachers each making $50k/year who were able to live (and live comfortably) on only 1/2 their income (and invest the other half in low-cost index funds) and be retired after 15 years. It doesn't take ramen noodle style living, rather choices about housing, transportation, and food that end up eating away at our income when the majority of those things are wants, rather than needs.

It's an analysis of whether or not a newer car(or 2), more expensive house, or eating out for multiple meals per week creates greater happiness in your life over the opportunity to be required to work less at your job.

It isn't rooted in the notion of "you millennials need to give up your Starbucks because that is what's making you poor". Just the idea that all purchase decisions are small, but cumulative, impacts on our ability to creat wealth.

For just a basic thought exercise, a $5 coffee 5x per week everyday on your way into the job, everyday for 30 years could have become $225,000 had it been invested in a low fee index fund. That's the ability to withdraw $10,000 per year in perpetuity. Not ramen noodle type changes. Rather a decision on what is more important, this purchase or my freedom from forced work.

Life is a constant battle with yourself over immediate satisfaction/sacrifice and future cost/benefit. The future being uncertain as it is, I prefer to occasionally buy a $5 cup of coffee when it strikes me.

 

[LaSportsman]

And I mean before Mr. Gore invented the internet how did you guys find out about stuff like 401ks and Roth IRAs anyway?

financial magazines (Money, Fortune, etc), college, older folks, . . . (IRAs, not Roth. Wasn't invented yet)

Wish Roth 401k/403b was a thing earlier.

 

[TN2shot07]

I think that is what was very eye opening to me about the FIRE movement was the notion of frugality (notice I didn't say being cheap) and it's impact on your savings vs spending rate. There are frequent writeups in the FIRE community about Average Joe &Jill who are both public school teachers each making $50k/year who were able to live (and live comfortably) on only 1/2 their income (and invest the other half in low-cost index funds) and be retired after 15 years. It doesn't take ramen noodle style living, rather choices about housing, transportation, and food that end up eating away at our income when the majority of those things are wants, rather than needs.

It's an analysis of whether or not a newer car(or 2), more expensive house, or eating out for multiple meals per week creates greater happiness in your life over the opportunity to be required to work less at your job.

It isn't rooted in the notion of "you millennials need to give up your Starbucks because that is what's making you poor". Just the idea that all purchase decisions are small, but cumulative, impacts on our ability to creat wealth.

For just a basic thought exercise, a $5 coffee 5x per week everyday on your way into the job, everyday for 30 years could have become $225,000 had it been invested in a low fee index fund. That's the ability to withdraw $10,000 per year in perpetuity. Not ramen noodle type changes. Rather a decision on what is more important, this purchase or my freedom from forced work.

How does this plan work with paying off a mortgage early? Rent or a mortgage for most people consumes a minimum of 25% of your income. I understand buying a house you can afford but are you just paying it out for the life of the loan?

 

[Mallardsx2]

Two other matters of note that will help you save and retire early:

-Make your kids pay for their college.(Roth 401K for kids)
- Make your kids pay for their cars and their gas. (get an after school job)
-Quit smoking or Chewing and put that money into an IRA yearly (You will be surprised how much you have in there after 20 years...)

I see a ton of people who have to work until they are 70 years old because they cant stop coddling their children. Kids need to spread their wings and fly and if they don't they become leeches on their parents into their 30's and beyond. We have all seen this. Dave Ramsey talks about this in a few of his videos. Later in life if you want to help them that is fine. But, until you have secured your retirement, you should let your kids figure it out on their own.

I know 3 people who "invested in their kids business" only to have their kid loose it all and now they are 70 years old and working at wal-mart.

Some tough love above but its so true.

I use this calculator to check how things appear from time to time. It really provides a reality check on how far your money will go into retirement. Input your best case scenario and your worst case scenarios for how much you will have saved. Just play around with it. You might be surprised how far even just $300,000-$500,000 will take you into retirement.

