5 ms·

A senior position in the doc will probably get you ~2M in savings by 35. How do you retire with that?

synaesthesisx 7y ago
Agreed - that’s not enough to retire on that young unless one relocates to a very LCOL area.
Swizec 7y ago
Using the 5% drawdown rule, 2M in savings is enough to have a 100k/year income in perpetuity without adding to savings. Idea being that average market returns are 7%. So if you use 5% per year, you will never run out.
- rhexs 7y ago
  5% is not a safe withdrawal rate for "in perpetuity". 3% is much more realistic if you want to be conservative.
  - Swizec 7y ago
    Yes it's a rule of thumb not the law of thermodynamics. Run your numbers with your own parameters for details.
  - villahousut 7y ago
    That's assuming you want to leave the whole 2 million principal in your will to your children. I don't see why - if you want to retire, you can consume the whole principal while you live.
    - thedufer 7y ago
      You can't plan to spend your last dollar on your deathbed unless you can predict every expense, the market, and the day you'll die, especially over a retirement that long (potentially 50+ years). Planning to leave something behind is really your only chance, unless you're comfortable with a very high chance of bankruptcy along the way.
3fe9a03ccd14ca5 7y ago
Even at a meager 2% interest that’s $40k a year. That’s a comfortable wage in much of the USA, especially if you’ve been camping in an RV for a decade to retire.
- perl4ever 7y ago
  I don't believe anything I read on HN about the lifestyles of the SV elite, but I think this scenario is comical if it were representative. You get paid well into six figures but have "to camp in an RV for a decade", and then you retire with a $40K income. You could have just gotten a $40K job at some place* that didn't kill your soul! In ten years, you'd be making at least $60K. And if you burned out for whatever reason anyway, you could go on disability. *by place, I mean either employer or city.
mc3 7y ago
you'd be in a position to invest too as you go.
typest 7y ago
You read through all the advice in these blogs [1][2]. Seriously. If you are invested in low cost index funds, most assume you can safely withdraw 4% a year and not deplete your principal. If you're retiring at 35, you might want a greater safety margin, so let's say 3%. That gives you 60K a year. How do you retire on 60K a year? Obviously take what I'm saying with a grain of salt as I'm a relatively young person and haven't done any of this yet. But...60K is the median household income in the US, so half of families in the US live on less. If you're retired, you can probably save in ways others can't. For instance: * Housing. You don't need to stay in a high cost of living city, so move to a much cheaper area (maybe a college town). * Education. You have much more time, so send your kids to all public education, and use your extra time to educate them further. * Debt. You have a ton of assets. Why hold any debt? * Automobiles. Bike instead, if you're physically able. * Health. Probably the hardest one since insurance in the US is tied to employment. I understand the recommended approach here is to pay out of pocket for a plan, but many have trouble with this. Of course, the standard advice is to use the extra time you have due to retirement to stay as healthy as possible, but I acknowledge this isn't a perfect plan. [1] https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/ [2] https://www.madfientist.com/ https://www.madfientist.com/
- tempestn 7y ago
  Good advice. Just one nitpick: The 4% rule, which states you can as a rule of thumb safely withdraw 4% of the starting capital per year in real dollars (IE increase it each year to account for inflation), is intended for a standard retirement period (65+) and does expect the principal to decrease. There's more debate as to what would be a safe withdrawal rate over the long term without depleting principal, but I expect 3% would be a bit on the high side, although not unreasonable if one has a backup like part-time work. Of course, that's assuming you withdraw 3% of the initial amount each year and adjust for inflation. Obviously if you only withdraw 3% of the current amount each year you'll never run out, by definition, but you might end up with shrinking spending money. Still, just a nitpick. I agree with you in principle for sure.
  - villahousut 7y ago
    That's a bit incorrect. Returns from a typical investment portfolio have been over 4% for the last 10-20 years, so that's the amount you can withdraw without depleting any principal. If you're looking to consume your whole principal by the time you die you can go way ahead of 4%, easily double that.
rhexs 7y ago
Easily by not living in the Bay Area. People FIRE at 1 million, which I always found a bit silly considering we're in the midst of an amazing market hyperinflated by some rather concerning fiscal policy, but with 2 you can weather a lot of bad years. Family with kids in a big, expensive city? Probably not.
hdhdhdd 7y ago
400k- taxes = 270k for joined filing Monthly expenses = 3k mortgage+ 500 property taxes + 2k daycare for one child(or 529) + 1.5k for food and other = 84k Without compounding interest you need 10 years to get 2m, and these salaries are for 5+ or more years of experience. (And you need down payment, etc.). Living in those areas is expensive. If you are making 500k, that's a different story :-)
- aiiane 7y ago
  people never factor in healthcare into this calculus.
  - hdhdhdd 7y ago
    Yup, I forgot about it. 7-8k max out of pocket (in-network) for family. In some companies there is also some payment for the health plan out of pocket. But the diff here is that on HSA plans the out of pocket comes before taxes.
stubish 7y ago
With no or self-sustaining offspring, you can retire on $US2M in savings just about anywhere in the world; not silicon valley and a handful of similar locations. Most of the world, including many places you would consider holiday resorts and amazing places to live, is quite achievable if you stay away from boats, fast cars and gambling. Its how people doing the same job in other cities get by earning half as much.

