For those attempting FIRE, even if you don’t reach your goal within the timeframe that you were anticipating, you’ll still be way ahead of where you would have been without having a goal in the first place.
yeah, I was wondering what the consequences would be of extending the timeline out even just 3-5 years more. Sure, if you had your heart set on retiring by 50 it's a shame, but 55 ain't all that bad - my dad did it (he's in his mid 70's right now), and he's got no regrets about it.
Yes, but you're not enjoying life during the journey...and WADR you can't do it with having kids, unless you're willing not to have your kids as your priority...which if that's your mindset, you shouldn't have kids.
yes this is true. there are a lot of important milestones you can hit much earlier than retirement. one of the most important to me is having enough saved to not be worried about job loss. if you can get laid off and then have the latitude to chill out for a few months while looking for a new (and better) job without having to worry too much about money, that's an amazing thing and anyone can achieve that level of savings.
Biggest lesson i learnt in 2023 in the stock market is that nobody knows what is going to happen next, so practice some humility and low a strategy with a long term edge.
Nobody knows anything; You need to create your own process, manage risk, and stick to the plan, through thick or thin, While also continuously learning from mistakes and improving.
Uncertainty... it took me 5 years to stop trying to predict what bout to happen in market based on charts studying, cause you never know. not having a mentor cost me 5 years of pain I learn to go we’re the market is wanting to go and keep it simple with discipline.
“NICOLE ANASTASIA PLUMLEE’’ is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
@@DrCliffAuD it was just a joke… these guys are absolutely fantastic… I can only speak for myself but I’ve followed their content now for about 5 years (barely missed a video and have 2 coffee mugs for questions being played on the show)… honest, sincere, detailed and good humored … they’ve grown to 250k plus subscribers… speaks for itself! This might be one of their best so far… thank you….
Thing is, I only need 60k/year to live a very lavish (in my opinion) lifestyle. The only reason I'm pushing myself to earn 200k/yr is because of FIRE... not because I want a 200k lifestyle. That means I only need to replace 30% of my income at retirement. A lot of FIRE folk are in the same boat!
💯. This entire show missed the entire point. It isn’t easy for these guys to admit the boilerplate financial advice that’s been around for decades has been blown up.
The logic throughout the show is completely misguided. The only mathematical difference between the 4 income levels were not the income levels themselves but the income growth rates associated with each income level. Logically speaking, it would have made more sense to separate the 4 segments based on income growth rates, not the incomes themselves. This was the only actual variable that had any influence on the pre-retirement income potential presented from scenario to scenario. But as a better alternative, I think it would have been better to keep the growth rates the same (to compare apples to apples) and instead change the savings rates. At a $50,000/year income, yeah 40% is the most anyone can hope for and 60% pre-retirement income would be necessary. At a $100,000/year income, maybe up to 50% can be saved and maybe only 50% of pre-retirement income is needed. At a $200,000/year income, maybe up to 60% can be saved and maybe only 40% of pre-retirement income is needed. At a $400,000/year income, same as above (because of higher taxes). So yes, a higher salary, would make it easier to reach financial independence, but only by: 1. Being used to a lower lifestyle right off the bat but still spending enough to not feel too squeezed while living it and 2. Not decreasing lifestyle after retirement because you were already living with a lower (but bearable) standard of living. But the way the show was actually done was so illogical that it made no sense being made at all.
The problem with this is, most people making $200k or $400k don't need 60% of their income in retirement. If they paid off their mortgage and all other debt before FIRE their cost of living is quite low, something like 30% or 40% would be more than enough. On the other side, saving over 40% of your income at $400k is also realistic if you avoid lifestyle creep. You can still live pretty lavishly with the first $200k, then save an entire $200k so you can live well later. Another aspect of FIRE thats appealing isn't even necessarily retiring early. It's knowing you COULD retire early. Therefore nearly all stress is removed because you can live your life only doing what you want, because you don't need to do anything anymore. You could cut back to half time, switch jobs, take 6 months off then get back into the field etc. Even if you fail to hit enough to actually retire early, you're still very ahead of the game for a regular age retirement.
Like the show generally but the fire episode was full of weird mistakes in terms of assumptions and modeling. 1. Should be based on covering desired expenses not replacing max income 2. Trinity study (4% rule, though since adjusted to be a bit higher) described adjusting the previous year's withdrawal by inflation each year. It is NOT a fixed 4% withdrawal strategy. 3. Sequence of return risks is a well covered topic with many straightforward mitigation strategies such as bond tents 4. Nobody does or should directly follow the Trinity approach in any case, it is a sort of base case. Real people adjust spending based on actual market conditions and there are objective strategies for doing so And that's just a few items.
Bring FIRE doesn’t mean you HAVE to sit around and do nothing. You can still do passion projects for money if you want. I believe FIRE is so people have a a CHOICE to not work something they do not want.
Achieving success hinges on the proactive actions and steps you undertake to reach your goals. The process of building wealth necessitates cultivating positive habits, such as consistently allocating funds at regular intervals towards robust investment opportunities. Financial management, despite its critical importance, often becomes a topic avoided by many, eventually causing difficulties down the road. My sincere hope is that anyone who comes across this message is able to find success and fulfillment in life's endeavors!
Starting early is simply the best way of getting ahead to build wealth, investing remains a priority. I learned from my last year's experience, I am able to build a suitable life because I invested early ahead this time.
I have been investing in the markets for over 3 years now and I have made nothing less than $400k in ROI. My portfolio has grown exponentially. Will advise you to consider stocks investment. `
”Stacie Lynn Winson” is the lady's name. I first saw her on a goldman sachs' report, then on Smart Advisors, and immediately looked her up on the internet; it was the best decision I've made to stay afloat in these crazy times. She has been outstanding.
She seems to possess an extensive knowledge base and a strong educational background. After conducting a quick Google search of her name, I stumbled upon her webpage. Thank you for sharing this information; I truly appreciate it.
I want FIRE, not to just sit around and do nothing all day, but so that I can FINALLY have complete control over my life. No having to report to someone. Truly being free. If I want to go backpack Europe, I can. If my family needs me, I'm there. I can generate other income any way I want to, but if that money doesn't come right away, it's ok because I have my safety net that I can rely on until it's ready. Complete control. Trying to fit about 30-35 years of work down into 10 years in order to pull it off is quite the grind, however.
Why is the goal to cover 60% of pre-retirement income and not annual expenses? Surely someone living below their means can justify pulling the trigger earlier if those expenses are covered.
The entire second half of the video is kind of going into "why", in deep detail. Short answer: It's basically a target with a high confidence of success. 60% is a "conservative" target. Don't price yourself out of doing what you want to do once you stop working. Expenses are variable, and they do tend to rise as you age (especially medical care costs), and accounting for the unexpected is part of the calculations. A "successful" FIRE plan means you have a LOT of years left to live, so it's important to mind the statistics. Most Americans have little "generational wealth", which means your expenses are likely paid from your own income... Of course, surely you can justify pulling the trigger earlier, even quitting work the second you can cover today's expenses, but that means you MUST continue living as you have before. You have all your time for yourself now, true, but there's no financial freedom at all, there's no accounting for a bad year, no accounting for getting older. Why are you pursuing a FIRE result in the first place? It's not a singular answer, but it seems to me it's about having your time for yourself, not spending them working for someone else. Stretch your mind to include the rest of your life, work now so you don't have to work later, your choice.
I think it is covering your expenses... If your saving 40% for 25 years then your only living off of 60%. Hence why they stop there. For those saving less than 40% they can't replace what they were living off of in 25 years and therefore arent really retiring "early"
The current market/economy is unnecessarily tougher for boomers/senior citizens, I’m used to just buying and holding assets which doesn’t seem applicable to the current rollercoaster market plus inflation is catching up with my portfolio. I’m really worried about survival after retirement.
Just buy Gold, the government has failed us or try to diversify your portfolio to other market sectors, that way your investment is balanced and you don’t get to make so much losses.
@@jeromesand Yes, gold is a great investment and a good bet against the devaluating dollar, been holding some for awhile now, I’m grateful my adviser’s moment by moment changes in the market are lightening quick, cos who know how much losses I would’ve had by now.
@@maiadazz I envy you, I’m still trying to recover from losses I incurred in 2021/2022, who is this investment adviser you work with, I’m intrigued and I could use some quality guidance
Do your due diligence and opt for one that has tactics to help your portfolio continue consistent and steady growth. "Margaret Johnson Arndt" is accountable for the success of my portfolio, and I believe she has the qualifications and expertise to accomplish your objectives.
I am one of the early practitioners of FIRE. I did it before there was even a name for it. I left the workforce at age 36. I'm 48 now, and doing just fine. I think it's great that more people have shown an interest in FIRE. I'd be happy to answer any questions you may have. Simply put, I would recommend FIRE to anyone who values freedom over stuff. Living a minimalist lifestyle is one of the keys to making it work. That's because not only do you save up capital faster, but you also require less total capital to retire, because you don't need to generate as much income to feel happy if you have a minimalist mindset.
@@BiigFigJ NOT AT ALL!! Many people don't get serious about saving for retirement until they are in their 40's or 50's. Depending on where you live I would try to get by on half that income (saving and investing the rest). Then you should be able to retire about 15 years early. Perhaps sooner if you get significant raises or a promotion. And, be sure to max out your company's 401k plan if they have one available. Unless you want to spend your time researching individual stocks, then I recommend investing in a broad index fund. Vanguard has plenty to choose from that have very low expense ratios. Diversification is important, because if you put all your eggs in one basket, then you only have to be wrong once to wipe yourself out. Most index funds spread out your capital across dozens of different stocks, so you can easily avoid that risk. The main ways I've saved money: always buy used cars with low mileage and always pay cash, only replace clothes when they wear out, cheapest Android over iPhone, no vacations, no credit cards, and I split my bills with housemates til I was 38. I'm not saying you have to do all of these, but the more you do, the quicker you'll save up capital.
Ive been watching this channel for the past few months, been able to really prioritize my saving and have myself well on my way to financial independence. Last week my wife and I booked a international honeymoon trip that cost over $15k, I’m excited for the trip as it’ll be fun and it’s a splurge that we won’t repeat for decades, but man did that hurt thinking how much growth I could’ve gotten out of that amount of money 😂
I love the philosophy at the 39 minute mark. I'm a youth pastor and I carry this attitude in my financially planning. My salary is provided by the congregation making sacrifices to give to the church. So I often ask what choices I can make in other growth and income sources over the next 3-4 decades so I can take some pay cuts or hopefully a 0 salary for my last decade in ministry
Hey money guy show. I’ve always recommended to people who are looking to retire to save 2 years of expenses to weather down turns before retirement. Typically the market will recover within 2 years. This keeps you from having to pull out of your nest egg while the knife is falling. Good rule of thumb I feel.
Talking about pre-retirement income instead of total expenses is a big miss every time you guys bring up FIRE. If you are saving 50% of your pre-retirement income, and paying an effective tax rate of 20%, you are already living your life spending 30% of your pre-retirement income. If for example you make $300k, save $150k, and pay taxes of $90k, then you are currently living on $60k. Why would you need to save up enough to replace 60% of your pre-retirement income $300k (which would give you $180k/yr). You guys are really stuck on replacing pre-retirement income which really just doesn't mix with FIRE since income does not indicate lifestyle when savings rate's increase to 30%+. You should really be talking about pre-retirement expenses. You can napkin math these taking 100% pre-retirement income minus savings rate minus 20-30% for effective tax rate. If you make $100k, save $40k, and pay 20% in taxes, then your pre-retirement expenses are 40% of income. THAT is the number you are trying to replace.
