By the time you retire you have more capital accruing interest, and generally more to invest in the attendant better investment opportunities available. That's what they meant.
My guess would be that there are very few people out there, at any stage in their career besides retirement, for whom interest and capital gains are more than a tiny fraction of their income. For most workers, things like salary, bonus, and (for a lucky few) stock grants make up 90% or even 99% of our income until we retire.
Parent is saying that in retirement your income is interest on your invested savings
I opened, there is too much info for my small brain to grasp and closed it. :-(
It's worth noting that this is targeted at FIRE folks - people who want financial independence (don't need to work to live) and want to retire early. To be able to retire 10+ years before the average american, you want to have a much higher degree of confidence that your financial plan can sustain you for 30/40/50 years. That requires much more complicated financial planning. Or you can just max our your 401k, IRA, H…
It's applicable math and a good check for anyone who wants to retire.
You are correct that reduced earnings period and a longer withdrawal period does increase risk for early retirees, though.
All this does is scare me. I honestly hope I die before I have to retire, because there's no way I'm going to have saved enough money to live off of, even modestly, and no way I'm going to remain sharp enough to continue earning through and beyond my 60s.
> there's no way I'm going to have saved enough money to live off of It is possible. It will take work and change on your part. The first step is to track your spending. The easiest way to do this is get an account with mint, ynab (you need a budget), or personal capital. You can link all of your accounts with the site and app. You can then categorized your spending. After you do this you can start seeing where you c…
There is an interesting article on the relationship between savings rate and number of years required to save for retirement.
Given a savings rate, the number of years required is income-invariant. (A given savings rate may not be invariant of course.)
>>> Take your total retirement savings and multiply it by 3%. For example, if you have $1.25m (retirement savings), multiplied by 0.03% (inflation), you get $45,000 in inflation. Then you subtract that number from your total savings: $1.25m - $45k = $880k. This will give you a baseline to understand your financial situation. I don't fully understand... 1.25M - 45k is most definitely not 880k. Did you do something els…
All this does is scare me. I honestly hope I die before I have to retire, because there's no way I'm going to have saved enough money to live off of, even modestly, and no way I'm going to remain sharp enough to continue earning through and beyond my 60s.
> there's no way I'm going to have saved enough money to live off of It is possible. It will take work and change on your part. The first step is to track your spending. The easiest way to do this is get an account with mint, ynab (you need a budget), or personal capital. You can link all of your accounts with the site and app. You can then categorized your spending. After you do this you can start seeing where you c…
There is no straightforward risk-less formula, unfortunately. You can follow all the textbook advice, have a budget, max your 401k, pay down your debt, buy a house, blah blah blah, and after 20 years still only have 1x or 1.5x your salary in total savings [ask me how I know] due to bad luck, unfortunate market timing, lack of skill in investing, emergencies, etc. I hate all this simplified, incomplete advice. If successfully saving for retirement was so straightforward and deterministic, there wouldn’t be an entire industry, with consultants and books, built up around trying to help people hopelessly navigate it.
Pay off a modest $100k house in a low cost of living area and you should be able to survive on Social Security alone. Save more if you can though.
Do this when you are young, too. Doing this when you're older, say 50+, can still work, it's just harder. Unless I pay my mortgage off early, before I qualify for Social Security, I'll still be paying it. On the other hand, it's less than $800/month, so I am not too worried.
A mortgage is a sort of reverse bond. Ideally, you pay it off aggressively shortly before you plan to retire.
This whole blog series is great, and I'd recommend it, but this particular post is the one responsive to the mortgage and retirement part:
Social Security, in my retirement? That's a laugh.
While it is fashionable to doubt that Social Security will be around for the Gen X or Millenial retirements, the reality is that it's simply a matter of political will. If people like Social Security (and they generally do), then all they have to do is vote for politicians who will protect it, and harass politicians when it looks like they won't. Of course it's fine to plan for a retirement without Social Security...…
IMO, publicly despairing that social security won’t exist in the future only serves to shift the Overton window, making it more likely that social security won’t exist.