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I Tested the Saving Technique That Promises Retirement at 40 (vice.com)
58 points by mooreds 24 days ago | hide | past | web | favorite | 82 comments

This article isn't very good. The author tried being frugal and saving 50% of his salary for a month, got bored (no drinks with friends or dates with girlfriend). The first half-year of FIRE living isn't even representative, because you can still live off the largesse of your past life. It's certainly true that your friend group changes, though, from meeting up over weekly drinks/dinners to meeting up to do a sport with low marginal costs like backpacking or rock climbing or basketball.

I've been more or less on the FIRE train for three years now. It's very easy when you have a software engineer's salary in Seattle. In my best year I only spent $21,000, but was fairly unhappy - saving money is a lot of work! All chores take longer and require more mental effort to figure out the least-expensive way of accomplishing your goal.

At this point I've actually found areas of technical interest I can expect to get paid for in the future, so I'm not as laser-focused on the goal. If you manage to bring in even a bit of cash in retirement, the safe withdrawal rate calculus tilts considerably in your favor.

To head off people saying "but you won't really be retired!" you should know the in-group has a term for you: the retirement police. The real goal is freedom, and not the type where you're lying to yourself that this is what you want to be doing.

Came here to agree with you and also add that while I've never heard of this movement over here in Europe I do know of a certain type of loosely based community of blogs, forums and people who invest hundreds of dollars each month into stock.

Special stock (I'm at a loss of english financial terms here) that give off a certain percentage of value back to you each year or month.

So the goal is the same, once you own enough of these stock you're supposed to live off the accumulated winnings from them. And of course these stock can be sold off too if you want to free some money. Or if the company announces that they're going to lower their percentage of value that they give out.

I've been doing this for a couple of years now, started late compared to my peers. I'm a slacker and so far haven't calculated much of anything. Simply jumped on a bandwagon, read some blog posts and got started.

But a co-worker who tipped me off to this "movement" claims he's calculated that he will be able to live off his return in 10 years.

This all depends on how much you're putting into your stock each month of course. Personally I buffer money and only buy stock every 3-4 months.

The trick is to find old well established businesses whose stock has been stable for many years, many of them fluctuate up and down over decades.

New companies do not tend to give off this return. I don't know the details but only certain companies give a return on their stock just by owning them. My stock trading app shows this info when you click on a stock.

Once you've bought into some company you might get a letter home saying that they're going to lower or raise the return depending on how well they're doing.

I believe you are referring to dividend investing? Investing in a portfolio of stocks that pay higher than average dividends. I'm not an expert in this, but dividend stocks don't normally have as high of a growth potential so the math may be different. Usually when the FIRE community refers to investing, they usually refer to an index fund that includes either the S&P500 or global stock index so you can track the movement of the broader economy and count on the economy growing year over year.

With dividend investing, it's not really the same thing and the math likely won't work out the same.

Also, depending on your jurisdiction, you pay taxes on dividends. So, it makes sense (while you earn) to invest in shares or funds that don't give you income (they pay dividends that you have to pay tax on), but capital gains (they increase in value, but you don't have to pay tax on that until you realise the gain, ie sell).

Once you're retired, you can switch from a capital growth portfolio to an income providing portfolio.

I'm guessing you lived with other people? $21k without roommates in Seattle seems particularly difficult these days. I managed under $10k/yr while in Seattle (living alone) but I lived a very poor lifestyle and had an incredibly cheap rental situation. ($400/month)

Managed to find a (pretty bad) 1bd apartment in Capitol Hill for $900/month, but rent increases had me moving into a comfortable 2bd where I paid $800/month. $400/month sounds amazing! I now have a mortgage so it's a bit more difficult to figure out what counts as housing costs and what counts as housing investment.

$800 with a roommate, right?

It was amazing... I envy that financial situation I had so much (being able to have such cheap base expenses). Now I pay over $2k for a little 400sqft shack in the peninsula of the bay. Haha.. ha... ha... :'( Wish I at least had more than a fridge and stove for that price.

I view any interest as housing costs and all principal paid as investment. But that's coming from someone who can't afford a home talkin'...

For someone who's never heard of the system it's good enough to get me interested. I'd love to see one with your history though. Great point.

There is truth in the notion that the saving mindset only heightens financial anxiety. And this, in my experience, can lead to poor financial decisions (the old "penny wise pound foolish" behaviour).

