The author should spend some time reading root of good's blogs.
The guy takes his family of four on multi-week vacations for essentially nothing...
How much is enough to FIRE in San Francisco?
51–60 of 120 posts
Re: How much is enough to FIRE in San Francisco?
#52Once your number as high as $5.6m, is that even plausibly within the scope of early retirement?
I feel like a lot of the value of getting a specific number is getting spooked by it! And then facing some real choices. Is it really worth N years of my working life to [live in the most expensive city in America] / [buy a large home] / [pay for 4 years of expensive American universities]?
And this isn't even touching on stuff tech people often want that OP doesn't (private schools / resort vacations / expensive winter sports).
Re: How much is enough to FIRE in San Francisco?
#53Companies are essentially subsidizing $1M (or more now?) mortgages if you are willing to go into their SV offices. You don't have to retire there! Just sell the house and move on.
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Re: How much is enough to FIRE in San Francisco?
#54Earlier quoted context omitted.
Maybe they mean they pay more in the bay area because of the high housing costs.
That's what I understood too, but it seems more like enough to rent, not buy.
Yeah I recently looked at rent costs down in the South Bay (thinking “tiny shitty apartment to avoid 12-15 hours of mandatory commuting 3 days a week”) and it’s insane - like “more than my mortgage payments” insane.
Re: How much is enough to FIRE in San Francisco?
#55I think any time you string together a series of worst case scenarios all being true at the same time, you're going to end up with something ridiculous. It's silly to ignore social security since at the bare minimum, if congress does nothing, people will still get roughly 75% of the benefit.
One tool I like better than the online calculators is the spreadsheet at https://earlyretirementnow.com/safe-withdrawal-rate-series/ . It'll give you the actual 0% failure safe withdrawal rate, based off of your numbers. I'm sure in OP's case it will be higher than 3.00%.
Re: How much is enough to FIRE in San Francisco?
#56The 4% rule as a plan is not very smart in the current environment. A few years ago it was difficult to get safe higher yielding equities/bonds, but no longer. You can build a quite safe stock/bond portfolio yielding 8% on distributions alone. Why would you aim to sell 4% of principal a year when you can avoid touching the principal at all at close to twice the yield? Large caps are also at quite high valuations hist…
The thing about retirement, especially early retirement, is it (hopefully) lasts a long time. It is foolish to assume that the trends of the last couple of years will continue on indefinitely rather than return to historic norms. Banking on a 7%-8% return on low risk assets is just asking for trouble.
You seem to misunderstand.
If a company owns apartment buildings and earns $1B a year, and pays out $500m a year in dividends at 5% yield, that is a 50% payout ratio and very safe margin of error on cashflow for real estate.
If you buy today and hold, that's locked in. You are in a safe position, if you assume that rents aren't going to decline nationally and materially. There is no "good times and bad times" you're in the position and in the game. Just hold it
If you buy Costco today at a 45x earnings multiple and 0.5% dividend, and expect to be able to sell it down at 4% a year and earn a better yield at lower risk, that is quite clearly poorly conceived in my opinion.
(among many other large caps in a similar position)
Re: How much is enough to FIRE in San Francisco?
#57Earlier quoted context omitted.
You don’t have to retire there, but it turns out that the Bay Area has one of the most pleasant climates in the entire world for humans and it is coupled with some of the most stunningly beautiful and varied terrain in the world. It’s hard to leave and call anything else retirement if you’re just considering climate, weather, and nature. My family did end up leaving the area but it was hard. I am still working. Would…
Entire central coast plus LA offers much of the same.
Doesn’t really solve the cost of living problem being in coastal CA :)
Re: How much is enough to FIRE in San Francisco?
#58The 4% rule as a plan is not very smart in the current environment. A few years ago it was difficult to get safe higher yielding equities/bonds, but no longer. You can build a quite safe stock/bond portfolio yielding 8% on distributions alone. Why would you aim to sell 4% of principal a year when you can avoid touching the principal at all at close to twice the yield? Large caps are also at quite high valuations hist…
Those yields can shrink or disappear quite rapidly, and then you are left selling the equity. From a purely financial perspective, there is nothing special about dividends versus selling equity, it doesn't make you better off; that is just rearranging how value is recognized. The main difference between dividends and growth is tax structure, which generally favors the latter due to the added optionality. Dividends are mostly only useful if you want to cater to fixed income investors and similar.
Re: How much is enough to FIRE in San Francisco?
#59I've spent years thinking about and pursuing early retirement. My thoughts:
1) You should never stop working. Humans need purpose. It may be worthwhile to think of it instead as saving money so you can transition to a more meaningful job. Maybe one that doesn't pay anything at all, like child rearing, or volunteering.
This conclusion implies that if you CAN already do something meaningful, it's probably better to do it sooner rather than later because youth/time is more valuable than money.
2) The 4% withdrawal rate works in a world where the US is dominant and young. Economic growth is fueled by young workers. We are able to stay relatively young thanks to immigration, but birth rates are falling all around the world.
Also, the geopolitical world is changing. The most likely scenario is that US power continues for the next several decades. A less likely scenario is a painful major conflict with China/Russia/etc. in which the US wins. An even less likely scenario is a painful conflict that the US loses. In the second two scenarios, you can't rely on the 4% rule to hold.
3) I like the idea of financial independence. But financial independence in that you have a chunk of wealth to cushion blows or go on sabbaticals, not that you're done having to work forever.
Re: How much is enough to FIRE in San Francisco?
#60Earlier quoted context omitted.
Stability is one of the reasons why I bought a few years ago (albeit, not in the SF Bay Area). That ever-looming possibility of needing to move again come lease renewal time, whether that be due to rent hikes or the landlord deciding to do something else with the property wore on my nerves. Of course home ownership isn’t all roses either, but I can at least rely on and plan around my mortgage payment not changing and…
>That ever-looming possibility of needing to move again come lease renewal time, whether that be due to rent hikes or the landlord deciding to do something else with the property wore on my nerves. That sounds dreadful and that's why there should be laws against landlords kicking out long time tenants at their whim. Your home should be a safe space and having that sword of Damocles constantly looming above your head…
It’s not great, but what makes it that much worse is the hunt for the next apartment that one needs to start a good deal before lease renewal just in case. Just having a single small cat cuts your options in half, and then of course price and whatever other quality of life things you might be looking for (e.g. adequate windows/natural light/building facing) cut that down further. Apartment hunting is anxiety-stoking.