While you are mathematically correct, I don't think allowing for a certain amount of lifestyle creep is a bad assumption to make. Now, you may say that the 60% of income might be allowing for way too much of that creepy, and for very high income people, I'd agree with you. But for people who are closer to average income than top 1% income (and that $300K figure you used puts your hypothetical person well into the top 1% category), it becomes a much more reasonable assumption. You even kind of demonstrated this with your second example. With that example, you arrived at needing to replace 40% of the that $100k income, but that is replacing current day income and assuming inflation stays fairly low and fairly constant. If you add in wanting to to take more vacations, helping out family, donating, etc. in retirement, plus the inherent uncertainty with life, that 40% could easily start getting to getting really close to 60% quite easily. It's a conservative assumption, and it becomes less and less reasonable when you start approaching top 1% levels of income, but I wouldn't count it as a miss as a general rule of thumb.
The first 10 minutes of this episode BLEW MY MIND. This is what makes you guys such a good watch, because the big math impacts of financial advising gets put on display. I never thought of the 4% SWR this way and I don't think most people do.
@@BitsOfInterest If that is the rule, then correct, they did it wrong. I think it is interesting to see how the market can mess with how the rule presents itself. Also, as they pointed out, figuring out exactly what 4% is for you when you take into account taxes and costs is tricky.
As a retiree you shouldn't take out more than you need regardless of market conditions. The 4% rule was only ever intended to be a quick, simple way for people to project how much they should save up before retiring. In reality withdrawals will likely fluctuate a bit from year to year as a natural course of life.
I think the math here biases the results in 2 ways. 1) annual merit increase ramp for lower vs higher incomes creates a higher target relative to available investable dollars in the lower income group. 2) The analysis ignores that one's savings rate and living expenses are inversely correlated. If i am able to save 40%, chances are I don't need 60% of my gross income to live (remember we pay taxes too). Yes, a higher income makes it easier to achieve fire, but not based on the math you laid out. A higher income enables a very high savings rate that allows someone to achieve a middle class standard of living (or a lifestyle signficantly under what their income would imply). For example, if I make 200k, but a middle class livestyle can be bought for 50k, I have 150k left to save/pay taxes. I could be saving half my gross income and living off 25%. Then my retirement target is also ~25% (plus taxes).
It was my understanding that if someone wanted to achieve FIRE, they were saving and investing at least 50% of their salary and that once they hit their retirement threshold they would continue to work on whatever they'd like on their own terms
Well, the more you can save the faster you can get there, just as long as the amount you are NOT saving is how much you plan to spend when you do get there. Otherwise you really haven't FIRE.
I successfully FIRE'ed 12 years ago. There's no hard rule about how much of your salary you need to save each month. I would recommend FIRE to anyone who values freedom over stuff. Because being a minimalist makes FIRE much easier. For most people's situation (including mine) living a frugal lifestyle is half the challenge. I'm very frugal by nature, so that has helped me a lot.
As somebody that is in the higher brackets for income, I'm shooting for a FIRE-like plan not to retire, but to have a solid financial foundation to drive my confidence, and so activists and counterparties can't threaten me. I have no plans to actually retire early, but the wealth is a vital tool for being able to compete on what is a very non-level playing field.
Retired at the end of 2022, at 38😊 and I moved to Finland where healthcare , dentist, college, daycare are free. A bonus that I bought a small condo 700 sqft with cash, no property taxes, free heating, so all utilities is $300 a month including electricity, phone, internet, snow removal, trash sewage water, plumber and electrician, car parking space. We are in the city centrum! I am loving my best life on the cheap because my hobbies are free, except for traveling and having to visit family in California 😅 not easy traveling to the states when the country is built for roads and cars.
Hey i commented this in the live feed but i think its important to point out that the initial wage assumed for Fire doesnt impact the goal for FIRE. In the different scenarios youve decreased the wage growth based on how much someone makes. That may or may not be a good assumption. Regardless the wage growth of the smaller income and aiming for 60% of the FINAL income is the issue. The 400k person hits their savings target much quicker because you set it at 60% and 0% wage growth. The 50k person is trying to hit a fast moving target. If the 50k person can have good wage growth and avoid lifestyle creep then they can achieve FIRE faster than a person with a 400k salary who doesnt prioritize and lets lifestyle creep affect them.
The "$50k" person is trying to replace 60% of $169k. The "$100k" person is replacing 60% of $209k. I feel like a principle of FIRE is to increase your savings rate as your income increases. I think everything Brian and Bo said about how hard FIRE is is still true, but this does make the numbers make more sense.
@@bennettmckay1244 It certainly seems like you need to put a lot more effort into figuring out your final consumption #. The lifestyle analysis seems like its actually the bigger part.
100% this comment- the math here doesn't make sense logically. All you're showing when looking at the final figure of income replacement stage is the difference between the rate of return and the increase in wage growth. Someone making 400k or 50k with the same wage growth(5%, 3%, 0%) will get the same income replacement percentage at the end of the 25 years assuming the same rate of return. I thought this was the focal point of the Money Guy show 25% savings/investing, and why salary doesn't really matter... Not the most useful episode from the crew
The best way to have calculate the numbers would've been: Take 60% of starting incomes as a "costs" value. Then apply a 2-3% inflation to that value. Then when you have 5% positive wage growth it wouldn't negatively affect you achieving your FIRE goal. The money guys example in this video would be to demonstrate the case where you let continuous lifestyle creep happen: I make 5% more so my costs are 5% more. And for financial mutants that follow the channel that shouldn't be the case. I'd also like to see scenarios where all of the different incomes have those various wage growth rates. I knew someone who out of law school had 180k starting salary with 7.5% structured raises. Not saying that's typical for high earners. But I also think it's utterly ridiculous to think someone with a 400k salary would get 0% wage growth lol. That's deff never happened.
I think it all comes back to knowing you desired retirement portfolio size based on covering living and discretionary expenses. That coupled with chosen safe withdraw rate. So not so much replacing X or Y% of final income, which I find they tend to base these assesment on too frequently
I really enjoy your videos, they make me think about a lot of things that I haven't considered yet. I almost fell into a point of no salvation in my mid 40’s but thankfully now I’m close to retiring in a satisfactory manner and have majority of my boxes ticked.
I like what they say about considering inflation, there are some things that you should already make a part of your budget/planning early on so you wont run out of it all early on
@rancatridge well I went through a d i vorce at 46 and it basically wrecked my me, before that I never really looked at what my r e t i r e ment would be like but after the whole situation I just had to look at things differently because I knew needed to get my life together before 65 at least.
Luckily for me I was r e f erred to a p a r ticular f i r m in Colorado by an a d visor. Fast forward to today through the firm in a couple years I've been able to amass 640k for r e t i r ement and still going.
Would love to see a Coast fire video by age with the assumption of retiring at 62/65 years old. Figured it would be more achievable and realistic for majority of incomes since the money has more time to grow.
I don’t understand the 25 year assumption. The point of FIRE is to be FI early, not in 25 years. Additionally, I don’t understand the 60% replacement income assumption; required retirement income is based on expenses. Further, income minus expenses determine savings (savings/investing) rate. Time to FIRE can be modeled by the savings rate. The savings rate is the ratio of expenses to income. The ratio is important, not the empirical value of income or expenses. For example, starting with zero assets, 10% returns, 4% SWR, and a 40% savings rate a person would approach FI in 16.3 years: excel calc = NPER(0.1,0.4*-100,0,25*0.6*100,0).
We experienced the peak of our era, and now it is gone. Recession is tanking everything including 401K. My retirement equities portfolio of $750K is in the reds. I keep losing because of inflation. This world will fall to the corrupt rulers in the same way that Rome did. I'm sorry if you're thinking about retiring and you're worried that your pension won't be enough to meet the rising cost of living. Horrible foreign policies everywhere, bad regulatory policy, bad fiscal policy, and bad energy policy.
I'm very worried about the future and where we're all heading, especially in terms of money and how to get by. I'm considering making my first investment in the stock market, but how can I do so given that the market has been in a mess for the majority of the year?
@tudorrwilson I’m in dire need of guidance so i can salvage my portfolio due to the massive dips and come up with better strategies. How can I reach this advisor?
Roughly £120k in my portfolio are in tech/TSLA stocks, can I get an advice on any other stocks that I can acquire to diversify my reserve across multiple markets while creating a comprehensive portfolio allocation that balances my concerns of risk aversion and returns that meet yearly inflation.
You need to hire a financial advisor to help you diversify your portfolio by including Mutual Funds, Etf's, the 11 GICS groups, inflation-indexed bonds, and stocks of companies with reliable cash flows rather than growth stocks, where prices were based on future prospective earnings.
@@chloeanderson543 That's correct. At first, I wasn't too pleased with my gains compared to my previous performances, I was doing so poorly, I thought I needed to diversify into better assets, so I got in touch with an investment-advisor. That same year, I pulled a net gain of £550k, which is about 10 times more than I average on.
@@kalfmanbrown5953 My portfolio has been in the gutter for the entire year, so I started researching new ways to profit in the market, but everything I tried just seemed to miss the mark. Please let us know the name of your financial advisor
I won't get into Mr money mustache, but he created a chart showing "the shockingly simple math behind early retirement". You guys should go over it and the nuisances in your philosophies. He essentially says if you're savings rate is x% then you're living on (100-x)% of your income and that's the amount you actually need to replace. Gives a little difference in numbers between you guys
I am in the lucky, high earner bracket. I found out most of my coworkers are doing FIRE, not because they actually want to retire early, but because they want to afford options for themselves when they are in their forties. I never wanted to retire early, but I like that mindset... have enough saved that you can to keep doing the intense job if you want. Or you can to do something else. It's about having the luxury to afford a choice. I like that mindset, so here I am binging these videos too :P
Most people that retire early after reaching their fire number end up going back to work doing something they enjoy and make income anyway Something I never hear discussed is what if you reach your fire number and continue to work and save at the normal rate another five years or so
Primary goals everyone should strive for before retiring is 1. House with no mortgage 2. No consumer debt 3. Some form of solid cash flow asset (rental house no/mortgage) 4. At least $1 mil is liquid assets
I have absolutely no intention of retiring, simply because I am far too passionate about the work I do to ever give it up. But even then, FIRE is still a valuable philosophy for me to pursue. Building a strong emergency fund, being able to support my parents and future family, and of course, working on passion projects. I think everyone can take something from FIRE, even if you don't actually plan on the early retirement.
Completely agree. Not to mention the fact that having a purpose, having something to do with your mind and your time is sooo important and integral to being a healthy, happy person into older age!
I agree that the FI part is more important than the RE part. When you're financially independent you don't have to work to pay the bills; you work because you want to on what you think is important.
I also look at the "blue zone" societies and it seems there is value in continuing to do some sort of work. I feel like it keeps your mind and body engaged. My goal is to be able to retire with dignity when I can no longer physically or mentally work.