I have also experienced an involuted perspective to money itself when on the saving mindset. Instead of seeking expansive [sic] opportunities, with an always-on savings mindset I often stop taking risks altogether. The FIRE movement, it seems, is only for those who have a reliable and predictable monthly income, or for those who can assume somewhat 100% employment till 40. If you're an entrepreneur, this arbitrary 50% saving of income won't work. You're more likely already forced to save for the next 3 months's just for wages and electric bills.

Not sure why you're being downvoted.

What isn't addressed in this 20-year plan is the risk of the many things outside of your control: health, local economy, unexpected family members, etc.

This isn't a risk-free option, it's an attempt to minimize risk in exchange for minimal financial independence. The margin for error is very low.

If you want to achieve financial independence in a more robust manner:

1. Save up 1-3 years of living expenses. This quickly gives you the financial independence of a practically unlimited runway. It's much more useful to have financial independence early in your career.

2. Use that independence to find the best possible way to make money for you -- retrain, start a business, etc.

3. Invest. Take as much (calculated) risk as possible while you're young and become more conservative over time.

People who front-load this in their careers often (in my experience) not only retire early but do so with significant wealth.

I’m trying hard to save enough for my son so he can be FI when he enters college (If he chooses to). I want him to have the choices I never had - not to spoil but pursue any path he desires without the mounting pressure of having to earn an income. I know this could go wrong if not done right so I hope to do it right by planning far in advance.

That's very interesting. I feel like being handed FI at a very young age could go either way. Either he realizes what a gift he's been given, or he squanders it because he doesn't. I don't think that I would have appreciated it at that age myself.

Of course, it's your choice to make (and I definitely don't know your situation or your son's situation), but it seems to me that a big part of FI is the mindset, not the money, and I'm not sure you can acquire the mindset without going through the frugal living.

Sure. My goal is to instill the mindset far in advance of handing down any sums of money. Basically, if I don’t observe the type of behavior I’m looking for such as managing your own finances in an intelligent manner, I’ll probably do something else with that money or just let it accrue interest until he is ready.

> The FIRE movement, it seems, is only for those who have a reliable and predictable monthly income, or for those who can assume somewhat 100% employment till 40. If you're an entrepreneur, this arbitrary 50% saving of income won't work. You're more likely already forced to save for the next 3 months's just for wages and electric bills.

I don't think you're viewing this quite right. There's no reason you have to hit a magical 50%. Having a regular income just makes it easier to predict when you can retire / when you become financially independent.

That was a pretty poor article. If all your free time activities involve spending money, mostly socialising in the pub from the sound of it, then maybe you should start by addressing that first. I don't follow the FIRE method but most of my free time is spent, without spending much or any money.

He also claims he got bored of eating the same chicken sandwich for lunch each day. Then prepare your own lunch before you go to work! It's not hard. Max 5 minutes

Just visit London once and see what people do at 6 p.m. Then you know how important pubs are in this society.

How much is a pint of beer? Pubs here in Singapore is not affordable at all. Going to one everyday after work will really land you in the poor house.

In London? Really expensive these days. Over £5 in some places.

If you fancy for retirement at 40, why not first save money so much that you can do what you think you would do when retired for one year? It is quite likely that after this experiment:

1. You realize that actually having a work is quite nice and being retired for extended time periods is boring

2. If you one day find something you really want to do instead of your day job, the treshold to quit your job and give a try is much lower because you already have faced the anxiety and uncertainty that means.

Obviously, this is easier to do if you do not have massive mortgage, student loan, car loan and four kids. Also it helps if your retirement plans do not include flying around with a private jet.

> You realize that actually having a work is quite nice and being retired for extended time periods is boring

Have you actually done this? I have and that was not my experience. I took a year off and it was great, I was never bored and the only reason I returned to work is because I need more saved before I could afford to make it permanent.

I have, and it was absolutely my experience. I "retired" at 28. Before that, I loathed my job and couldn't wait to quit. After? I realized that satisfying work is one of the main ingredients of happiness. If I had figured that out sooner, I could have found a job I enjoyed more, rather than quitting, bumbling around for years trying to figure out what to do with my life.

I do think a significant hazard of a real job is not nearly enough time off (precluding extended travel and so on), but again, if that's the sticking point, negotiate that.

