Early Retirement (2006) • Hacker News Board

Re: Early Retirement (2006)

#221

Post by tonyedgecombe » Wed, Aug 04, 2021, 5:26 PM UTC

simonh wrote: post #149

cfeduke wrote: post #29

The greatest expense for me in retirement is now health insurance so it makes sense for me to instead work for insurance coverage and put my wealth towards an inheritance for my children. I used to naively believe once I paid off my mortgage, had a substantial retirement account and savings - a couple million dollars - I'd no longer work. It's also very difficult to get off of the treadmill of spending a lot of money…

Once you have kids the calculation changes, at least for me. I could retire comfortably in a few years, but my earning power is at it's peak. Every extra year I work provides significant extra resources for my family, to help the girls afford their first houses and get a good start in life when they graduate. I'll probably work another 5 years beyond what I'd probably do if it was purely about self-interest for mysel…

>Also I'm a Brit here in the UK so health care is just not really an issue.

The Tories really don't like the NHS so I'm assuming they will continue to squeeze it. I wouldn't be surprised if we end up paying for things like joint replacements.

Re: Early Retirement (2006)

#222

Post by tunesmith » Wed, Aug 04, 2021, 5:28 PM UTC

rubicon33 wrote: post #78

cfeduke wrote: post #29

The greatest expense for me in retirement is now health insurance so it makes sense for me to instead work for insurance coverage and put my wealth towards an inheritance for my children. I used to naively believe once I paid off my mortgage, had a substantial retirement account and savings - a couple million dollars - I'd no longer work. It's also very difficult to get off of the treadmill of spending a lot of money…

As a mid-30s software developer who is trying to save as much as possible, with the hopes of retiring before I'm old and deprecate, this really sucks to read. $2 million in investments AND a payed off mortgage and still, it doesn't pencil out to retire? Seems like over the past decade+ the 'value' of even $1 million has become more and more diluted. To support even just a middle class, to upper middle class lifestyle…

There's a lot of shorthand advice out there, but at the end of the day, if someone wants to get a better sense of what they need to retire, there's no way around it - they have to start tracking their own expenses by categories.

I personally do it every month. I know where every dollar has gone every month, and I also track a 12-month moving average. So I have a sense now of what our yearly expenses are. I compare that with the ever-changing recommendations of what a "Safe Withdrawal Rate" is, and then I try to squint into the future to mix in the effects of: taxes from retirement income; social security (even at the 80% level if no one fixes it); increased retirement expenses from having fun; decreased retirement expenses from not working and getting old; increased retirement expenses from health.

But ultimately, it just comes down to the trio of savings, interest rate, and expenses.

Re: Early Retirement (2006)

#223

Post by myth_drannon » Wed, Aug 04, 2021, 5:28 PM UTC

spacedcowboy wrote: post #127

toomuchtodo wrote: post #58

Earlier quoted context omitted.

It's a lesser problem, but there are also less opportunities to accumulate wealth rapidly. Lots of folks I know get FatFIRE (>=$5MM assets, $200k/year in income at 4% SWR) in the US and then retire to Portugal [1] (which has universal healthcare, and gets you access to the EU). [1] https://en.wikipedia.org/wiki/Portugal_Golden_Visa

I'm a Brit, been living in the US for a decade or so now. I came here for the money and the weather, but the weather is going to shit these days... The long term plan was always to make sufficient money to retire early, then go home. Complicating this easy straightforward idea was that I got married (!) and now have a kid who I don't want to uproot. So now I wait for college-days, and then sod off back to the UK :) T…

Living far away from your children and grandchildren is really sad, especially once you get old and need help and company.

Re: Early Retirement (2006)

#224

Post by tonyedgecombe » Wed, Aug 04, 2021, 5:30 PM UTC

throwaway894345 wrote: post #202

marktangotango wrote: post #36

Earlier quoted context omitted.

