5 ms·

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

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 levels, and one could live modestly in a LCOL area on that, but that's not what most people have in mind. Particularly for a "millionaire".

lotsofpulp 5y ago
Medicare. To be eligible for Medicaid, you have to be quite lacking in assets.
- xythian 5y ago
  Silver hair? Medicare. Need some aid? Medicaid.
  - beervirus 5y ago
    Good mnemonic. I can never remember which is which.
snek_case 5y ago
I feel like I'd be happy enough just maintaining my current lifestyle more or less, but yes, we as software developers tend to be paid relatively well, so just matching that can be quite expensive. I also feel kind of uncomfortable with the idea of retiring without a little bit of extra safety margin in case of economic turmoil. If 2M is enough to retire, I'd probably want 2.5 just to be extra safe. My current job pays well but is very stressful, and that had me thinking more about FIRE (Financial Independence, Retire Early), but then I realized that on anything less than 120K a year (also have a mortgage to pay), I couldn't afford the therapist I'm seeing right now, and I'd be on the hook for dental cleaning, every other expense. My current plan is to save enough that I could technically almost retire on it, and then start prioritizing low stress jobs over income. Let the nest egg grow on its own even if I don't contribute as much with a lower paying job, and still get some benefits.
- voidfunc 5y ago
  The low stress jobs are the key. If I have 2-3 million saved, do I really want to grind at a FAANG or equivalent? Theres low key startups and enterprise dev jobs that are much less stressful and still pay around 120-150K which keeps healthcare covered, CoL covered, and keeps your nest-egg intact.
  - Psyonic 5y ago
    IMO your view of stress at FAANG vs elsewhere is off. Some of the least stressed engineers I know work for the big names. I'm sure there are stressed engineers there as well, but I'd be surprised if it's actually a higher %.
- walletburst 5y ago
  Sounds like Coast FIRE would be a good approach for you: https://walletburst.com/coast-fire-calc https://walletburst.com/coast-fire-calc
ryandrake 5y ago
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 costs have grown? It makes it impossible to set a target. All those "save for retirement" online tools start with that nonsensical question: "How much income will you need in retirement?" How the F should I know? I can't predict the future. EDIT: Yes, SOME tools will account for inflation by asking you what you think inflation might be between now and retirement day. (Who knows?) Most don't account for costs that will rise much faster than inflation, like housing and health care.
- flak48 5y ago
  The calculators usually account for inflation (and also for a percentage rate of return on the lumpsum you have saved), you would answer "How much income will you need in retirement?" with today's value of a $ (eg. if $80k a year would be enough for this year if you retired today)
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- dsfgjhkfdgkhj34 5y ago
  There is uncertainty in everything, but your argument about inflation seems vacuous. The $80k figure is supposed to be real dollars, not nominal. A well diversified investment portfolio will include inflation resistant assets (such as REITs, energy stocks, or commodities).
- paulpauper 5y ago
  Aren't there tons of books and calculators for this?the value of the dollar is irrelevant if you live in the US. Inflation does not concern me much. Real estate and stocks have generally been good hedges.
wil421 5y ago
Does the 4% withdrawal rate include dividends and the average 6/7% estimated growth rate? Napkins calculations for 2m at 6% is 120k. As OP said if you don’t have a mortgage then you’re going to have a lot more extra money than someone with an 80-120k income and a mortgage.
throwaway894345 5y ago
> 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 your retirement that $80K is purely spending money--your house should be paid off and you're not setting 15% of that $80K aside for retirement any more. $80K/year is a lot of spending money to most people. > You're not driving around in Ferrari's and eating caviar on that (parodying a rich lifestyle here). Of course there are levels, and one could live modestly in a LCOL area on that, but that's not what most people have in mind. Particularly for a "millionaire". The meme of a millionaire driving Ferrari's and eating caviar is dated due to inflation. Most people with any real-world experience with money (including my no-higher-education, blue-collar family) understand that millionaires don't live like that these days due to inflation.
- tonyedgecombe 5y ago
  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.
  - throwaway894345 5y ago
    I’m talking about the specific meme, not particulars of Ferrari ownership. That’s an interesting digression, however.
tunesmith 5y ago
For the US, retiring, at least for most that are on the verge of retiring savings-wise, means you have a mix of regular savings (that has already been taxed) and 401k savings (that hasn't). If you figure out how to limit your 401k distributions, then it may be possible to keep your taxable income low enough that you get ACA subsidies to limit the cost of your health insurance premiums. Although maybe that's not the expensive part?
ghaff 5y ago
Medicare eligibility is certainly an important milestone in the US. One can retire earlier but doing so would add another significant non-optional cost.