I've heard this type of thing before but it seems to set up something of a false dichotomy to me. Not having to work a full time job doesn't mean doing nothing, it means financial independence to pursue whatever projects are meaningful to you. I don't really resonate with the approach described in the article because for me those projects tend to require a bit more than a subsistence level of income. There are endless interesting projects to pursue that aren't the most viable options when you have to worry about paying the bills however.

Sometimes all it means is continuing in the same job, but saying what you're really thinking more often!

It can be a little difficult to get past the “this is a vacation” phase of your mindset if you know it’s bookended by the search for more income - a lot of people need months just to de-stress alone, and then the clock is kind of ticking. Plus the opportunity cost of leaving a potentially lucrative position you already have if you’re saving on the path.

That said, sabbaticals are really useful to realign your priorities. You can pick things up that you wouldn’t normally with a regular work schedule, something that might feel a lot more personally fulfilling. It’s usually less about the avoidance of work and more about doing something without having the grind of having to go for more money.

Your comment was very helpful to me. I've been rethinking my career lately. I'm a postman who codes for fun in his spare time, but I don't make a lot of money. I calculated that with my job as a postman, it would take 10-30 years to save 1-3 years living expenses. I suppose it's time for a new job.

FIRE requires gamification:

1. Dave-Ramsey-style "list your debts smallest to largest, knock them out till you reach the last level!"

2. Mr-Money-Mustache-style "dial down your spending, try to beat my high score!"

etc, what-have-you.

Beneficial advice, yet follow all the steps and you achieve a vacuum. You've arrived, there's no more debts to pay, spending is under control: now what? It's up to you, but perhaps your identity has been consumed by the journey. What were you living for all along?

What indeed? You can answer that today!

> What indeed? You can answer that today!

That is true, but sometimes in the grind of the every day it can be hard to look up and take the time to really think about what you want. And it can be scary to think about upending everything to get what you think you might want.

That's why gamification is easier--concrete goals that don't take a lot of deep thinking about your purpose on earth are easier to achieve when you're in the daily grind.

Not saying it's better--as a sibling comment says, you should aim to build the life you want as soon as you can, rather than save save save and then arrive someplace you weren't aiming for. But the gamification is easier to grasp and less scary to aim for, in my opinion.

Certainly not all the social posturing with expensive cars, brand identities and Instagram photos of luxury travel and restaurant meals that everybody else is getting for their money.

This is why it's often said you should build the life you want, then save for it.

I really enjoy working and see myself doing that all my life but then I have a certain anxiety that the good times will be over rather sooner than later because (1) maybe we’re living through the peak SWE salary times and (2) I’ll become unemployed due to ageism. This anxiety forces me to contemplate FIRE tactics.

With all due respect to all opinions expressed and to the (still IMHO "poor") article it is not like "FIRE" is a "revolution" of "any kind" it is more or less what "normal" people using "common sense" (an extremely uncommon thing BTW) have always used.

Though retiring by 40 is pure bullshit unless you have exceptionally high earnings/income.

The good ol' advice was:


Possibly a stupid question: what happens if the American economy (or whatever the index fund you invest in reflects) doesn't grow for a sustained period of time? The article kind of addresses this, but doesn't clarify if FIRE advocates have a proper rebuttal (I get the feeling that there isn't one).

If it happens then you cry into your giant pile of savings & financial responsibility then go back to work. There are no certainties in life.

What period of time? 5 years? 10 years? 20? 50? Long-term investment accepts that downturns happen. The worst thing you can do in that situation is divest when prices are low, since historically the stock market has always recovered and continued growth. If growth were to stop entirely, then sure, you'd have to rethink your strategy, but it's incredibly unlikely and simply not relevant. You could, for example, invest in a global index fund. Or, worst-case, keep working for longer than you expected.

If you plan to FIRE, you can focus on increasing your income and/or decreasing your spending. Of the two, decreasing your spending is more powerful:

1. You save more.

2. You can live on less should your income drop (for example, you retire).

This is born out mathematically: a permanent $1k drop in spending is way more powerful than a $1k increase in income over your earning years. Cultivating a lean lifestyle seems like a good general skill.

In an economic downturn having a few hundred thousand pounds / dollars sitting in the bank they will have more options than your average person.

The economy would have to be completely screwy for there not to be a way of making money from capital. Even if the currency goes into hyper inflation you are much more likely to be able to get it out into a safer currency when you have enough of it lying around.

Brexit says hi! Fortunately I can invest in overseas stocks and bonds to defray some of the problems, but don't count on "having a few hundred thousand" in the bank as being worth much if your country decides to leap off a cliff.

