This 4×6 index card has all the financial advice you’ll ever need • Hacker News Board

Re: This 4×6 index card has all the financial advice you’ll ever need

#91

Post by chad_oliver » Tue, Sep 17, 2013, 12:59 AM UTC

Afforess wrote: post #86

timr wrote: post #81

Earlier quoted context omitted.

Even if you're a "rich" software engineer, the advice is overstated. You need to make a lot of money (or be really lucky in the stock market) to have a 66% savings rate lead to any sort of real retirement in 10 years. Say I make $100k gross per year. That's a very nice salary for a new grad engineer -- the kind of person who might take this ten-year-retirement advice to heart. Roughly 1/3 of that income goes to taxes…

a 4% rate of return, on average from the S&P 500 index is reasonable. With 1 million, you could live off of $25000/yr, which is more than enough to live like a king if you do not have other debt payments. You could rent a $1000/month apartment, pay for a $400/month car, eat $300/month in groceries, and still have thousands and thousands left over.

Don't forget to account for inflation. You're more likely to end up with a 1-2% return in real dollars.

Re: This 4×6 index card has all the financial advice you’ll ever need

#92

Post by steve-howard » Tue, Sep 17, 2013, 1:00 AM UTC

kintamanimatt wrote: post #31

muzz wrote: post #8

Earlier quoted context omitted.

well yes, but it should be too hard to replace "401k" with whatever tax-advantaged retirement program is available

Edit: Misinterpreted what a 401(k) is. I thought it was a tax-free savings account that you can borrow against, rather than a form of pension plan. The UK does have something somewhat similar: a personal pension scheme. The rest of this comment is wrong, but I'll leave it here for giggles. -- They don't really always exist. As far as I'm aware there isn't really the British equivalent of a 401k, for example. Brits ha…

You're not too wrong; you can borrow against a 401(k) (<50% of the balance, no more than $50k total). Most financial advice says to stay away, though.

Re: This 4×6 index card has all the financial advice you’ll ever need

#93

Post by untog » Tue, Sep 17, 2013, 1:02 AM UTC

sliverstorm wrote: post #87

coldtea wrote: post #32

Earlier quoted context omitted.

> would include never having a mortgage, which would be a huge lost opportunity for many A lost opportunity? If you can afford a house easily buy one, if you cannot afford it a mortage is anything but a huge opportunity. http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to... http://www.jamesaltucher.com/2011/05/why-i-would-rather-shoo...

This advice seems to completely gloss over one key fact: You have to live somewhere . Seriously- if you didn't, buying a house would be a terrible investment! But you do, so the cost of owning a house needs to be compared to the cost of renting, instead of being discussed as a normal investment.

Not sure why this is being downvoted. If you don't get mortgage, the presumption is that you aren't going to buy a house outright, either. You're going to rent, which isn't exactly an ideal situation in the long term.

Re: This 4×6 index card has all the financial advice you’ll ever need

#94

Post by baddox » Tue, Sep 17, 2013, 1:03 AM UTC

acdha wrote: post #40

baddox wrote: post #21

Earlier quoted context omitted.

I think it's too broad, because the economic efficacy of social programs probably varies wildly, especially when we're talking about government social programs.

> economic efficacy of social programs probably varies wildly, especially when we're talking about government social programs. As opposed to literally everyone having to figure this out on their own? Say what you will about government programs, they're going to be more consistent than what you get pushing the problem out to millions of individual actors.

> Say what you will about government programs, they're going to be more consistent than what you get pushing the problem out to millions of individual actors.

What I'll say is that I think this is a ludicrous assumption to make, for the same reason that it would be ludicrous to assume that government food distribution or automobile production would be more consistent than pushing the problem out to millions of individual actors.

Re: This 4×6 index card has all the financial advice you’ll ever need

#95

Post by sliverstorm » Tue, Sep 17, 2013, 1:03 AM UTC

throwaway1979 wrote: post #15

JoshTriplett wrote: post #9

Almost all of this is excellent advice, except for one point: "save 20% of your money". That's a bare minimum, which will let you retire after about 37 years of working. Bump it to 35% and you'll retire after 25 years. Bump it to 50% and retire in 17. Bump it to two-thirds and retire in 10 years. That's one of the most important factors in your personal finances: not how much you make off your investments, not whethe…

"Save 20%" ... gross or net?

It would have to be net. Your tax situation determines the conversion from gross to net, and can vary wildly from person to person making percentage rates based on gross too variable.

While you should of course do what you can to reduce taxes, that's so complicated it warrants completely independent dialogue.

Re: This 4×6 index card has all the financial advice you’ll ever need

#96

Post by sliverstorm » Tue, Sep 17, 2013, 1:04 AM UTC

untog wrote: post #93

sliverstorm wrote: post #87

Earlier quoted context omitted.

This advice seems to completely gloss over one key fact: You have to live somewhere . Seriously- if you didn't, buying a house would be a terrible investment! But you do, so the cost of owning a house needs to be compared to the cost of renting, instead of being discussed as a normal investment.

Not sure why this is being downvoted. If you don't get mortgage, the presumption is that you aren't going to buy a house outright, either. You're going to rent, which isn't exactly an ideal situation in the long term.