If you shook your house payment, and retired TODAY, and you and your spouse are used to living on $100,000 combined income and you are retirement age (62) and you have 1 million in your 401K's combined.... That will take you until ~ 2046 to burn through it all......and truthfully, that isnt even factoring in you SS and any savings you may have...

Basically, your money will likely outlive you....the odds of both husband and wife living until their 80's just simply put, is not in your favor.

Retirement Withdrawal Calculator |- MyCalculators.com

Retirement Withdrawal Calculator - If you're already retired, or close to retirement, calculate how much you can withdraw from your savings to last through retirement. Free, fast and easy to use online!

www.mycalculators.com

Its fun to play around with and see the different scenarios.

Retire and Enjoy life!

If you can do it at 55, and you want to, DO IT.

On the topic of inflation, just ride it out. The price of products and services is going to come down quickly once people have blown their wad on those items for the next year or two. For some reason, people are buying as hard as ever right now at inflated prices and it is absolutely crushing their savings buckets. The market will correct itself in my opinion. Sit back, buy only the minimum of everything that you NEED and wait for it all to come down.

Trucks, cars, houses, food, the prices are going to come down, just wait and see.


As for paying off your mortgage early before you retire, if you have a good amount of money in the bank, you may not want to do that actually, but that's a topic for another day.

 

[TN2shot07]

Two other matters of note that will help you save and retire early:

-Make your kids pay for their college.(Roth 401K for kids)
- Make your kids pay for their cars and their gas. (get an after school job)
-Quit smoking or Chewing and put that money into an IRA yearly (You will be surprised how much you have in there after 20 years...)

I see a ton of people who have to work until they are 70 years old because they cant stop coddling their children. Kids need to spread their wings and fly and if they don't they become leeches on their parents into their 30's and beyond. We have all seen this. Dave Ramsey talks about this in a few of his videos. Later in life if you want to help them that is fine. But, until you have secured your retirement, you should let your kids figure it out on their own.

I know 3 people who "invested in their kids business" only to have their kid loose it all and now they are 70 years old and working at wal-mart.

Some tough love above but its so true.

I could not agree more but inevitably these statements will rub people the wrong way.

If you are in a position early on (no consumer debt and kicked off retirement early) then saving for college is awesome. There is no law that parents are responsible for that expense. There is also no guarantee that when you take out student loans that your kid will use the degree or even end up with one. My parents still have thousands of dollars in student loans from sending my sister to a private school and has no application in her career now.

There are a lot of parents now obsessed with their kids playing sports (every one ever invented it seems) but there is nothing wrong with forcing them to work while in school. Having responsibilities associated with that car will most likely make them treat it differently and they learn how to balance life and work early on.

You’re also spot on with tobacco, my dad has smoked 2 packs a day of Marlboros my whole life. Without a doubt that would have funded a decent retirement on its own but he’s still working

 

[Mallardsx2]

I could not agree more but inevitably these statements will rub people the wrong way.

If you are in a position early on (no consumer debt and kicked off retirement early) then saving for college is awesome. There is no law that parents are responsible for that expense. There is also no guarantee that when you take out student loans that your kid will use the degree or even end up with one. My parents still have thousands of dollars in student loans from sending my sister to a private school and has no application in her career now.

There are a lot of parents now obsessed with their kids playing sports (every one ever invented it seems) but there is nothing wrong with forcing them to work while in school. Having responsibilities associated with that car will most likely make them treat it differently and they learn how to balance life and work early on.

You’re also spot on with tobacco, my dad has smoked 2 packs a day of Marlboros my whole life. Without a doubt that would have funded a decent retirement on its own but he’s still working

Its not really meant to rub people the wrong way, it more meant to just open peoples eyes to things.

"Why can't I retire?"

Well, Sir, you bought 6 new trucks, 4 boats, 7 jet ski's, 2 houses, funded 3 kids colleges for degrees that they never even used, and then you went on a vacation to the Bahama's every year for 30 years.