Agreed - that’s not enough to retire on that young unless one relocates to a very LCOL area.

Using the 5% drawdown rule, 2M in savings is enough to have a 100k/year income in perpetuity without adding to savings. Idea being that average market returns are 7%. So if you use 5% per year, you will never run out.

rhexs 7y ago
5% is not a safe withdrawal rate for "in perpetuity". 3% is much more realistic if you want to be conservative.
- Swizec 7y ago
  Yes it's a rule of thumb not the law of thermodynamics. Run your numbers with your own parameters for details.
- villahousut 7y ago
  That's assuming you want to leave the whole 2 million principal in your will to your children. I don't see why - if you want to retire, you can consume the whole principal while you live.
  - thedufer 7y ago
    You can't plan to spend your last dollar on your deathbed unless you can predict every expense, the market, and the day you'll die, especially over a retirement that long (potentially 50+ years). Planning to leave something behind is really your only chance, unless you're comfortable with a very high chance of bankruptcy along the way.

3fe9a03ccd14ca5 7y ago

Even at a meager 2% interest that’s $40k a year. That’s a comfortable wage in much of the USA, especially if you’ve been camping in an RV for a decade to retire.

perl4ever 7y ago
I don't believe anything I read on HN about the lifestyles of the SV elite, but I think this scenario is comical if it were representative. You get paid well into six figures but have "to camp in an RV for a decade", and then you retire with a $40K income. You could have just gotten a $40K job at some place* that didn't kill your soul! In ten years, you'd be making at least $60K. And if you burned out for whatever reason anyway, you could go on disability. *by place, I mean either employer or city.

mc3 7y ago

you'd be in a position to invest too as you go.

typest 7y ago

You read through all the advice in these blogs [1][2]. Seriously. If you are invested in low cost index funds, most assume you can safely withdraw 4% a year and not deplete your principal. If you're retiring at 35, you might want a greater safety margin, so let's say 3%. That gives you 60K a year. How do you retire on 60K a year? Obviously take what I'm saying with a grain of salt as I'm a relatively young person and haven't done any of this yet. But...60K is the median household income in the US, so half of families in the US live on less. If you're retired, you can probably save in ways others can't. For instance: * Housing. You don't need to stay in a high cost of living city, so move to a much cheaper area (maybe a college town). * Education. You have much more time, so send your kids to all public education, and use your extra time to educate them further. * Debt. You have a ton of assets. Why hold any debt? * Automobiles. Bike instead, if you're physically able. * Health. Probably the hardest one since insurance in the US is tied to employment. I understand the recommended approach here is to pay out of pocket for a plan, but many have trouble with this. Of course, the standard advice is to use the extra time you have due to retirement to stay as healthy as possible, but I acknowledge this isn't a perfect plan. [1] https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/ [2] https://www.madfientist.com/ https://www.madfientist.com/

tempestn 7y ago
Good advice. Just one nitpick: The 4% rule, which states you can as a rule of thumb safely withdraw 4% of the starting capital per year in real dollars (IE increase it each year to account for inflation), is intended for a standard retirement period (65+) and does expect the principal to decrease. There's more debate as to what would be a safe withdrawal rate over the long term without depleting principal, but I expect 3% would be a bit on the high side, although not unreasonable if one has a backup like part-time work. Of course, that's assuming you withdraw 3% of the initial amount each year and adjust for inflation. Obviously if you only withdraw 3% of the current amount each year you'll never run out, by definition, but you might end up with shrinking spending money. Still, just a nitpick. I agree with you in principle for sure.
- villahousut 7y ago
  That's a bit incorrect. Returns from a typical investment portfolio have been over 4% for the last 10-20 years, so that's the amount you can withdraw without depleting any principal. If you're looking to consume your whole principal by the time you die you can go way ahead of 4%, easily double that.

rhexs 7y ago

Easily by not living in the Bay Area. People FIRE at 1 million, which I always found a bit silly considering we're in the midst of an amazing market hyperinflated by some rather concerning fiscal policy, but with 2 you can weather a lot of bad years. Family with kids in a big, expensive city? Probably not.

hdhdhdd 7y ago

400k- taxes = 270k for joined filing Monthly expenses = 3k mortgage+ 500 property taxes + 2k daycare for one child(or 529) + 1.5k for food and other = 84k Without compounding interest you need 10 years to get 2m, and these salaries are for 5+ or more years of experience. (And you need down payment, etc.). Living in those areas is expensive. If you are making 500k, that's a different story :-)

aiiane 7y ago
people never factor in healthcare into this calculus.
- hdhdhdd 7y ago
  Yup, I forgot about it. 7-8k max out of pocket (in-network) for family. In some companies there is also some payment for the health plan out of pocket. But the diff here is that on HSA plans the out of pocket comes before taxes.

stubish 7y ago

With no or self-sustaining offspring, you can retire on $US2M in savings just about anywhere in the world; not silicon valley and a handful of similar locations. Most of the world, including many places you would consider holiday resorts and amazing places to live, is quite achievable if you stay away from boats, fast cars and gambling. Its how people doing the same job in other cities get by earning half as much.