Haha yes, if you can buy a house outright, definitely do that.

Unless, of course, you can land an incredibly low interest rate on your mortgage and have something interesting to do with your capitol, like fund your business.

Re: This 4×6 index card has all the financial advice you’ll ever need

#97

Post by Afforess » Tue, Sep 17, 2013, 1:05 AM UTC

timr wrote: post #88

Afforess wrote: post #86

Earlier quoted context omitted.

a 4% rate of return, on average from the S&P 500 index is reasonable. With 1 million, you could live off of $25000/yr, which is more than enough to live like a king if you do not have other debt payments. You could rent a $1000/month apartment, pay for a $400/month car, eat $300/month in groceries, and still have thousands and thousands left over.

"a 4% rate of return, on average from the S&P 500 index is reasonable." Not if you're depending on using that money in the next ten years. Or if you believe in inflation. A 4% rate of return from an index fund is long-term average behavior, not instantaneous yield. Historically, depending on when you entered the market, a ten-year outlook could have led to anything from a huge gain to a huge loss. If you're the unluc…

4% return is conservative. 7% is actually the historical average. So my 4% left plenty of room for bad years.

RETIRING in San Francisco would be a massive mistake. If you are retired why the hell are you living in a uber-expensive city. Location matters less when you don't have a job. Move up to Oregon.

Also if you decide to have children, that is a conscious decision you made to dump your millions down the toilet. I guess some people like kids enough to work an extra 30 years. I sure don't.

Re: This 4×6 index card has all the financial advice you’ll ever need

#98

Post by nilkn » Tue, Sep 17, 2013, 1:08 AM UTC

timr wrote: post #88

Afforess wrote: post #86

Earlier quoted context omitted.

a 4% rate of return, on average from the S&P 500 index is reasonable. With 1 million, you could live off of $25000/yr, which is more than enough to live like a king if you do not have other debt payments. You could rent a $1000/month apartment, pay for a $400/month car, eat $300/month in groceries, and still have thousands and thousands left over.

"a 4% rate of return, on average from the S&P 500 index is reasonable." Not if you're depending on using that money in the next ten years. Or if you believe in inflation. A 4% rate of return from an index fund is long-term average behavior, not instantaneous yield. Historically, depending on when you entered the market, a ten-year outlook could have led to anything from a huge gain to a huge loss. If you're the unluc…

I agree that his definition of "king" is pushing it, but it's equally silly to ignore the possibility of retiring in any of the cities in the US that are cheaper than San Francisco, i.e., in any of the cities in the US that are not San Francisco and NYC. Honestly, in a middle-of-the-road city like Houston and with full ownership of a car and home, $25k net per year would actually give you a pretty comfortable life--remember that you wouldn't have to save any of that for retirement, because you're already retired. The main hitch is health insurance and/or kids.

Also, Firecalc is a good tool for running withdrawal strategies over historical data: http://www.firecalc.com/

It gave very positive results for withdrawing $25k/year on a $1M portfolio for a total of 60 years. Obviously, though, there is no 60 year period starting in 1999 for which the data is fully known, so it has its limits and can be prone to overfitting. It does take inflation into account, by the way (by increasing your withdrawal correspondingly each year).

Re: This 4×6 index card has all the financial advice you’ll ever need

#99

Post by VikingCoder » Tue, Sep 17, 2013, 1:08 AM UTC

jellicle wrote: post #80

There are a couple of good parts about this post. The first is the HN comments, which are an unintentional fountain of hilarity. But the second is the assumptions. 50% of the US population can't afford to put even a dollar into any sort of investment security. Of the 50% of the public that does own some sort of security, most of them are in the three-figures range. This index card, without realizing it at all, has ta…

I agree, but it is potentially useful to that demographic.

If we made this two or three standard deviations more exclusive, the financial advice could be: Be born wealthy. Don't borrow against your trust fund.

Re: This 4×6 index card has all the financial advice you’ll ever need

#100

Post by timr » Tue, Sep 17, 2013, 1:09 AM UTC

Afforess wrote: post #97

timr wrote: post #88

Earlier quoted context omitted.

"a 4% rate of return, on average from the S&P 500 index is reasonable." Not if you're depending on using that money in the next ten years. Or if you believe in inflation. A 4% rate of return from an index fund is long-term average behavior, not instantaneous yield. Historically, depending on when you entered the market, a ten-year outlook could have led to anything from a huge gain to a huge loss. If you're the unluc…

4% return is conservative. 7% is actually the historical average. So my 4% left plenty of room for bad years. RETIRING in San Francisco would be a massive mistake. If you are retired why the hell are you living in a uber-expensive city. Location matters less when you don't have a job. Move up to Oregon. Also if you decide to have children, that is a conscious decision you made to dump your millions down the toilet. I…

"4% return is conservative. 7% is actually the historical average. So my 4% left plenty of room for bad years."

It's only "conservative" if you don't understand variance.

The risk isn't in the value of the average. The risk is in the variation around that average. Like I said: if you invested 66% of your net income in the stock market in 1999, you'd be a long way from retirement today.

And if you're tempted to keep arguing this point, you might want to take a moment to consider how I know this. (Hint: the reality of a great many investors trumps your theories of how the stock market works.)