I don't PLAN on stopping work early however I do hope to achieve FI early which would then allow me to RE if I choose to, because feelings and circumstances can change.
I love your channel and I try and share it with as many people as i can. Your content is great and you all are almost always incredibly positive and inspirational. That being said, there often seems to be a change in messaging and tone around FIRE topics. Instead of here's how to achieve through "discipline & deferred gratification" the tone here was how hard this is which seems very out of character with most of your content. Would love to see Bo more "excited about this FIRE episode" and Brian describing the "big beautiful tomorrow" that comes with FIRE!
23:58 I think a more relevant chart would not be comparing to current income but to current expenditures. I want to see the inflection point of maintaining my lifestyle without any changes. At more aggressive savings rates, I expect to see a steeping slope. My wife and I were able to save 50% of our post-tax income from the beginning. This was for different reasons. We were preparing ourselves for the potentiality of one of us losing a job and being able to live off of one income without worry. We weren't even thinking of FIRE. I like to think of saving as a two-edged sword. It provides money for the future and reduces the amount you'll need in the future to maintain your standard of living.
I think what people mean by retire is that they're no longer slogging away at a corporate job they don't like. It couldn't mean doing side jobs that you like working at a soap store or just doing anything, obviously humans were meant to be productive but to do so on your own and to quit to take a vacation if you want it's quite different and having to work for a living
@@sasukesuite1hahaha well FDNR is definitely something I hear my friends and coworkers talk about having in their future. I hope in my case that once I cross the Financial Independence line, I’ll want to continue working for a few years with a renewed vigor and a pep in my step. I got some big plans by age 45 - Coast FIRE achieved + house paid off + peak earning for the household
This is why I am so appreciative of working for the state with a 2% a year pension, I contribute more both of my and my wife’s Roth and additional to her 403b as she has a pension too.
I used to think every investor went broke during recessions, meanwhile some make millions. I also thought everybody went out of business during the Great Depression, but some went into business. Bottom line, there's always depression for some, and profit for others, it all starts from having the right mindset. That said, I've set asides $250k to invest for future, unfortunately l'm a complete noob.
True, A lot of folks downplay the role of professionals until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
Can't divulge much, it's only right you do your due diligence. I'm been guided by Olivia Maria Lucas and most likely, the internet is where to find her deets.
The doesn't have to mean sitting on a beach. Can just mean working reduced hours or changing to a lower paying less stressful career that feels like retirement but can still pay the bills
So being in the 200K range of income, our actual spend rate is 75K, but right now that includes daycare and also my mortgage. Once the mortgage is paid off and out kid is out of daycare and we have enough saved for college our expected current expenses would be 45K. We are planning on living using 100K as our target withdrawal rate to cover medical coverage and also to allow for a lot more travel. So living on roughly 50% is completely feasible even when factoring in the cost of medical coverage. I don't think we always need to be looking to cover 60% of your income, it really depends on your expected expenses + extra for padding + extra for free time to do more activities + medical coverage.
The sequence of return risk is an eye-opener, but that's why you have to learn to adapt. Be able to spend less than anticipated and always have a backup plan.
There are ways to mitigate it - you could have a large cash bucket or a bond tent to be able to guard against those market down turns. I feel like they really oversimplified this and glossed over a variety of protections.
Rewatching this. My household has never made 100k, but by paying off all debt and saving 1/2 of my paycheck the last 5 years, we are well on our way to FI. We can afford anything, just not everything. Had to replace a car and paid cash for it. Vacation? Bought tickets early and paid off before we went. I bring home 42% of my teaching salary, we max two Roth IRAs using side hustles and max a 403b 23,000 a year.
I love it when they state an 'aggressive savings rate' thats below my own rate and I'm not even a FIRE dude. Just a relatively good wage for my area and living normally without debts or stupid expenses.
I’d love to see student loans calculated in the $200,000 and $400,000 examples. I’m graduating med school in a year and those salaries are typical post residency but I’ll have 3 years making $60,000 and $220,000 in student loans starting out.
My thoughts are that you can still achieve it easily if you want to. You will have to sacrifice particularly until the loans are paid off, but your income will go up and you can live a great life and still save at least 40% annually over the long term. Again, if you want to. Great video, but they also left taxes out of the equation (or at least did not speak to them).
Do some reading on White Coat Investor. Basically, unless you are going to be taking advantage of a federal loan repayment plan or are going to be working for a company that offers significant loan repayment, what FIRE looks like in the post-med school case is like this: During residency, you enter income driven repayment. You won't make much/any progress on your loans as the interest on your loans is probably going to be about 13k per year so even just paying the interest on a typical 50-60k resident salary is going to be difficult. If you end up doing a fellowship, you may be able to make a bit more since fellows will typically be making closer to 100k. When you get out of residency, you will hopefully be making at least 200k per year. That will hopefully translate into ~130k or so of take home income. Continue living like you did as a resident (spending 40k per year or so) and you can repay your loans in about 3 years. Then, only allow your lifestyle to increase slightly (to ~50k spending per year or so) and continue saving everything else. Even if you are in one of the lower paying specialties, you should be able to save somewhere in the range of 80-90k per year. Running the numbers, assuming an 8% rate of return and $7000 saved per month ($84,000 per year), you will have about 3.8 million in 20 years. Even if your rate of return is 6% you will still have about 3 million. Either way, a 3% withdrawal will be 90k or more per year. That's the broad overview of a 20-25 year FIRE plan as a physician. If you finish college at 22, med school at 26, and residency at 29 or 30, that puts you retiring in your early/mid 50s, which isn't the super early retirement that gets all the clicks on UA-cam, but is certainly early retirement. Of course, the above analysis doesn't take into account things like spousal income or the possibility of making more. There is a huge range of incomes even in low paying specialties with primary care ranging from the 150s to the low 300s, so if FIRE is your goal, it is very worthwhile to investigate your potential jobs closely, look at bonus/productivity incentive structure and figure out how to maximize your income potential.
FIRE has different levels + whether you retire in same spot/home vs go to a diff country where COL is half or less. The latter is much much much achievable for sure. FIRE at 30? You need to save ~90% in your 20s. At 40, maybe around ~60% in your 20s & 30s. At 50, I think you can make do with 25~30% as long as you downgrade when you retire (mortgage paid off + kids are independent + downsize home/or move to cheaper country). I think FIRE at 50 is very doable for disciplined financial mutants who save 25+% as long as kids are independent by then.
People always misunderstand what the 4% rule is from the original paper by Bengen. He doesn't say withdraw 4% of total portfolio every year of retirement. The paper is testing withdrawing 4% of total portfolio in the first year of retirement, setting what that dollar amount is and then withdrawing that dollar amount adjusted by actual inflation every year after that regardless of portfolio value. Obviously if you always withdraw 4% of your portfolio value is you would never run out of money because if your portfolio value decreases you would withdraw less if you just stuck to 4%. That ISNT the strategy and I was shocked and bummed that the Money Guy show didn't know that or decided to represent it as just a flat 4% withdrawl every year. What Bengen showed, which was what was impressive and encouraging, was if you did that regardless of what 30 year period you looked at in the history of there was a greater than 95% chance you would be able to do that for 30 years. So, let me give to real examples and show what the 4% rule is versus what it is not. You retire with $1 million. First year you withdraw 4% that is $40k. During the year the stock market drops an astounding 50% so now you have basically $500k. Next year you don't withdraw $20k, you look at inflation see that it was 3% that year and withdraw $41,200 despite that downturn. What the Bengen paper says is even though that feels so wrong that over the history of the market chances are you will still be able to do that year after year and make it through 30 years. You guys misrepresented the 4% rule in this video. EDIT: lol I should have given you guys more credit I posted this after the first 6 minutes of the video because I was shocked by the example you were giving. My bad you were showing exactly what I said above and doing it by first showing the common misinterpretation of the rule was actually brilliant. Although you still didnt run the actual scenario which was starting at 4% and increasing for inflation every year. Still better than I thought so egg on my face.
I'm struggling with the math, if you get social security at 70, working 25 years, and want a 40 year retirement for your money means you start working at 5 years old and are retired by 30. These assumptions just don't work. In reality if you start working at 20 and retire at 45 (very early), you need to fund your lifestyle for just 25 years before social security takes the bulk of it. Once you adjust those 3% withdraw rates to 4.5% then all the numbers start coming together really nicely. If you doubt social security will replace your fire income then run the numbers. Fire people spend less of their income than normal retirement people so social security places a huge (or all) of it.
We achieved Fire in November 2021 at 38 years old. Then moved out of the US to our home country. Everything that could go wrong for us, went wrong. Because of a shortage in containers around the world, shipping our staff ended up being double. Because there was a shortage of used cars, our car in the new country ended up being almost double, because the labor and building material shortage, the building of our new home ended up being... You guessed it, double. The war in Ukraine and inflation made our investments suffer and the 2 years fully funded emergency fund we had, ended up lasting 1 year and 2 months, because of inflation and all the extra expenses I mentioned. Thankfully, my husband and I were able to start working remotely and we are no longer Retired, but thank God we are still Financial independent. I agree so much with the statement "measure twice".
@trave7644 we don't live in the US anymore, the rest of the world is a much cheaper place to live in. We can live comfortably with $2.5k a month (entire family of 4). Retirement it's not an age, it's a number. We have been able to spend more time doing other things that we love and we don't get pay for (charitable work with people in our town) and also be close to our elderly parents. But my advice to anyone that wants to retire young would be, whatever calculations you made, multiply that times 2, just to be safe.
This one was a bit frustrating, because they made it out like it was the wage difference that impacted the final salary replacement, but in reality - it's all to do with their wage growth numbers (5%, 3%, 1.5% 0). If they ran the numbers again and flipped the growth assumptions round, they'd come to the conclusion that it's much easier to fire on 50K with no wage growth? That doesn't make any sense. I think they should have focussed instead on what actual lifestyle impacts the wage difference makes, e.g. 40% savings rate at 50k means you're likely cutting into spending for necessities, whereas high income folks have a lot more latitude with their spending cuts, because most of it will be for luxuries.
Yeah when you run FIRE calculations and base it on replacing a percentage of income (instead of expenses) you're already down the wrong path. The whole point is that saving also means you are cutting expenses. If you get salary increases you should be able to save more (a higher percentage).
The thing I don't like about the FIRE acronym is it does not represent the mentality correctly. The words "retire early" make it sound like your goal is to stop working entirely (early retirement), and that is fundamentally NOT what FIRE is about. FIRE is about reaching a point where you can separate financial burden from your work. You still absolutely plan to continue working, you just do so with goals other than monetary gain. Common goals are to follow a passion, help people you care about, or just coast in a cushy stress-free work environment that gives you something to do. If your goal is to sit on a beach somewhere or to travel the world, you are not FIRE. you are seeking early retirement.
The big gap in the lower incomes is about the salary ramps. The $50k with a 5% increase ends at $169k, the $100k with 3% ends at $203k, and the $200k with 1.5% ends at $290k. The fact that the early contributions are from an amount significantly under the final target really hurts those - but if you can avoid lifestyle inflation as salary increases, you can raise your contribution over time.