But surely Brexit is an argument for building a nest egg.

The Boris Johnsons and Jacob Reece-Moggs of the world aren't worried about the financial aspects of Brexit, because they have a 'nest egg'.

Diversified investments mean you will see much less of a drop (or even a rise in local currency).

But let's think through the case that stuff in the UK drops by 50% and you're entirely invested within the UK. Instead of having "a few hundred thousand" you'd have somewhere north of £100000 (depending on what you mean by 'a few').

That sounds to me like it'd give you some security, or help a move to another country.

Then you'll be in a safer position than the vast majority of people, and it pushes back your date.

If this happens, that worldwide there's no growth for the next 15 years, think about the two paths

* FIRE path, I have significant savings, but can't retire young.

* Non-FIRE, my plan to retire at 70 is behind now and I'm worried about being able to retire then.


FIRE path: I deferred enjoyment but now my significant savings are wiped out in the economic collapse.

Non-FIRE path: I enjoyed my life, and my insignificant savings are wiped out in the economic collapse.

(Aside from economic collapses, there's is a similar potential that comes in the form of unexpected early death.)

But your savings would not be "wiped out". They'd just be lower.

You're making a big divide between the two paths though which really should not exist. If you are not enjoying your life, the fire plans won't work for you because they'll leave you with the same money to live on in retirement.

There's a reason the common advice is to build the life you want then save for it.

> Aside from economic collapses, there's is a similar potential that comes in the form of unexpected early death.)

Which is unlikely but:

1. Retiring early gives me a greater chance of not working until I die.

2. If I die and am living with no spare savings and at the upper end of what I earn, my wife and son will struggle more without me. With significant savings they'll be financially secure.

To be a bit shorter, my favourite response to "but what if I die young" is "but what if you don't?".

Really, sacrificing income where your utility curve plateaus means you're giving up not much now for more later. And the realistic worst cases are mitigated significantly by having savings or investments.

I'd rather risk not having some stuff I don't really care about now and dying at 40, than risk dying at 70 still working but with a few more trinkets around me.

> But your savings would not be "wiped out"

Having savings wiped out is a thing that actually happens in sufficiently significant economic collapses and FIRE is not proof against it.

> Really, sacrificing income where your utility curve plateaus

Empirically, the point at which utility derived from additional income becomes insignificant is vastly beyond the income level most people will ever reach. It's even beyond the point most tech workers will be able to reach, and even moreso what they will reach before any point where retirement would be “early”.

> Having savings wiped out is a thing that actually happens in sufficiently significant economic collapses and FIRE is not proof against it.

Can you point me to where this happened for a well diversified portfolio? Even the great depression on one index (dow jones) didn't see things drop to 0.

There's nothing stopping you running out of money by spending it when things crash, no, but having more makes it less likely. And we can look at historical crashes and see if your savings would have lasted if withdrawn at certain rates.

Having more savings makes it more likely you can weather significant economic collapses. That's surely not in dispute.

> Empirically, the point at which utility derived from additional income becomes insignificant is vastly beyond the income level most people will ever reach

Perhaps it's my fault for being overly precise though I thought the followup clarified the point. It's not about your utility curve going completely flat, but it will drop off significantly at some point. As your utility curve drops off, you're sacrificing less and less now for future gains.

> and even moreso what they will reach before any point where retirement would be “early”.

I really don't like the idea of having some cutoff for "early" retirement when it comes to planning. Most people need to plan for retirement at some age.

It's all a trade, and there's risk obviously, but personally (and the reason to talk of utility curves is that it is personal) what I'm giving up now pales in comparison to what I'm likely to get in the future. In the worst cases I'm in a better position or provided for my family, and the cost to me now in terms of utility is low (though not 0).

I'm not sure about the FIRE crowd, but the crowd at Bogleheads.org advocates a three-fund portfolio with the equity side being composed of a 60% allocation to US equity, 40% ex-US equity (exact ratio up to the individual to decide). This diversification tries to address the risk you brought up of being over-concentrated in your country's stock were something like Japan's stagnation from 1990-present to happen to the US.

The author doesn’t make enough money to do this well. £34k seems like a low salary for an educated 28 year old in London.

What do you mean by educated?

This is a person who is only able to entertain themselves by spending money. That doesn't sound educated to me.