lotsofpulp 5y ago

Medicare. To be eligible for Medicaid, you have to be quite lacking in assets.

xythian 5y ago
Silver hair? Medicare. Need some aid? Medicaid.
- beervirus 5y ago
  Good mnemonic. I can never remember which is which.

snek_case 5y ago

I feel like I'd be happy enough just maintaining my current lifestyle more or less, but yes, we as software developers tend to be paid relatively well, so just matching that can be quite expensive. I also feel kind of uncomfortable with the idea of retiring without a little bit of extra safety margin in case of economic turmoil. If 2M is enough to retire, I'd probably want 2.5 just to be extra safe. My current job pays well but is very stressful, and that had me thinking more about FIRE (Financial Independence, Retire Early), but then I realized that on anything less than 120K a year (also have a mortgage to pay), I couldn't afford the therapist I'm seeing right now, and I'd be on the hook for dental cleaning, every other expense. My current plan is to save enough that I could technically almost retire on it, and then start prioritizing low stress jobs over income. Let the nest egg grow on its own even if I don't contribute as much with a lower paying job, and still get some benefits.

voidfunc 5y ago
The low stress jobs are the key. If I have 2-3 million saved, do I really want to grind at a FAANG or equivalent? Theres low key startups and enterprise dev jobs that are much less stressful and still pay around 120-150K which keeps healthcare covered, CoL covered, and keeps your nest-egg intact.
- Psyonic 5y ago
  IMO your view of stress at FAANG vs elsewhere is off. Some of the least stressed engineers I know work for the big names. I'm sure there are stressed engineers there as well, but I'd be surprised if it's actually a higher %.
walletburst 5y ago
Sounds like Coast FIRE would be a good approach for you: https://walletburst.com/coast-fire-calc https://walletburst.com/coast-fire-calc

ryandrake 5y ago

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 costs have grown? It makes it impossible to set a target. All those "save for retirement" online tools start with that nonsensical question: "How much income will you need in retirement?" How the F should I know? I can't predict the future. EDIT: Yes, SOME tools will account for inflation by asking you what you think inflation might be between now and retirement day. (Who knows?) Most don't account for costs that will rise much faster than inflation, like housing and health care.

flak48 5y ago
The calculators usually account for inflation (and also for a percentage rate of return on the lumpsum you have saved), you would answer "How much income will you need in retirement?" with today's value of a $ (eg. if $80k a year would be enough for this year if you retired today)
deleted 5y ago
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deleted 5y ago
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dsfgjhkfdgkhj34 5y ago
There is uncertainty in everything, but your argument about inflation seems vacuous. The $80k figure is supposed to be real dollars, not nominal. A well diversified investment portfolio will include inflation resistant assets (such as REITs, energy stocks, or commodities).
paulpauper 5y ago
Aren't there tons of books and calculators for this?the value of the dollar is irrelevant if you live in the US. Inflation does not concern me much. Real estate and stocks have generally been good hedges.

wil421 5y ago

Does the 4% withdrawal rate include dividends and the average 6/7% estimated growth rate? Napkins calculations for 2m at 6% is 120k. As OP said if you don’t have a mortgage then you’re going to have a lot more extra money than someone with an 80-120k income and a mortgage.

throwaway894345 5y ago

> 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 your retirement that $80K is purely spending money--your house should be paid off and you're not setting 15% of that $80K aside for retirement any more. $80K/year is a lot of spending money to most people. > You're not driving around in Ferrari's and eating caviar on that (parodying a rich lifestyle here). Of course there are levels, and one could live modestly in a LCOL area on that, but that's not what most people have in mind. Particularly for a "millionaire". The meme of a millionaire driving Ferrari's and eating caviar is dated due to inflation. Most people with any real-world experience with money (including my no-higher-education, blue-collar family) understand that millionaires don't live like that these days due to inflation.

tonyedgecombe 5y ago
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.
- throwaway894345 5y ago
  I’m talking about the specific meme, not particulars of Ferrari ownership. That’s an interesting digression, however.

tunesmith 5y ago

For the US, retiring, at least for most that are on the verge of retiring savings-wise, means you have a mix of regular savings (that has already been taxed) and 401k savings (that hasn't). If you figure out how to limit your 401k distributions, then it may be possible to keep your taxable income low enough that you get ACA subsidies to limit the cost of your health insurance premiums. Although maybe that's not the expensive part?

ghaff 5y ago

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