Buying a home, having a family, and taking care of medical needs is not lifestyle creep. Assuming that they should contribute 100% of their annual 5% raise just doesn't make sense with inflation and cost of living increase as you age.
As others are saying in the comments, this video might need to be re-done to address some missed points. For example salary and saving is really dependent on location. And also what about taxes, since these are based on gross incomes, are we assuming this is all in our 401k and tax advantaged accounts?
Money a guy Show. Please do a separate episode to address all these comments. There is good co tent there and for myself, will help understanding. Thanks, I appreciate you!!!!
Great episode. I had never seen that slide at 13.10, great insight on realistic withdraw rates based on FIRE retirement periods. That combined with the Know Your Number data gets you set on the path with solid information.
A quick back of the napkin calculation for FI is: ((1-savings rate)/(rate of return))/savings rate=years to FI. EX: 50% savings rate with a 7% return ((1-0.50)/(0.07))/0.50=14.3 years of savings to FI.
Definitely fall in the fi and rewire. If the kids are taken care of and finances aren't weighing me down, I can choose a career that prioritizes what I love irrespective of paycheck. So many of the careers that impact people, non profits, ecological work, teaching, are death sentences from a financial stability point of view. Financial independence, then do what matters.
I save and invest roughly 70% of my salary in the financial market (high yield etfs, equities, coins, gold, etc.). This is essentially how I made my first million dollars, albeit with an FA. I work as an engineer and live in upstate New York. My spending is modest. I pay minimal rent, have no debt, and my car is paid off. I can just save, then. At this moment, I consider myself lucky and am thankful that Susan Kay Mack is managing my portfolio because she is the only person I know who is wealthier than I am, hehe.
The stats presented from 23:45 on are *not applicable.* FIRE income numbers should be a function of % expenses in your budget (what % you live off of), not % TOTAL income replacement!! Many doing FIRE have expenses that are 25-40% of their GROSS income BEFORE investing 40%, 45%, 50%, even 60%. Would love to see another segment with corrected figures.
The stats are completely applicable, they just use different assumptions than you. Clearly you prefer to use expense based assumptions for how much you will need in the future, but that doesn't make using income based assumptions incorrect., it makes them more conservative (with moderate incomes at least).
@@Alan-jk1yi I'll quote what @diddlydum2 posted below, as it applies: "This one was a bit frustrating, because they made it out like it was the wage difference that impacted the final salary replacement, but in reality - it's all to do with their wage growth numbers (5%, 3%, 1.5% 0). If they ran the numbers again and flipped the growth assumptions round, they'd come to the conclusion that it's much easier to fire on 50K with no wage growth? That doesn't make any sense." Unfortunately, the income based assumptions do not make sense in the video, taking them for what they are. IMO using expenses as a proportion of income is the way to go.
@@AlexFlavell Well then I'll quote what I said in a different post: "You're assuming no life style increases. Now I agree that if FIRE is you goal, spending 60% of your income when you make $400k is a completely unreasonable amount of consumeristic spending, but it you're much closer to the average income (which most people are), 60% starts becoming more and more reasonable. You seem to be leaning more towards a lean FIRE philosophy, while they are leaning more towards a fat FIRE philosophy. Their philosophy on FIRE isn't wrong, it's just different from yours." Basically, the closer you get to an average income, the more the proportion needed to replace basic needs approaches 60%. It also allows for more discretionary spending than your assumptions, which is closer to fat FIRE compared to your more lean FIRE. You may not like that philosophy, which is fine, but that doesn't mean it doesn't make sense. It's conservative, and I'll agree that it makes much less sense for very high incomes, but it's not a bad rule of thumb to use for people who's incomes are more towards the average side (which, again, is most people).
@@Alan-jk1yi That is a very wishy-washy approach. 60% spending may be in line with the average consumer, leaving 40% left to invest. With that approach, it's so easy to get it wrong when calculating fire; it does not matter what the income is when doing calculations, all that matters are proportions of expenses to income. See below... Take your example. Let's say someone makes $100k a year and spends 60% annually, $60k. FIRE lies in what happens with the remaining $40k. Was it donated? Is it saved? Lost? Invested? Compare what happens if that $40k was saved annually vs. invested. If saved over 25 years, that 40k turns into $1M. Not bad, but not enough to replace *annual expenses* ($60k = 6% drawdown annually). If invested over that same time period at 8% annual returns, that same principal turns into $3,158,176. More than enough to cover annual *expenses* and then some. To your point about incomes differing, take the same scenario, but start with someone making $500k. 60% expenses = $300k a year annually. If saving all of the rest ($200k annually) over 25 years, it turns into 5M. You'll find that the proportion is the same as above; 4% of $5M ($200,000) still does not cover $300,000 annual expenses. This scenario is invariant *no matter how high or low income gets* IF the proportion of expenses is the same. The scenario changes once the proportion of expenses changes.
@@AlexFlavell Dealing in percentages is inherently imperfect as it glosses over a lot of nuances. Yes, income is irrelevant to the math if we're talking about replacing fixed living expenses, but that misses the different realities that different people at different income levels face. You're making a mathematical argument, I'm making a practical one. Mathematically, the percentages are the same for someone making $50k as someone making $500k. But the reality is, the person making $500k could easily live luxuriously off 20% of their income, while the the person making $50k might be struggling to live off of 80% of theirs, without any luxuries. They are fundamentally different situations even if the relative percentages for how much they will eventually need are technically the same. That's why replacing income is a decent approximation for most. Yeah, it's doesn't work well for super high income people, but they effectively play by different rules since the cost of living for a decent life is only a small fraction of the their total income, while reverse is true for lower income people. I don't see that as wishy-washy, I see that as acknowledging the messiness of real life.
Easier for me to estimate how much I'd like to spend today, then estimate a rate of return adjusted for inflation. Contributions also have to be adjusted for inflation. If I can get to the FIRE number with 3%, then great! That said, that ship has sailed a long time ago. I started investing very late so just getting to regular retirement is the goal.😅
I did fire to be a stay at home mom. I went back to work to enjoy giving to my kids. From what I see, retired people get bored. Friday morning, a retired friend called and work me up at 7:15am. She talked for over 2 hours. When it's 100° on a hot August day, bored retired people will be on a golf course.
Wow, Annie. That’s impressive. How old were you when you were able to stop working, and how did you chirca FIRE? Imagine the snark and backlash you’d receive if you made this comment on the Ramsey site.
To add to these numbers...10% of Americans make at least 102k a year and only 1% of Americans make 400k a year. So, just to try and pull off this fire, you're most likely going to need to be closer to that 100k level of income, which excludes the mass majority of Americans. I was only making around 55k a few years ago and realized I had a lot of work and sacrifice to do in order to get where I wanted to go, so I started a side hustle. Now 4 years have passed and I'm making quite the income from the side hustle and my job is expecting to bump me from the 70k a year I'm making now, to 100k. So, paired with my side income from my business, I have a MUCH better shot to get to where I want to be...but that's not saying that I took it easy the past 4 years. I've busted my butt to get where I am today. Focused, but not finished.
So I am saving 35% of my gross income pretty comfortably, so living on 65%. However ALL my tax is comign out of that 65%, so I don't really need to replace 65% of my income, I need to replace whatever my net income of that 65% is, which is probably actually just 35% (because my income is high and also I live in Canada lol)
Realistically for true FIRE, you need to save 50 to 75 percent of your income as well as invest almost all in stocks and hopefully over a 15 to 20 year period, you can capture average to above returns without significant drops like 2008
I’m all for calculating conservatively but this is overly so. Based on these numbers someone making $200k+ for 25 years needs to invest 40% to barely make the cut. Cost of living in retirement is a major factor that needs to be taken into account. Aiming to replace 60% of income is definitely not needed for everyone.
Bear market usually lasts 1.5years. How about prepare 2years emergency fund besides investment portfolio in the market. As long as its a bearish market, instead of selling investment, spend the emergency fund on expenses. When the market is back to bull, withdraw and fulfill the 2year emergency fund. Will this way get the first case better?
The first time these guys did a show on FIRE, they missed the mark so badly with their math and when I tried to comment on it, my comment somehow never didn't show up. Now they are pretending to understand the movement (and the math behind it) and doing that backhanded compliment, two-faced thing that smarmy salesmen do. People who pursue FIRE often do their own research and ditch their financial advisors and that's all this overly cautious "make sure you measure twice and cut once" feigning concern stance is about. Guys, your AUM is not threatened by FIRE. There are enough people not pursuing FIRE for you to still do really, really well. You can't sit this one out.
I'd love to see the calculations redone to account for the fact that if your savings rate is ~40% then the number to maintain your pre-retirement lifestyle is no longer 60% of your gross income anymore. That may help make those numbers seem a little less dismal!
I think though this was well put out, but it isn't for me. Considering a mid income, short minded person with constant need for cash, are these still recommended? I have over $142k in my portfolio, I'll appreciate a short term profitable investment that could say turn $142k to $300k
Geoarbitrage and 60% of your income may not be necessary. We are planning on retiring at 50/51 years old as a perpetual traveler. Not quite F.I.R.E by the strict definition, but close enough.
The only variable changing these numbers are the income increases. One thing to keep in mind is the higher the savings rate, the less you’re spending. If you save 40% of gross and are taxed at 25%. If you can replace 40% of gross income, you were only spending 35% of gross (100-40-25) before and will actually get a pay raise in retirement.
This was depressing and im not even trying for FIRE. Just started late and work in a job i love but that is notoriously low paying. It feels like ill never retire.
I would think most firees would move internationally after retirement which would greatly reduce the 60% income replacement requirement. For instance, you can live pretty solidly in a big city in SE Asia or S America for 2k a month.
Something I don't like about the sharing of 60% retirement percentages of final income. Say you are making 100k, but you are living like the 50k person or you continue to live like you make 100k towards the end, which is 209k after 25 years. Think about it you're already throwing that extra money into retirement you are used to living on less, so your COL is lower than the final retirement. That's why I like the beginning slide that shows what if I pull a static number vs 4% each year.
In the sequence of return example, I feel like the examples aren't very comparable. The person with $1million at 2003 would've presumably endured the downturn of 2000-2003 so one could assume they would've had a higher wealth at 2000 than the first example. Mathematically, of course the sequence makes a HUGE difference.
In order to visualize sequence of return risk without other variables, you must start with the same portfolio value at different points in time or only work in percentages.
People making $400k usually have a lot of student loans or business owners who pay a ton in healthcare. I've seen people in these situations lose everything due to healthcare cost.