"Entertainment", in the sense that it's commonly used, should really be called "paid entertainment". There's plenty of free entertainment. Read a book, good for a walk, or my favourite: learn something new that is complementary to your current skills and that might make you more econmically valuable. But he doesn't like these things, he just likes being with friends in the pub and playing FIFA. I promise you that I know a lot of educated people and their lives look nothing like that.

I mean it as in its definition, which has nothing to do with how someone entertains themself.

You haven't answered the question. What is your definition?

> and eating a Tesco meal deal for lunch (£3) [$4]. I know I should be preparing my own lunches to save an extra bit of cash, but the effort required to save an extra dollar a day doesn't quite cut it for me

This for me is a wonderful little example of how costs build up.

If you're not familiar with a "meal deal" in the UK, they're a sandwich/snack/drink combo. They are almost universally pretty poor.

The author talks of the effort to prepare lunch, when compared to a basic sandwich and thinks this would still cost about £2 per day.

If they could cut the lunch cost in half it'd be equivalent to them getting a £500/year payrise.

Edit - oh, the meal deal was them trying to save money. Then making at home you can have something a lot better and cheaper and if they were spending 5-6 per day before (easy to do) it may be worth £2k/year in salary, up to 2500 of they have a student loan too.

> As I spend my lunch break stolidly working my way through a seventh straight chicken sandwich,

But you weren't limited to that sandwich, and the sandwich wasn't part of your savings!

As usual, it's a fairly lazy look at the concept. Take a moderate salary in a high cost of living place and try vaguely to cut it drastically, then sum up by saying you might die anyway so why bother.

Here's a quick simpler rundown:

Keep track of what you're spending, it's a simple habit that can pay off well.

Spend less on things that don't improve your life.

Spend more on the things that do.

If one of the things that would improve your life is more financial safety or being able to not have to work, spend some of your money on that.

Other than "earn more money if it's worth the change in job satisfaction" that's a recipe for making your life better whether you want to retire early or not.

Real economic freedom varies by the area you live in, but if you live in major metro areas, where you want to take advantage of all the cultural and entertainment offerings they have and also raise children, real economic freedom starts kicking in at around $700,000/year +/- $200k.

To make that much without a job, you need roughly $10M in the bank (yielding ~7% growth). That's a lot. A $500k/yr job w/o taxes or spending anything would take 20 years. The only way to get there is to have family money or hit the startup lotto (or actual lotto).

These articles are not about true economic freedom at 40, they're about limiting your consumption and being happy about it.

Where in the world do you need $700k/y to live relatively freely?... I can't fathom what kind of life you are aspiring to.

Here's a breakdown:

- After taxes that $700k turns into $450k.

- NYC 3br apartment in a good neighborhood costs ~$3M, which roughly translates into $200k/yr

- If you have 3 kids, childcare and/or private school costs $30-50k/kid, say $120k/yr, this will be much higher when they go to college

- Good healthcare for a family of 5 (you're not working, so you need to buy it), costs roughly $40k/yr

- Basic living expenses of food, clothing, utilities, is another $40k.

That leaves about $50k leftover that you can use for vacations, further savings, luxury items, etc. At this rate, you're living very well with a very nice life, but definitely not a like a king.

I think you're just trolling, but let's assume you really believe NYC is a representative choice for a "major metro area" and not simply one of the most expensive cities in the world to live in.

> After taxes that $700k turns into $450k.

You're talking about capital income - taxation varies around the world.

> NYC 3br apartment in a good neighborhood costs ~$3M, which roughly translates into $200k/yr

If you have $10m in the bank, buy the apartment and these $200k/yr will be 0 (just maintenance/running costs) and cost you $210k of your capital income, but pre-tax. You just won $65k/year plus the yearly increase in the apartment's value.

> Basic living expenses of food, clothing, utilities, is another $40k.

You can't be serious. This is far from "basic".

Or just rent the apartment for < $8k/mo ($96k/yr). (And that’s for a new luxury building in a top neighborhood. Make a couple compromises and you can fairly easily bring that down to $6k.)

Yeah, living on an income of less than $500k (which is what the vast majority of people - including families - do, even in NYC) requires making a compromise here or there and not having the absolute best of absolutely everything. Shocker.

Why do you assume the poster was trolling?

Yes, taxation varies, but if are resident in NY, you pay taxes on worldwide income, so that's not off the mark.