This is the reality of the situation; until you're eligible for (edit) medicare, health is a significant expense. When paired with the "hedonistic treadmill" of spending, early retirement takes a lot more investment than many suspect. Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year. You're not driving around in Ferrari's and eating caviar on that (parodying a rich lifestyle here). Of course there are…

> When paired with the "hedonistic treadmill" of spending, early retirement takes a lot more investment than many suspect. Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year. Right, which is why people should save 10-15% starting from a young age. > Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year. That's quite a lot more than the median household income and by the time you're withdrawing…

Most Ferraris are financed, I remember reading an article that said more than half of UK Ferrari owners have a net worth of less than a million pounds.

Re: Early Retirement (2006)

#225

Post by lotsofpulp » Wed, Aug 04, 2021, 5:30 PM UTC

jorblumesea wrote: post #218

lotsofpulp wrote: post #203

Earlier quoted context omitted.

Those premiums look the same as those for employer sponsored health insurance: https://www.statista.com/statistics/632151/premiums-for-empl... https://www.commonwealthfund.org/sites/default/files/2020-11... https://files.kff.org/attachment/Summary-of-Findings-Employe...

Those premiums are significantly above what corporate employees pay. My premiums at my current and last job were way below those figures. Keep in mind "private employers" is a huge bucket and would encompass a wide range of companies, including smaller companies with likely small budgets. It is not reflective of many of the benefits many SWEs would get.

Again, I am talking about the total cost of insurance, not just the portion of the cost of insurance that an employer asks an employee to pay.

Just because an employer is paying for $18k out of $20k of your annual health insurance premiums (again, check code DD box 12 of your W2), does not mean that health insurance costs (meaningfully) less for an employer. It is simply a portion of your total compensation, which both employer and employee prefer to go via the employer due to the ability to purchase it with pre tax money, hence an immediate savings of 30% on the insurance premium portion of one’s expenses.

To go back to the root of this conversation, my purpose was to clarify that “healthcare via employer” is simply an artifact of the tax code and results in savings of tax rate * annual health insurance premiums.

Re: Early Retirement (2006)

#226

Post by brewdad » Wed, Aug 04, 2021, 5:35 PM UTC

brianwawok wrote: post #102

rubicon33 wrote: post #78

Earlier quoted context omitted.

As a mid-30s software developer who is trying to save as much as possible, with the hopes of retiring before I'm old and deprecate, this really sucks to read. $2 million in investments AND a payed off mortgage and still, it doesn't pencil out to retire? Seems like over the past decade+ the 'value' of even $1 million has become more and more diluted. To support even just a middle class, to upper middle class lifestyle…

The "Safe withdraw rate" is something like 4%. 1 million saved = 40k per year, adjusting with inflation. 2 million saved = 80k per year, adjusting for inflation. If you can live a life you want for 80k a year, then sure - 2 million can do it. And yes, there will always be a "what if the economy collapses etc. etc", but retiring doesn't mean you can never ever for any reason hold a job again or make money.

Don't forget that safe withdrawal rate assumes a 30 year retirement. If you are looking at a 40+ year retirement, the safe withdrawal rate is probably more like 3-3.5%.

Re: Early Retirement (2006)

#227

Post by ghaff » Wed, Aug 04, 2021, 5:35 PM UTC

marktangotango wrote: post #36

cfeduke wrote: post #29

The greatest expense for me in retirement is now health insurance so it makes sense for me to instead work for insurance coverage and put my wealth towards an inheritance for my children. I used to naively believe once I paid off my mortgage, had a substantial retirement account and savings - a couple million dollars - I'd no longer work. It's also very difficult to get off of the treadmill of spending a lot of money…

This is the reality of the situation; until you're eligible for (edit) medicare, health is a significant expense. When paired with the "hedonistic treadmill" of spending, early retirement takes a lot more investment than many suspect. Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year. You're not driving around in Ferrari's and eating caviar on that (parodying a rich lifestyle here). Of course there are…

Medicare eligibility is certainly an important milestone in the US. One can retire earlier but doing so would add another significant non-optional cost.

Re: Early Retirement (2006)

#228

Post by gshubert17 » Wed, Aug 04, 2021, 5:36 PM UTC

ryandrake wrote: post #68

marktangotango wrote: post #36

Earlier quoted context omitted.