@@dietbajablast5790By who? Statics show that doctors and dentists do not retire early. My plumber who owns his own business all these years hasn't retired early. My buddy who had his own business fixing planes hasn't retired. Infact, he works two jobs. He flies for Delta and fixes planes on his days off. He needs benefits from Delta. My buddy who owns his own trucking company went to work driving a train for benefits and hire another driver for his trucks. I did very very well during the housing crash and took time off to be a stay at home mom. I got by on rental income. I was very healthy and instead of health insurance, I paid cash. One of my tenants worked at a local clinic that only had a nurse practitioner. So, I got special treatment. I think I went twice all those years. I retired at 32 to raise a child. I know the downside of it. As long as people are healthy, there isn't a problem. I've seen videos of couples who retired early and when sickness hit, now they are broke. Being in real estate, I had a builders discount at the local builders supply store. The owner is a great guy but now he works as a cashier after his wife got cancer. Business owners DO NOT have the same benefits as a W2 worker. I'm well aware that people who have NO LIFE can aquire wealth a lot faster than a normal adult. But living at home with mommy, never having a spouse or partner, and never having any children isn't much of a life. I know that guy and it's sad. I feel bad for his sisters. He clings to them and I can only imagine how bad it is after retirement. Last week, my coworker was telling me how much he makes rewiring homes and other electrical work. Then he tells me how much it cost to carry insurance in case there is an incident. Again, a person who has his own business but working a full time W2 job for benefits. I've been a landlord since I was 19 years old. I understand what it takes to reach fire because I retired for 14 years...and that works fine until someone gets sick. $400k per year doesn't mean much when chemotherapy is $200k per year. My father in law owned his own business when he was diagnosed. He retired early after his diagnosis. The sickness drained a ton of wealth even though he had a cancer policy. This was after a life of camping for vacation with a wife and 4 sons.
For those attempting FIRE, even if you don’t reach your goal within the timeframe that you were anticipating, you’ll still be way ahead of where you would have been without having a goal in the first place.
yeah, I was wondering what the consequences would be of extending the timeline out even just 3-5 years more. Sure, if you had your heart set on retiring by 50 it's a shame, but 55 ain't all that bad - my dad did it (he's in his mid 70's right now), and he's got no regrets about it.
Keep your spending in check. Otherwise you will have to unretire.
Yes, but you're not enjoying life during the journey...and WADR you can't do it with having kids, unless you're willing not to have your kids as your priority...which if that's your mindset, you shouldn't have kids.
yes this is true. there are a lot of important milestones you can hit much earlier than retirement. one of the most important to me is having enough saved to not be worried about job loss. if you can get laid off and then have the latitude to chill out for a few months while looking for a new (and better) job without having to worry too much about money, that's an amazing thing and anyone can achieve that level of savings.
@@WinS392 This is my current goal, I really want to achieve this (this is more than just a 6-month emergency fund).
Biggest lesson i learnt in 2023 in the stock market is that nobody knows what is going to happen next, so practice some humility and low a strategy with a long term edge.
Nobody knows anything; You need to create your own process, manage risk, and stick to the plan, through thick or thin, While also continuously learning from mistakes and improving.
Uncertainty... it took me 5 years to stop trying to predict what bout to happen in market based on charts studying, cause you never know. not having a mentor cost me 5 years of pain I learn to go we’re the market is wanting to go and keep it simple with discipline.
Could you kindly elaborate on the advisor's background and qualifications?
“NICOLE ANASTASIA PLUMLEE’’ is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Just ran an online search on her name and came across her websiite; pretty well educated. thank you for sharing.
I reached FIRE waiting for this to start.
It's those content meetings 😆
How did you do it? Can you share your strategy?😂
I can always tell when someone isn't a content creator themselves when they make unappreciative and pointless comments like these. 😂
@@DrCliffAuD it was just a joke… these guys are absolutely fantastic… I can only speak for myself but I’ve followed their content now for about 5 years (barely missed a video and have 2 coffee mugs for questions being played on the show)… honest, sincere, detailed and good humored … they’ve grown to 250k plus subscribers… speaks for itself! This might be one of their best so far… thank you….
All the wait has compounded my interest! Lmao😂
Thing is, I only need 60k/year to live a very lavish (in my opinion) lifestyle. The only reason I'm pushing myself to earn 200k/yr is because of FIRE... not because I want a 200k lifestyle. That means I only need to replace 30% of my income at retirement. A lot of FIRE folk are in the same boat!
💯. This entire show missed the entire point. It isn’t easy for these guys to admit the boilerplate financial advice that’s been around for decades has been blown up.
The logic throughout the show is completely misguided.
The only mathematical difference between the 4 income levels were not the income levels themselves but the income growth rates associated with each income level. Logically speaking, it would have made more sense to separate the 4 segments based on income growth rates, not the incomes themselves. This was the only actual variable that had any influence on the pre-retirement income potential presented from scenario to scenario.
But as a better alternative, I think it would have been better to keep the growth rates the same (to compare apples to apples) and instead change the savings rates.
At a $50,000/year income, yeah 40% is the most anyone can hope for and 60% pre-retirement income would be necessary.
At a $100,000/year income, maybe up to 50% can be saved and maybe only 50% of pre-retirement income is needed.
At a $200,000/year income, maybe up to 60% can be saved and maybe only 40% of pre-retirement income is needed.
At a $400,000/year income, same as above (because of higher taxes).
So yes, a higher salary, would make it easier to reach financial independence, but only by:
1. Being used to a lower lifestyle right off the bat but still spending enough to not feel too squeezed while living it and
2. Not decreasing lifestyle after retirement because you were already living with a lower (but bearable) standard of living.
But the way the show was actually done was so illogical that it made no sense being made at all.
@@thoryan3057 exactly! Well summarized.
@@thoryan3057 Lean Fire
@@thoryan3057you nailed it here. If they were trying to publish this study, the methods section of the paper would get the laughed out of the room.
The problem with this is, most people making $200k or $400k don't need 60% of their income in retirement. If they paid off their mortgage and all other debt before FIRE their cost of living is quite low, something like 30% or 40% would be more than enough.
On the other side, saving over 40% of your income at $400k is also realistic if you avoid lifestyle creep. You can still live pretty lavishly with the first $200k, then save an entire $200k so you can live well later.
Another aspect of FIRE thats appealing isn't even necessarily retiring early. It's knowing you COULD retire early. Therefore nearly all stress is removed because you can live your life only doing what you want, because you don't need to do anything anymore. You could cut back to half time, switch jobs, take 6 months off then get back into the field etc.
Even if you fail to hit enough to actually retire early, you're still very ahead of the game for a regular age retirement.
Like the show generally but the fire episode was full of weird mistakes in terms of assumptions and modeling.
1. Should be based on covering desired expenses not replacing max income
2. Trinity study (4% rule, though since adjusted to be a bit higher) described adjusting the previous year's withdrawal by inflation each year. It is NOT a fixed 4% withdrawal strategy.
3. Sequence of return risks is a well covered topic with many straightforward mitigation strategies such as bond tents
4. Nobody does or should directly follow the Trinity approach in any case, it is a sort of base case. Real people adjust spending based on actual market conditions and there are objective strategies for doing so
And that's just a few items.
Bring FIRE doesn’t mean you HAVE to sit around and do nothing. You can still do passion projects for money if you want. I believe FIRE is so people have a a CHOICE to not work something they do not want.
Exactly.
Achieving success hinges on the proactive actions and steps you undertake to reach your goals. The process of building wealth necessitates cultivating positive habits, such as consistently allocating funds at regular intervals towards robust investment opportunities. Financial management, despite its critical importance, often becomes a topic avoided by many, eventually causing difficulties down the road. My sincere hope is that anyone who comes across this message is able to find success and fulfillment in life's endeavors!
Starting early is simply the best way of getting ahead to build wealth, investing remains a priority. I learned from my last year's experience, I am able to build a suitable life because I invested early ahead this time.
I have been investing in the markets for over 3 years now and I have made nothing less than $400k in ROI. My portfolio has grown exponentially. Will advise you to consider stocks investment. `
I've been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?
”Stacie Lynn Winson” is the lady's name. I first saw her on a goldman sachs' report, then on Smart Advisors, and immediately looked her up on the internet; it was the best decision I've made to stay afloat in these crazy times. She has been outstanding.
She seems to possess an extensive knowledge base and a strong educational background. After conducting a quick Google search of her name, I stumbled upon her webpage. Thank you for sharing this information; I truly appreciate it.
I want FIRE, not to just sit around and do nothing all day, but so that I can FINALLY have complete control over my life. No having to report to someone. Truly being free. If I want to go backpack Europe, I can. If my family needs me, I'm there. I can generate other income any way I want to, but if that money doesn't come right away, it's ok because I have my safety net that I can rely on until it's ready. Complete control. Trying to fit about 30-35 years of work down into 10 years in order to pull it off is quite the grind, however.
Why is the goal to cover 60% of pre-retirement income and not annual expenses? Surely someone living below their means can justify pulling the trigger earlier if those expenses are covered.
The entire second half of the video is kind of going into "why", in deep detail. Short answer: It's basically a target with a high confidence of success. 60% is a "conservative" target. Don't price yourself out of doing what you want to do once you stop working. Expenses are variable, and they do tend to rise as you age (especially medical care costs), and accounting for the unexpected is part of the calculations. A "successful" FIRE plan means you have a LOT of years left to live, so it's important to mind the statistics. Most Americans have little "generational wealth", which means your expenses are likely paid from your own income... Of course, surely you can justify pulling the trigger earlier, even quitting work the second you can cover today's expenses, but that means you MUST continue living as you have before. You have all your time for yourself now, true, but there's no financial freedom at all, there's no accounting for a bad year, no accounting for getting older. Why are you pursuing a FIRE result in the first place? It's not a singular answer, but it seems to me it's about having your time for yourself, not spending them working for someone else. Stretch your mind to include the rest of your life, work now so you don't have to work later, your choice.
I think it is covering your expenses... If your saving 40% for 25 years then your only living off of 60%. Hence why they stop there. For those saving less than 40% they can't replace what they were living off of in 25 years and therefore arent really retiring "early"
Because of you're saving 40%, replacing 60 percent means you can keep the exact same quality of life
The current market/economy is unnecessarily tougher for boomers/senior citizens, I’m used to just buying and holding assets which doesn’t seem applicable to the current rollercoaster market plus inflation is catching up with my portfolio. I’m really worried about survival after retirement.
Just buy Gold, the government has failed us or try to diversify your portfolio to other market sectors, that way your investment is balanced and you don’t get to make so much losses.
@@jeromesand Yes, gold is a great investment and a good bet against the devaluating dollar, been holding some for awhile now, I’m grateful my adviser’s moment by moment changes in the market are lightening quick, cos who know how much losses I would’ve had by now.
@@maiadazz I envy you, I’m still trying to recover from losses I incurred in 2021/2022, who is this investment adviser you work with, I’m intrigued and I could use some quality guidance
Do your due diligence and opt for one that has tactics to help your portfolio continue consistent and steady growth. "Margaret Johnson Arndt" is accountable for the success of my portfolio, and I believe she has the qualifications and expertise to accomplish your objectives.
I am one of the early practitioners of FIRE. I did it before there was even a name for it. I left the workforce at age 36. I'm 48 now, and doing just fine. I think it's great that more people have shown an interest in FIRE. I'd be happy to answer any questions you may have. Simply put, I would recommend FIRE to anyone who values freedom over stuff. Living a minimalist lifestyle is one of the keys to making it work. That's because not only do you save up capital faster, but you also require less total capital to retire, because you don't need to generate as much income to feel happy if you have a minimalist mindset.
is age 29 earning 53-60k a year too late and too little?