As for buying the apartment: The poster assumes 7% yield on the savings; can the apartment give the same yield? It's not obviously better to purchase it (though the tax shield might make it so).

$40k is maybe more than basic, but it's not exactly luxurious for 5. Deduct a phone and computer, and you're left with less than $500 per person per month for food and clothes - that doesn't buy you LV and Hermes.

> As for buying the apartment: The poster assumes 7% yield on the savings; can the apartment give the same yield? It's not obviously better to purchase it (though the tax shield might make it so).

You misunderstood me, I said you would buy the $3M apartment, but I did not say you would buy it all 100% in cash. On the contrary, the standard approach is to put 20% down (~$600k) and pay the rest off with a 30 year mortgage at ~4% interest. The interest alone comes to ~$100k/yr and with principal and building common charges, the cost can easily near $200k.

Your yield calculations fail to appreciate the leverage that exists in real-estate. Even in NYC, with a fast-growing real-estate market, market value rarely grows beyond 3%/year. So purchasing an apartment in 100% cash is almost certainly worse than renting and investing. However, few people buy in all cash (except for Russian oligarchs, and they have other issues). Most put down 20% and take loans on the rest. If you put down 20% on the apartment, pay 4% interest on the loan, and the apartment's value grows 3%/year, you net 11% increase on your initial down payment investment, making it attractive when compared to renting/investing.

> Why do you assume the poster was trolling?

Because NYC isn't exactly the typical "major metro area".

> As for buying the apartment: The poster assumes 7% yield on the savings; can the apartment give the same yield?

That wasn't the point - they claimed it's $3m or $200k/year (which is approx. 7% yield). By buying it, you don't have to pay $200k/year and lower your pre-tax capital income by that much (7% of the $3m capital income lost), which is much less than $200k.

Okay. Where else is a major metro? London. Paris. Hong Kong. Singapore. Tokyo. Chicago. Los Angeles. And maybe, maybe San Francisco or Boston.

If a metro area don’t have a couple major orchestras, operas, a few major sports teams, and a world class hospital, it’s hard to take “major” seriously.

Vancouver, Moscow, Berlin, Madrid, Rome, Melbourne, Sydney, Amsterdam... $700k/year for a comfortable retirement with kids is just so far out of touch anywhere else than SF, NYC, maybe London. How can someting like 95%+ of the population who make less even cope? (Manhattan median household income is ~$85k).

>> Okay. Where else is a major metro? London. Paris. Hong Kong. Singapore. Tokyo. Chicago. Los Angeles.

> Vancouver, Moscow, Berlin, Madrid, Rome, Melbourne, Sydney, Amsterdam

These are all great cities, but once you start arguing about amenities of specific cities, you're already making value judgments about what you would consider a good life. Further, while these cities are significantly less expensive, they are just 30% or 50% less expensive, not multiple order of magnitude.

My point was to show the absurdity of the underlying article's premise: that temporarily forgoing fancy coffees, monthly luxurious dinners, and other personal indulgences can lead to long term riches. It's a fantasy. Attaining either wealth requires much more than that, or changing your definition of wealth.

> My point was to show the absurdity of the underlying article's premise: that temporarily forgoing fancy coffees, monthly luxurious dinners, and other personal indulgences can lead to long term riches.

That's not the premise of the article, you've just weaseled this into the topic. First "economic freedom", now wealth and riches. The premise of the FI movement and the subject of the article is retiring comfortably at 40 without a luxurious lifestyle. No NYC penthouse, no jet-setting. Of course you will always find an even more expensive place and lifestyle for anything someone proposes, but that's just moving the goal post and missing the point of the article and movement.

> How can someting like 95%+ of the population who make less even cope?

For starters, most don't aim to retire at 40 in "economic freedom".

You forgot the butler and the nannies!

Not quite. For one thing, that +/- 200k matters a lot. Start out making $100k out of college. Get a 10% raise per year. Save half of everything you make over that initial $100k—like pretending you only got a 5% raise. You’ll be able to retire with $10M in the bank in your early 50s. At 40, you’ll have a couple million in the bank, kids in school, and be able to take modest family vacations without worrying about it. You can absorb health problems, needs for therapy of various sorts—give your kids a great launch.

The trick is finding ways to keep that compensation number moving up 10%/year. The first decade is easy. The second... can be done. Past that, I dunno.