This is the reality of the situation; until you're eligible for (edit) medicare, health is a significant expense. When paired with the "hedonistic treadmill" of spending, early retirement takes a lot more investment than many suspect. Even at a safe withdrawal rate of 4%, $2M is "only" $80k a year. You're not driving around in Ferrari's and eating caviar on that (parodying a rich lifestyle here). Of course there are…

Will $80k a year be enough for any lifestyle? That's the question I struggle with. It's more than enough in today's dollars. But I have no idea what will happen with inflation and costs between now and retirement day. Maybe by the time I retire, $80k/yr will be poverty level. Maybe health insurance premiums alone will cost $80k/yr. Who knows! What will the value of the dollar be and to what extent will healthcare cos…

> How much income will you need...?

I tried to get my own answer for this question in a couple of ways (retired 5 years ago, age 62 so not early).

First, I tracked my expenses, but didn't have a planned budget. I wanted to know how much I spent and where it went. I kept monthly and yearly summaries on a spreadsheet and made charts to better visualize trends and variability. I think just tracking expenses was encouragement to live modestly and contribute regularly to savings: information not coercion.

Second, I tracked potential future income/benefits. I have an employer retirement plan and an IRA plan. Before retirement, I used the retirement plan's calculators to estimate that benefit. For my IRA I used a 4% withdrawal estimate.

Third, I assumed my expense totals would be the same in retirement. I might spend less on commuting, work clothes, etc., but more on medical care, vacation travel, and so on. I estimated housing costs for either renting or having a mortgage. (Ended up selling the house when I retired, moving and renting for 3 years, then buying a new place and getting a small mortgage for that.)

Over the short term, assumptions of continuity are reasonable. As you point out, the longer term is much more of a question mark. So, fourth, I tried to make allowances for uncertainties and contingencies. How much padding or margin did I want to be comfortable? Perhaps 10% to 20% more income than one's average expenses would feel comfortable? Perhaps a contingency plan for part-time work?

All these numbers will be in current dollars, so they will be comparable. What I discovered when running my numbers (after learning about an opportunity to buy some retirement plan benefits with money I had saved in a 401-K) was that I could then afford to retire. I can't predict the future either, but felt comfortable with the uncertainties I could see.

Following one's own situation roughly once a year, one can see how different conditions and assumptions give different results. Generally, the less one spends and the more savings one has, the more flexible one can be in choosing jobs, places to live, lifestyle, and so on.

Re: Early Retirement (2006)

#229

Post by tonyedgecombe » Wed, Aug 04, 2021, 5:36 PM UTC

bitxbitxbitcoin wrote: post #174

neogodless wrote: post #98

Earlier quoted context omitted.

Early Retirement communities are kind of a spectrum. Bogleheads, inspired by Jack Bogle, founder of Vanguard, leans towards topics of investing, having lots of money, and being able to afford the things you want. If you visit the forums, expect to be encouraged to amass a very large fortune to be able to handle anything. MrMoneyMustache.com has an environmental slant, and tends to attract relatively high earners like…

These “stratified” communities are also viewable on Reddit. One end is called /r/fatfire and the other is /r/leanfire. To match the three communities you talked about in terms of anticipated spending… fatfire is similar to bogleheads while leanfire is similar to earlyretirementextreme. Fire being financial independence retirement early.

There is a discussion going on in the ERE forums at the moment that accuses the leanfire types of being somewhat profligate.

People love to divide themselves into tribes.

Re: Early Retirement (2006)

#230

Post by nuclearnice1 » Wed, Aug 04, 2021, 5:37 PM UTC

2sk21 wrote: post #165

danhak wrote: post #111

Earlier quoted context omitted.

> With a disciplined approach to investing, I think that it's very much possible to reach financial independence with a typical tech salary in the US Bear in mind that you have been the beneficiary of an exceptional bull market

I should mention that I started regular automated index fund investing in the mid 1990s. I have been through two _big_ market corrections: 2001 and 2008-9. Despite being nervous, I never once stopped my automatic investments.

And 2020. Down 30%