@@BiigFigJ NOT AT ALL!! Many people don't get serious about saving for retirement until they are in their 40's or 50's. Depending on where you live I would try to get by on half that income (saving and investing the rest). Then you should be able to retire about 15 years early. Perhaps sooner if you get significant raises or a promotion. And, be sure to max out your company's 401k plan if they have one available. Unless you want to spend your time researching individual stocks, then I recommend investing in a broad index fund. Vanguard has plenty to choose from that have very low expense ratios. Diversification is important, because if you put all your eggs in one basket, then you only have to be wrong once to wipe yourself out. Most index funds spread out your capital across dozens of different stocks, so you can easily avoid that risk. The main ways I've saved money: always buy used cars with low mileage and always pay cash, only replace clothes when they wear out, cheapest Android over iPhone, no vacations, no credit cards, and I split my bills with housemates til I was 38. I'm not saying you have to do all of these, but the more you do, the quicker you'll save up capital.
Ive been watching this channel for the past few months, been able to really prioritize my saving and have myself well on my way to financial independence. Last week my wife and I booked a international honeymoon trip that cost over $15k, I’m excited for the trip as it’ll be fun and it’s a splurge that we won’t repeat for decades, but man did that hurt thinking how much growth I could’ve gotten out of that amount of money 😂
I love the philosophy at the 39 minute mark.
I'm a youth pastor and I carry this attitude in my financially planning.
My salary is provided by the congregation making sacrifices to give to the church.
So I often ask what choices I can make in other growth and income sources over the next 3-4 decades so I can take some pay cuts or hopefully a 0 salary for my last decade in ministry
Hey money guy show. I’ve always recommended to people who are looking to retire to save 2 years of expenses to weather down turns before retirement. Typically the market will recover within 2 years. This keeps you from having to pull out of your nest egg while the knife is falling. Good rule of thumb I feel.
Hi there! Great advise, I'm considering 3 years worth of cash in a high yield savings account.
Talking about pre-retirement income instead of total expenses is a big miss every time you guys bring up FIRE. If you are saving 50% of your pre-retirement income, and paying an effective tax rate of 20%, you are already living your life spending 30% of your pre-retirement income. If for example you make $300k, save $150k, and pay taxes of $90k, then you are currently living on $60k. Why would you need to save up enough to replace 60% of your pre-retirement income $300k (which would give you $180k/yr).
You guys are really stuck on replacing pre-retirement income which really just doesn't mix with FIRE since income does not indicate lifestyle when savings rate's increase to 30%+. You should really be talking about pre-retirement expenses. You can napkin math these taking 100% pre-retirement income minus savings rate minus 20-30% for effective tax rate. If you make $100k, save $40k, and pay 20% in taxes, then your pre-retirement expenses are 40% of income. THAT is the number you are trying to replace.
Correct. Usually love Money Guy's content but they dropped the ball on this one.
So true. Not sure how they messed up this math.
While you are mathematically correct, I don't think allowing for a certain amount of lifestyle creep is a bad assumption to make. Now, you may say that the 60% of income might be allowing for way too much of that creepy, and for very high income people, I'd agree with you. But for people who are closer to average income than top 1% income (and that $300K figure you used puts your hypothetical person well into the top 1% category), it becomes a much more reasonable assumption.
You even kind of demonstrated this with your second example. With that example, you arrived at needing to replace 40% of the that $100k income, but that is replacing current day income and assuming inflation stays fairly low and fairly constant. If you add in wanting to to take more vacations, helping out family, donating, etc. in retirement, plus the inherent uncertainty with life, that 40% could easily start getting to getting really close to 60% quite easily. It's a conservative assumption, and it becomes less and less reasonable when you start approaching top 1% levels of income, but I wouldn't count it as a miss as a general rule of thumb.
I’m going for financial independence so I can choose what I will do for a living.
The first 10 minutes of this episode BLEW MY MIND. This is what makes you guys such a good watch, because the big math impacts of financial advising gets put on display. I never thought of the 4% SWR this way and I don't think most people do.
They did it wrong though... It's 4% on the day you retire and inflation adjusted going forward. You're not taking out less when the market is down.
@@BitsOfInterest If that is the rule, then correct, they did it wrong. I think it is interesting to see how the market can mess with how the rule presents itself. Also, as they pointed out, figuring out exactly what 4% is for you when you take into account taxes and costs is tricky.
@@BitsOfInterest4 percent of current balance
@@calebmelton5989 that is what they did, it is not what the Trinity Study looked at.
As a retiree you shouldn't take out more than you need regardless of market conditions. The 4% rule was only ever intended to be a quick, simple way for people to project how much they should save up before retiring. In reality withdrawals will likely fluctuate a bit from year to year as a natural course of life.
I think the math here biases the results in 2 ways.
1) annual merit increase ramp for lower vs higher incomes creates a higher target relative to available investable dollars in the lower income group.
2) The analysis ignores that one's savings rate and living expenses are inversely correlated. If i am able to save 40%, chances are I don't need 60% of my gross income to live (remember we pay taxes too).
Yes, a higher income makes it easier to achieve fire, but not based on the math you laid out. A higher income enables a very high savings rate that allows someone to achieve a middle class standard of living (or a lifestyle signficantly under what their income would imply).
For example, if I make 200k, but a middle class livestyle can be bought for 50k, I have 150k left to save/pay taxes. I could be saving half my gross income and living off 25%. Then my retirement target is also ~25% (plus taxes).
Yes. The key to doing this is to estimate expenses, and if you can save 60% you sure don't need to replace 60% of your income.
yea dont let these guys scare you
It was my understanding that if someone wanted to achieve FIRE, they were saving and investing at least 50% of their salary and that once they hit their retirement threshold they would continue to work on whatever they'd like on their own terms
right? FIRE people are usually saving at least 50-75%, some of the more extreme above that.
Well, the more you can save the faster you can get there, just as long as the amount you are NOT saving is how much you plan to spend when you do get there. Otherwise you really haven't FIRE.
Most of FIRE is understanding how to reduce your reoccurring expenses so you don't need $10M to retire
Fire folks talk about net savings rates after taxes. Money Guy folks always talk about gross savings rates
I successfully FIRE'ed 12 years ago. There's no hard rule about how much of your salary you need to save each month. I would recommend FIRE to anyone who values freedom over stuff. Because being a minimalist makes FIRE much easier. For most people's situation (including mine) living a frugal lifestyle is half the challenge. I'm very frugal by nature, so that has helped me a lot.
As somebody that is in the higher brackets for income, I'm shooting for a FIRE-like plan not to retire, but to have a solid financial foundation to drive my confidence, and so activists and counterparties can't threaten me. I have no plans to actually retire early, but the wealth is a vital tool for being able to compete on what is a very non-level playing field.
Retired at the end of 2022, at 38😊 and I moved to Finland where healthcare , dentist, college, daycare are free. A bonus that I bought a small condo 700 sqft with cash, no property taxes, free heating, so all utilities is $300 a month including electricity, phone, internet, snow removal, trash sewage water, plumber and electrician, car parking space. We are in the city centrum! I am loving my best life on the cheap because my hobbies are free, except for traveling and having to visit family in California 😅 not easy traveling to the states when the country is built for roads and cars.
Hey i commented this in the live feed but i think its important to point out that the initial wage assumed for Fire doesnt impact the goal for FIRE.
In the different scenarios youve decreased the wage growth based on how much someone makes. That may or may not be a good assumption. Regardless the wage growth of the smaller income and aiming for 60% of the FINAL income is the issue. The 400k person hits their savings target much quicker because you set it at 60% and 0% wage growth. The 50k person is trying to hit a fast moving target.
If the 50k person can have good wage growth and avoid lifestyle creep then they can achieve FIRE faster than a person with a 400k salary who doesnt prioritize and lets lifestyle creep affect them.
The "$50k" person is trying to replace 60% of $169k. The "$100k" person is replacing 60% of $209k. I feel like a principle of FIRE is to increase your savings rate as your income increases. I think everything Brian and Bo said about how hard FIRE is is still true, but this does make the numbers make more sense.
@@bennettmckay1244 It certainly seems like you need to put a lot more effort into figuring out your final consumption #. The lifestyle analysis seems like its actually the bigger part.
100% this comment- the math here doesn't make sense logically. All you're showing when looking at the final figure of income replacement stage is the difference between the rate of return and the increase in wage growth.
Someone making 400k or 50k with the same wage growth(5%, 3%, 0%) will get the same income replacement percentage at the end of the 25 years assuming the same rate of return.
I thought this was the focal point of the Money Guy show 25% savings/investing, and why salary doesn't really matter... Not the most useful episode from the crew
The best way to have calculate the numbers would've been:
Take 60% of starting incomes as a "costs" value. Then apply a 2-3% inflation to that value. Then when you have 5% positive wage growth it wouldn't negatively affect you achieving your FIRE goal.
The money guys example in this video would be to demonstrate the case where you let continuous lifestyle creep happen: I make 5% more so my costs are 5% more. And for financial mutants that follow the channel that shouldn't be the case.
I'd also like to see scenarios where all of the different incomes have those various wage growth rates. I knew someone who out of law school had 180k starting salary with 7.5% structured raises. Not saying that's typical for high earners. But I also think it's utterly ridiculous to think someone with a 400k salary would get 0% wage growth lol. That's deff never happened.
I think it all comes back to knowing you desired retirement portfolio size based on covering living and discretionary expenses. That coupled with chosen safe withdraw rate. So not so much replacing X or Y% of final income, which I find they tend to base these assesment on too frequently
I really enjoy your videos, they make me think about a lot of things that I haven't considered yet. I almost fell into a point of no salvation in my mid 40’s but thankfully now I’m close to retiring in a satisfactory manner and have majority of my boxes ticked.
I like what they say about considering inflation, there are some things that you should already make a part of your budget/planning early on so you wont run out of it all early on
@rancatridge well I went through a d i vorce at 46 and it basically wrecked my me, before that I never really looked at what my r e t i r e ment would be like but after the whole situation I just had to look at things differently because I knew needed to get my life together before 65 at least.
Luckily for me I was r e f erred to a p a r ticular f i r m in Colorado by an a d visor. Fast forward to today through the firm in a couple years I've been able to amass 640k for r e t i r ement and still going.
Thank you
@rancatridge they're cal led " ferro chrome securities "
Would love to see a Coast fire video by age with the assumption of retiring at 62/65 years old. Figured it would be more achievable and realistic for majority of incomes since the money has more time to grow.
I don’t understand the 25 year assumption. The point of FIRE is to be FI early, not in 25 years. Additionally, I don’t understand the 60% replacement income assumption; required retirement income is based on expenses. Further, income minus expenses determine savings (savings/investing) rate. Time to FIRE can be modeled by the savings rate. The savings rate is the ratio of expenses to income. The ratio is important, not the empirical value of income or expenses.
For example, starting with zero assets, 10% returns, 4% SWR, and a 40% savings rate a person would approach FI in 16.3 years: excel calc = NPER(0.1,0.4*-100,0,25*0.6*100,0).
They definitely over complicated it with strawman examples
We experienced the peak of our era, and now it is gone. Recession is tanking everything including 401K. My retirement equities portfolio of $750K is in the reds. I keep losing because of inflation. This world will fall to the corrupt rulers in the same way that Rome did. I'm sorry if you're thinking about retiring and you're worried that your pension won't be enough to meet the rising cost of living. Horrible foreign policies everywhere, bad regulatory policy, bad fiscal policy, and bad energy policy.