A 10% raise per year over 3 decades means 17x your original salary, earning you $1.7m annually by 50. Probably not something you can reliably plan for. That's why it's important to keep consumption in check.

> Start out making $100k out of college. Get a 10% raise per year. Save half of everything you make over that initial $100k—like pretending you only got a 5% raise.

Do the math, it doesn't work. Starting with $100k at 20, with 5% raises every year gets you to $430k/yr at 50. You're still nowhere near $10M.

Get a 10% raise. At 50 you’re at $1.7M/yr. You save 0.8M that year, spend 900k—including paying off your kids’ education. Assuming 5% returns, your savings tick over to $11118263.51.

But you’re right that it’s not pretending you only got 5% raises.

I'd say you can have substantial freedom (not luxury) with less.

But 7% yield is a bit optimistic, because you pay tax on nominal growth. Say, if you achieve 8% nominal growth, have a 37.5% tax rate, you're left with 5%. Now deduct 2% inflation, and you can only take out 3% per year.

Thus, your $10m only give you $300k a year (after tax, real), which is enough for 5, I'd say (maybe not in NY, but in many other nice places). However, that assumes 8% nominal return, which is not something I'd bet my retirement on, given current elevated asset values.

This 7% being thrown around is not a real return. Adjusted for inflation you’d be lucky to get 4%, assuming you are not collecting when the market is tanking.

Yes. My claim is that the situation is exacerbated by the fact that you pay taxes on the nominal return; in other words, you need to "pay" inflation out of after-tax return. Thus, your real after-tax return is minuscule; and you should, in my view, calculate only with 2% or max 3% sustainable withdrawal rate to be prudent.

I don’t think FIRE is for families of 5 living in one of the most expensive places.

"monthly subscriptions like Netflix and Spotify" ... I can see a problem right there. Somehow I have managed to live my life without either of those things, and I still manage to watch series, films and listen to tons of music.

That's not necessarily a problem. Its the next paragraph where they complain they're bored despite the subscriptions that's the problem.

I'm new to HK - just read the guidelines. I clicked this post because the title screamed scam( to me and I was curious. I was happily surprised to see a post that makes sense.

I've never heard of FIRE. I'm always skeptical of things with names like that - and some of the rules may or may not be ideal - but the conc3ept behind it is fantastic. I'm old and tried living this way way back in my 20's - then i got a family. Without a wife with the same ideals - forget it.

But* - if it could be gamified ... I always want to design something :-)

Waste of time to waste your youth like that, as a frugal shut-in. Plus, this strategy of earning a living thru speculating and miserly living aint so fun when bull-market dead and percentages drop. Best to not worry bout money in your twenties and build your career and make your mistakes and make lots of friends and enjoy drinking as much as you want while not getting fat.

It's always good to live beneath your means. Not just for financial reasons, but because you'll be happier if you do.

FIRE doesn't have to be miserable. Read Mr. Money Mustache and see how saving can be fun, fulfilling, and even luxurious. Spending >90% of your paycheck is a good way to have to work a long time with not much to show for it.

I think there are two unethical aspects to this: Firstly, less money spent will harm the economy, and, secondly, if lots of people do it, the system will adjust to lower salaries until it is not feasible anymore, i.e. this cheatcode depends on most other people still working their entire lives and constantly spending lots of their incomes.

Honestly I found none of that unethical.

If you're able to live with a lower consumption you should not increase it just to "not harm the economy". On the contrary I would find it unethical to increase your consumption beyond your need.

To your second point, I don't find it compelling either. First off, the FIRE way requires some amount of restraint and discipline - in many ways it's like dieting. It's good for you, but that doesn't mean people will do it - it will continue to be only a subset of people. Secondly, how would the system would adjust? What would be the driver for lower wages? The method is basically to save and invest half your income - that doesn't depend on your income. The people are still equally skilled, working equally hard during their working years. The output at their work while they work remains unchanged.

If anything it might drive wages _up_, as people would require increasingly higher compensation to stay at work, if the alternative is to live happily and safely without working.

No because instead of retiring at 60-70 and having a 40+ year career, you have a <20 year career, so twice as many people can get a bite at your career cherry, rather than subjecting half the population to under employment, low pay etc.

Plus large percentages of the population living in debt, and paycheque to paycheque isn't particularly sustainable. So everyone having lots of savings would add stability.

Just because money isn't spent on BS doesn't mean it's not active in the economy. Savers end up lending money to others who deploy it usefully as capital.

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