People are spenders for sure. And that's ok, its their money to do with as they wish. But when they are still working at 70......they look back and wonder where it all went.

We all cant "live every day like its our last".

 

[AvidIndoorsman]

If you are in a position early on (no consumer debt and kicked off retirement early) then saving for college is awesome. There is no law that parents are responsible for that expense. There is also no guarantee that when you take out student loans that your kid will use the degree or even end up with one. My parents still have thousands of dollars in student loans from sending my sister to a private school and has no application in her career now.

Small caveat parents with money who don’t pay for their kids school screw over their kids. (Middle class and up)

You can’t get your parents off your FAFSA all the way up to graduate school, when my wife applied to Dartmouth for medical school Dartmouth required her parents income even though we were 26 and married.

Pay, don’t pay, you do you but as a country we need to change that law and allow people to be seen by the government as financially independent at 18 if that’s the way they are going to be treated by their parents and society.

 

[TN2shot07]

Small caveat parents with money who don’t pay for their kids school screw over their kids. (Middle class and up)

You can’t get your parents off your FAFSA all the way up to graduate school, when my wife applied to Dartmouth for medical school Dartmouth required her parents income even though we were 26 and married.

Pay, don’t pay, you do you but as a country we need to change that law and allow people to be seen by the government as financially independent at 18 if that’s the way they are going to be treated by their parents and society.

I agree. My comment was directed at parents who put themselves in a bad financial position just to send their kids to college.

That rule with FAFSA is bs. I was also saddled using my parents income and they made no contribution, I feel your pain (except I know I wasn’t smart enough to go to Dartmouth )

The same government that makes you use that income is also more than willing to write the 18 year old hundreds of thousands in student loans, they don’t want to cut into that side business by being logical…

 

[HandgunHunter]

I “semi retired” May 1 at 40.

I take in about 1 months worth of full time work and spread it across the year.

So far…..the fishing, spring Turkey, and range time increase has been awesome.

 

[TN2shot07]

I “semi retired” May 1 at 40.

I take in about 1 months worth of full time work and spread it across the year.

So far…..the fishing, spring Turkey, and range time increase has been awesome.

That’s a good position to be in and I’m guessing the work is something you really enjoy? How are you addressing medical insurance right now? That’s always the biggest hurdle I see when looking at early retirement goals

 

[AlaskaHunter]

I agree. My comment was directed at parents who put themselves in a bad financial position just to send their kids to college.

That rule with FAFSA is bs. I was also saddled using my parents income and they made no contribution, I feel your pain (except I know I wasn’t smart enough to go to Dartmouth )

The same government that makes you use that income is also more than willing to write the 18 year old hundreds of thousands in student loans, they don’t want to cut into that side business by being logical…

Another approach is to have kids attend community college for 2 years, then transfer to a university for their degree the final 2 years. Saves in terms of tuition, room and board if they commute to a community college and for the first 2 years many of the courses are the same basic courses as at a larger university. If student does poorly at a community college, student is likely to perform poorly at a larger university and might be better pursuing a different career.

In some fields, at the graduate level a research assistantship will cover the cost of tuition and a basic stipend, but the student needs to excel in academics to get to that level.

The other approach is to spend lots of money for a 4-year university degree away from home.
As an extreme example, average undergraduate tuition & fees of Ivy League is $57,500 per year
total cost with housing, etc. exceeds $80k per year.

 

[AlaskaHunter]

That’s a good position to be in and I’m guessing the work is something you really enjoy? How are you addressing medical insurance right now? That’s always the biggest hurdle I see when looking at early retirement goals

I retired at 62 and we saved over $25k per year in health insurance premiums by
keeping our income below the threshold required for Obamacare subsidy.
That also helped keep us in the 12% tax bracket and more savings invested in the 401k to grow for the future.
We could do this easily because we have no major expenses (house paid off, no car payments, no debt, no kids)
Now my Medicare premiums are actually a bit higher than before age 65.