I'm very worried about the future and where we're all heading, especially in terms of money and how to get by. I'm considering making my first investment in the stock market, but how can I do so given that the market has been in a mess for the majority of the year?
@tudorrwilson I’m in dire need of guidance so i can salvage my portfolio due to the massive dips and come up with better strategies. How can I reach this advisor?
Roughly £120k in my portfolio are in tech/TSLA stocks, can I get an advice on any other stocks that I can acquire to diversify my reserve across multiple markets while creating a comprehensive portfolio allocation that balances my concerns of risk aversion and returns that meet yearly inflation.
You need to hire a financial advisor to help you diversify your portfolio by including Mutual Funds, Etf's, the 11 GICS groups, inflation-indexed bonds, and stocks of companies with reliable cash flows rather than growth stocks, where prices were based on future prospective earnings.
@@chloeanderson543 That's correct. At first, I wasn't too pleased with my gains compared to my previous performances, I was doing so poorly, I thought I needed to diversify into better assets, so I got in touch with an investment-advisor. That same year, I pulled a net gain of £550k, which is about 10 times more than I average on.
@@kalfmanbrown5953 My portfolio has been in the gutter for the entire year, so I started researching new ways to profit in the market, but everything I tried just seemed to miss the mark. Please let us know the name of your financial advisor
As a private pilot myself - that general aviation example is spot on. Always stick to the smallest Cessna you can find if you want to fly at all!
I won't get into Mr money mustache, but he created a chart showing "the shockingly simple math behind early retirement". You guys should go over it and the nuisances in your philosophies. He essentially says if you're savings rate is x% then you're living on (100-x)% of your income and that's the amount you actually need to replace. Gives a little difference in numbers between you guys
I am in the lucky, high earner bracket. I found out most of my coworkers are doing FIRE, not because they actually want to retire early, but because they want to afford options for themselves when they are in their forties. I never wanted to retire early, but I like that mindset... have enough saved that you can to keep doing the intense job if you want. Or you can to do something else. It's about having the luxury to afford a choice. I like that mindset, so here I am binging these videos too :P
money guys = the best financial content on you tube period.
Most people that retire early after reaching their fire number end up going back to work doing something they enjoy and make income anyway
Something I never hear discussed is what if you reach your fire number and continue to work and save at the normal rate another five years or so
Primary goals everyone should strive for before retiring is
1. House with no mortgage
2. No consumer debt
3. Some form of solid cash flow asset (rental house no/mortgage)
4. At least $1 mil is liquid assets
Why would you want 1M liquid? Make that money work for you!
@@MoneyMace You understand what liquid assets are right. Assets that can be sold quickly for money such as stocks
Alright now you're speaking my language. I'm excited you are covering this topic.
I have absolutely no intention of retiring, simply because I am far too passionate about the work I do to ever give it up. But even then, FIRE is still a valuable philosophy for me to pursue. Building a strong emergency fund, being able to support my parents and future family, and of course, working on passion projects.
I think everyone can take something from FIRE, even if you don't actually plan on the early retirement.
Completely agree. Not to mention the fact that having a purpose, having something to do with your mind and your time is sooo important and integral to being a healthy, happy person into older age!
I agree that the FI part is more important than the RE part. When you're financially independent you don't have to work to pay the bills; you work because you want to on what you think is important.
I also look at the "blue zone" societies and it seems there is value in continuing to do some sort of work. I feel like it keeps your mind and body engaged. My goal is to be able to retire with dignity when I can no longer physically or mentally work.
I don't PLAN on stopping work early however I do hope to achieve FI early which would then allow me to RE if I choose to, because feelings and circumstances can change.
Well, I would love to quit tomorrow so if you want to send some cash over I would gladly accept
Thank you guys for being real and laying it out there. I appreciate your honesty in all of your videos. Keep doing what you’re doing!
I love your channel and I try and share it with as many people as i can. Your content is great and you all are almost always incredibly positive and inspirational. That being said, there often seems to be a change in messaging and tone around FIRE topics. Instead of here's how to achieve through "discipline & deferred gratification" the tone here was how hard this is which seems very out of character with most of your content. Would love to see Bo more "excited about this FIRE episode" and Brian describing the "big beautiful tomorrow" that comes with FIRE!
Good to see it's still possible. Posting this now at 30 making ~55k and over 2023 I've managed to plug away 48% of my income. Low cost of living area.
23:58 I think a more relevant chart would not be comparing to current income but to current expenditures. I want to see the inflection point of maintaining my lifestyle without any changes. At more aggressive savings rates, I expect to see a steeping slope. My wife and I were able to save 50% of our post-tax income from the beginning. This was for different reasons. We were preparing ourselves for the potentiality of one of us losing a job and being able to live off of one income without worry. We weren't even thinking of FIRE. I like to think of saving as a two-edged sword. It provides money for the future and reduces the amount you'll need in the future to maintain your standard of living.
This is sort of built in, they were saying a savings rate of "up to 40%" so 60% of income would be 100% of expenses. Taxes are less clear.
I retired twice. Both times I went back to work. Now I believe in FINR - financial independence never retire ❤
Would that be FDRN? Lol
I think what people mean by retire is that they're no longer slogging away at a corporate job they don't like. It couldn't mean doing side jobs that you like working at a soap store or just doing anything, obviously humans were meant to be productive but to do so on your own and to quit to take a vacation if you want it's quite different and having to work for a living
Love this!
@@sasukesuite1hahaha well FDNR is definitely something I hear my friends and coworkers talk about having in their future. I hope in my case that once I cross the Financial Independence line, I’ll want to continue working for a few years with a renewed vigor and a pep in my step. I got some big plans by age 45 - Coast FIRE achieved + house paid off + peak earning for the household
This is why I am so appreciative of working for the state with a 2% a year pension, I contribute more both of my and my wife’s Roth and additional to her 403b as she has a pension too.
Is this suppposed to be post-tax income? Because if I can save 40k on a 100k salary and I'm paying typical taxes, 53% income replacement is great.
I used to think every investor went broke during recessions, meanwhile some make millions. I also thought everybody went out of business during the Great Depression, but some went into business. Bottom line, there's always depression for some, and profit for others, it all starts from having the right mindset. That said, I've set asides $250k to invest for future, unfortunately l'm a complete noob.
The market has gone berserk! regardless of experience level, everyone needs a sort of coach at some point to thrive forward.
True, A lot of folks downplay the role of professionals until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
How can I contact your
Asset coach as my portfolio is dwindling?
Can't divulge much, it's only right you do your due diligence. I'm been guided by Olivia Maria Lucas and most likely, the internet is where to find her deets.
Thanks for sharing, I just looked her up online and I would say she really does have an impressive background on investing
The doesn't have to mean sitting on a beach. Can just mean working reduced hours or changing to a lower paying less stressful career that feels like retirement but can still pay the bills
So being in the 200K range of income, our actual spend rate is 75K, but right now that includes daycare and also my mortgage. Once the mortgage is paid off and out kid is out of daycare and we have enough saved for college our expected current expenses would be 45K. We are planning on living using 100K as our target withdrawal rate to cover medical coverage and also to allow for a lot more travel. So living on roughly 50% is completely feasible even when factoring in the cost of medical coverage. I don't think we always need to be looking to cover 60% of your income, it really depends on your expected expenses + extra for padding + extra for free time to do more activities + medical coverage.
I think people pursuing FIRE seriously would be saving more than 40%, probably 50-70%, maybe even higher if income is higher.
Been waiting for this one to finish editing since I caught the end of it live
The sequence of return risk is an eye-opener, but that's why you have to learn to adapt. Be able to spend less than anticipated and always have a backup plan.
There are ways to mitigate it - you could have a large cash bucket or a bond tent to be able to guard against those market down turns. I feel like they really oversimplified this and glossed over a variety of protections.
The FIRE movement must include maintaining good health. Health and wealth goes together.
As is a big part of FIRE. Having SS kick in at 63-70 is what allows for a little bigger withdrawal rate earlier in retirement.
Rewatching this. My household has never made 100k, but by paying off all debt and saving 1/2 of my paycheck the last 5 years, we are well on our way to FI. We can afford anything, just not everything. Had to replace a car and paid cash for it. Vacation? Bought tickets early and paid off before we went. I bring home 42% of my teaching salary, we max two Roth IRAs using side hustles and max a 403b 23,000 a year.
I love it when they state an 'aggressive savings rate' thats below my own rate and I'm not even a FIRE dude. Just a relatively good wage for my area and living normally without debts or stupid expenses.
I’d love to see student loans calculated in the $200,000 and $400,000 examples. I’m graduating med school in a year and those salaries are typical post residency but I’ll have 3 years making $60,000 and $220,000 in student loans starting out.
My thoughts are that you can still achieve it easily if you want to. You will have to sacrifice particularly until the loans are paid off, but your income will go up and you can live a great life and still save at least 40% annually over the long term. Again, if you want to. Great video, but they also left taxes out of the equation (or at least did not speak to them).
Do some reading on White Coat Investor. Basically, unless you are going to be taking advantage of a federal loan repayment plan or are going to be working for a company that offers significant loan repayment, what FIRE looks like in the post-med school case is like this:
During residency, you enter income driven repayment. You won't make much/any progress on your loans as the interest on your loans is probably going to be about 13k per year so even just paying the interest on a typical 50-60k resident salary is going to be difficult. If you end up doing a fellowship, you may be able to make a bit more since fellows will typically be making closer to 100k.
When you get out of residency, you will hopefully be making at least 200k per year. That will hopefully translate into ~130k or so of take home income. Continue living like you did as a resident (spending 40k per year or so) and you can repay your loans in about 3 years. Then, only allow your lifestyle to increase slightly (to ~50k spending per year or so) and continue saving everything else. Even if you are in one of the lower paying specialties, you should be able to save somewhere in the range of 80-90k per year.
Running the numbers, assuming an 8% rate of return and $7000 saved per month ($84,000 per year), you will have about 3.8 million in 20 years. Even if your rate of return is 6% you will still have about 3 million. Either way, a 3% withdrawal will be 90k or more per year.
That's the broad overview of a 20-25 year FIRE plan as a physician. If you finish college at 22, med school at 26, and residency at 29 or 30, that puts you retiring in your early/mid 50s, which isn't the super early retirement that gets all the clicks on UA-cam, but is certainly early retirement.
Of course, the above analysis doesn't take into account things like spousal income or the possibility of making more. There is a huge range of incomes even in low paying specialties with primary care ranging from the 150s to the low 300s, so if FIRE is your goal, it is very worthwhile to investigate your potential jobs closely, look at bonus/productivity incentive structure and figure out how to maximize your income potential.
FIRE has different levels + whether you retire in same spot/home vs go to a diff country where COL is half or less. The latter is much much much achievable for sure. FIRE at 30? You need to save ~90% in your 20s. At 40, maybe around ~60% in your 20s & 30s. At 50, I think you can make do with 25~30% as long as you downgrade when you retire (mortgage paid off + kids are independent + downsize home/or move to cheaper country). I think FIRE at 50 is very doable for disciplined financial mutants who save 25+% as long as kids are independent by then.