 

[TN2shot07]

Another approach is to have kids attend community college for 2 years, then transfer to a university for their degree the final 2 years. Saves in terms of tuition, room and board if they commute to a community college and for the first 2 years many of the courses are the same basic courses as at a larger university. If student does poorly at a community college, student is likely to perform poorly at a larger university and might be better pursuing a different career.

In some fields, at the graduate level a research assistantship will cover the cost of tuition and a basic stipend, but the student needs to excel in academics to get to that level.

The other approach is to spend lots of money for a 4-year university degree away from home.
As an extreme example, average undergraduate tuition & fees of Ivy League is $57,500 per year
total cost with housing, etc. exceeds $80k per year.

You are correct, that plan can work. In TN right now you can do two years of community college for free so that’s even better.

Two caveats with this approach - 1. All community courses are not created equally and if you transfer only to end up taking additional courses you wasted that time
2. You better check with whatever university you are planning to transfer to because I personally know a couple of people that earned an associates at a community college and virtually none of it qualified at the 4 year school

 

[SD_Prairie_Goat]

You are correct, that plan can work. In TN right now you can do two years of community college for free so that’s even better.

Two caveats with this approach - 1. All community courses are not created equally and if you transfer only to end up taking additional courses you wasted that time
2. You better check with whatever university you are planning to transfer to because I personally know a couple of people that earned an associates at a community college and virtually none of it qualified at the 4 year school

2X. knew plenty of people that ran into this.

Especially in my engineering class. Knew one kid that ended up having to take 2 years community collage then 4 years at university because prereqs, class transfers etc. didn't work out the way a guidance councilor said it would.


Moral of the story, if you don't check really really hard, good chance you get screwed over and waste 2 years at the community collage you have to repeat anyway...

 

[hank4elk]

No mortgage debt or any debt, but for monthly things is good in retirement.
Being single with no kids makes a difference. But if had any none would be coddled.
Living like I do helps too.
My brother called it a hermits heaven. I doubt I could live like this in many other places.

 

[AvidIndoorsman]

2X. knew plenty of people that ran into this.

Especially in my engineering class. Knew one kid that ended up having to take 2 years community collage then 4 years at university because prereqs, class transfers etc. didn't work out the way a guidance councilor said it would.


Moral of the story, if you don't check really really hard, good chance you get screwed over and waste 2 years at the community collage you have to repeat anyway...

Further it's a black mark on your record if you try to get into highly competitive fields. It there are 50 applications from Harvard the kid with 2 years at a community college is never getting an interview.

 

[BuzzH]

I also cautuion people to not save too much as well. You can do VERY well if you start doing 15% early. But the longer you wait the more you have to contribute.

shake that mortgage by 55 and you’ll be all set for the “rule of 55”….

When I turn 55 I’m throwing the computer In the trash and I’ll answer to no man ever again until I’m dead…

Yes you will...the tax man needs answered to and doesn't rest, even after you're dead.

 

[AvidIndoorsman]

Its not really meant to rub people the wrong way, it more meant to just open peoples eyes to things.

"Why can't I retire?"

Well, Sir, you bought 6 new trucks, 4 boats, 7 jet ski's, 2 houses, funded 3 kids colleges for degrees that they never even used, and then you went on a vacation to the Bahama's every year for 30 years.

People are spenders for sure. And that's ok, its their money to do with as they wish. But when they are still working at 70......they look back and wonder where it all went.

We all cant "live every day like its our last".

It's really interesting having this intergenerational retirement conversations. Obviously the mechanism that current 30 year olds use will be totally different than 65 year olds used, but the fundamentals are the same.

A question that I always have, probably also a good one for @SAJ-99 and @npaden are what have you seen as average real portfolio returns over 30 years. One of my biggest petpeeves is guys that use the historical growth of the market as a means of projecting portfolio performance.

How many people have actually been in an index fun for 40 years, probably almost no one, some peoples portfolios might mimic them still... likely big differences right?