People always misunderstand what the 4% rule is from the original paper by Bengen. He doesn't say withdraw 4% of total portfolio every year of retirement. The paper is testing withdrawing 4% of total portfolio in the first year of retirement, setting what that dollar amount is and then withdrawing that dollar amount adjusted by actual inflation every year after that regardless of portfolio value. Obviously if you always withdraw 4% of your portfolio value is you would never run out of money because if your portfolio value decreases you would withdraw less if you just stuck to 4%. That ISNT the strategy and I was shocked and bummed that the Money Guy show didn't know that or decided to represent it as just a flat 4% withdrawl every year.
What Bengen showed, which was what was impressive and encouraging, was if you did that regardless of what 30 year period you looked at in the history of there was a greater than 95% chance you would be able to do that for 30 years. So, let me give to real examples and show what the 4% rule is versus what it is not.
You retire with $1 million. First year you withdraw 4% that is $40k. During the year the stock market drops an astounding 50% so now you have basically $500k. Next year you don't withdraw $20k, you look at inflation see that it was 3% that year and withdraw $41,200 despite that downturn. What the Bengen paper says is even though that feels so wrong that over the history of the market chances are you will still be able to do that year after year and make it through 30 years.
You guys misrepresented the 4% rule in this video.
EDIT: lol I should have given you guys more credit I posted this after the first 6 minutes of the video because I was shocked by the example you were giving. My bad you were showing exactly what I said above and doing it by first showing the common misinterpretation of the rule was actually brilliant. Although you still didnt run the actual scenario which was starting at 4% and increasing for inflation every year. Still better than I thought so egg on my face.
I'm struggling with the math, if you get social security at 70, working 25 years, and want a 40 year retirement for your money means you start working at 5 years old and are retired by 30. These assumptions just don't work. In reality if you start working at 20 and retire at 45 (very early), you need to fund your lifestyle for just 25 years before social security takes the bulk of it. Once you adjust those 3% withdraw rates to 4.5% then all the numbers start coming together really nicely. If you doubt social security will replace your fire income then run the numbers. Fire people spend less of their income than normal retirement people so social security places a huge (or all) of it.
FIRE - Financial Independence Retire Earlier to do what I want. I made sure what I really to do still makes money just not enough to live off of.
We achieved Fire in November 2021 at 38 years old. Then moved out of the US to our home country.
Everything that could go wrong for us, went wrong. Because of a shortage in containers around the world, shipping our staff ended up being double. Because there was a shortage of used cars, our car in the new country ended up being almost double, because the labor and building material shortage, the building of our new home ended up being... You guessed it, double. The war in Ukraine and inflation made our investments suffer and the 2 years fully funded emergency fund we had, ended up lasting 1 year and 2 months, because of inflation and all the extra expenses I mentioned.
Thankfully, my husband and I were able to start working remotely and we are no longer Retired, but thank God we are still Financial independent. I agree so much with the statement "measure twice".
@trave7644 we don't live in the US anymore, the rest of the world is a much cheaper place to live in. We can live comfortably with $2.5k a month (entire family of 4). Retirement it's not an age, it's a number. We have been able to spend more time doing other things that we love and we don't get pay for (charitable work with people in our town) and also be close to our elderly parents. But my advice to anyone that wants to retire young would be, whatever calculations you made, multiply that times 2, just to be safe.
This one was a bit frustrating, because they made it out like it was the wage difference that impacted the final salary replacement, but in reality - it's all to do with their wage growth numbers (5%, 3%, 1.5% 0). If they ran the numbers again and flipped the growth assumptions round, they'd come to the conclusion that it's much easier to fire on 50K with no wage growth? That doesn't make any sense. I think they should have focussed instead on what actual lifestyle impacts the wage difference makes, e.g. 40% savings rate at 50k means you're likely cutting into spending for necessities, whereas high income folks have a lot more latitude with their spending cuts, because most of it will be for luxuries.
Yeah when you run FIRE calculations and base it on replacing a percentage of income (instead of expenses) you're already down the wrong path. The whole point is that saving also means you are cutting expenses. If you get salary increases you should be able to save more (a higher percentage).
The thing I don't like about the FIRE acronym is it does not represent the mentality correctly. The words "retire early" make it sound like your goal is to stop working entirely (early retirement), and that is fundamentally NOT what FIRE is about. FIRE is about reaching a point where you can separate financial burden from your work. You still absolutely plan to continue working, you just do so with goals other than monetary gain. Common goals are to follow a passion, help people you care about, or just coast in a cushy stress-free work environment that gives you something to do.
If your goal is to sit on a beach somewhere or to travel the world, you are not FIRE. you are seeking early retirement.
The big gap in the lower incomes is about the salary ramps. The $50k with a 5% increase ends at $169k, the $100k with 3% ends at $203k, and the $200k with 1.5% ends at $290k. The fact that the early contributions are from an amount significantly under the final target really hurts those - but if you can avoid lifestyle inflation as salary increases, you can raise your contribution over time.
Buying a home, having a family, and taking care of medical needs is not lifestyle creep. Assuming that they should contribute 100% of their annual 5% raise just doesn't make sense with inflation and cost of living increase as you age.
As others are saying in the comments, this video might need to be re-done to address some missed points.
For example salary and saving is really dependent on location. And also what about taxes, since these are based on gross incomes, are we assuming this is all in our 401k and tax advantaged accounts?
This shows is very inspirational. I love to listen to it . Thank you . Chicago , Illinois
Money a guy Show. Please do a separate episode to address all these comments. There is good co tent there and for myself, will help understanding. Thanks, I appreciate you!!!!
"How to Achieve Fire By Income"
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20 minutes of why FIRE is undesirable since it's a threat to the Money Guy business model XD
Great episode. I had never seen that slide at 13.10, great insight on realistic withdraw rates based on FIRE retirement periods. That combined with the Know Your Number data gets you set on the path with solid information.
A quick back of the napkin calculation for FI is: ((1-savings rate)/(rate of return))/savings rate=years to FI.
EX: 50% savings rate with a 7% return ((1-0.50)/(0.07))/0.50=14.3 years of savings to FI.
Thank you for the formula.
Just so you know, the expression is “back of the envelope”.
@@genxx2724 I’ve probably spent too much time in pubs ;)
Definitely fall in the fi and rewire. If the kids are taken care of and finances aren't weighing me down, I can choose a career that prioritizes what I love irrespective of paycheck.
So many of the careers that impact people, non profits, ecological work, teaching, are death sentences from a financial stability point of view.
Financial independence, then do what matters.
Reading people’s comments makes me feel like a broke fool 😂. Just started watching these guys. I’m going to have to make large lifestyle adjustments
I save and invest roughly 70% of my salary in the financial market (high yield etfs, equities, coins, gold, etc.). This is essentially how I made my first million dollars, albeit with an FA. I work as an engineer and live in upstate New York. My spending is modest. I pay minimal rent, have no debt, and my car is paid off. I can just save, then. At this moment, I consider myself lucky and am thankful that Susan Kay Mack is managing my portfolio because she is the only person I know who is wealthier than I am, hehe.
Truly Stocks, ETFs and Mutual funds are the best investment decision you can make both short term and long term for steady money flow. Kudos
out of curiosity I did read about Susan Kay Mack on the web.,she has a great resume.
i'm happy there are lots of people doing so well...Love this channel for the transparency
Y’all need to do better with these bot accounts 😂. Generic first and last name with 4 digits at the end, hmmmm
The stats presented from 23:45 on are *not applicable.* FIRE income numbers should be a function of % expenses in your budget (what % you live off of), not % TOTAL income replacement!! Many doing FIRE have expenses that are 25-40% of their GROSS income BEFORE investing 40%, 45%, 50%, even 60%. Would love to see another segment with corrected figures.
The stats are completely applicable, they just use different assumptions than you. Clearly you prefer to use expense based assumptions for how much you will need in the future, but that doesn't make using income based assumptions incorrect., it makes them more conservative (with moderate incomes at least).
@@Alan-jk1yi I'll quote what @diddlydum2 posted below, as it applies:
"This one was a bit frustrating, because they made it out like it was the wage difference that impacted the final salary replacement, but in reality - it's all to do with their wage growth numbers (5%, 3%, 1.5% 0). If they ran the numbers again and flipped the growth assumptions round, they'd come to the conclusion that it's much easier to fire on 50K with no wage growth? That doesn't make any sense."
Unfortunately, the income based assumptions do not make sense in the video, taking them for what they are. IMO using expenses as a proportion of income is the way to go.
@@AlexFlavell Well then I'll quote what I said in a different post: "You're assuming no life style increases. Now I agree that if FIRE is you goal, spending 60% of your income when you make $400k is a completely unreasonable amount of consumeristic spending, but it you're much closer to the average income (which most people are), 60% starts becoming more and more reasonable. You seem to be leaning more towards a lean FIRE philosophy, while they are leaning more towards a fat FIRE philosophy. Their philosophy on FIRE isn't wrong, it's just different from yours."
Basically, the closer you get to an average income, the more the proportion needed to replace basic needs approaches 60%. It also allows for more discretionary spending than your assumptions, which is closer to fat FIRE compared to your more lean FIRE. You may not like that philosophy, which is fine, but that doesn't mean it doesn't make sense. It's conservative, and I'll agree that it makes much less sense for very high incomes, but it's not a bad rule of thumb to use for people who's incomes are more towards the average side (which, again, is most people).
@@Alan-jk1yi That is a very wishy-washy approach. 60% spending may be in line with the average consumer, leaving 40% left to invest. With that approach, it's so easy to get it wrong when calculating fire; it does not matter what the income is when doing calculations, all that matters are proportions of expenses to income. See below...
Take your example. Let's say someone makes $100k a year and spends 60% annually, $60k. FIRE lies in what happens with the remaining $40k. Was it donated? Is it saved? Lost? Invested?
Compare what happens if that $40k was saved annually vs. invested. If saved over 25 years, that 40k turns into $1M. Not bad, but not enough to replace *annual expenses* ($60k = 6% drawdown annually). If invested over that same time period at 8% annual returns, that same principal turns into $3,158,176. More than enough to cover annual *expenses* and then some.
To your point about incomes differing, take the same scenario, but start with someone making $500k. 60% expenses = $300k a year annually. If saving all of the rest ($200k annually) over 25 years, it turns into 5M. You'll find that the proportion is the same as above; 4% of $5M ($200,000) still does not cover $300,000 annual expenses. This scenario is invariant *no matter how high or low income gets* IF the proportion of expenses is the same.
The scenario changes once the proportion of expenses changes.
@@AlexFlavell Dealing in percentages is inherently imperfect as it glosses over a lot of nuances. Yes, income is irrelevant to the math if we're talking about replacing fixed living expenses, but that misses the different realities that different people at different income levels face. You're making a mathematical argument, I'm making a practical one.
Mathematically, the percentages are the same for someone making $50k as someone making $500k. But the reality is, the person making $500k could easily live luxuriously off 20% of their income, while the the person making $50k might be struggling to live off of 80% of theirs, without any luxuries. They are fundamentally different situations even if the relative percentages for how much they will eventually need are technically the same. That's why replacing income is a decent approximation for most.
Yeah, it's doesn't work well for super high income people, but they effectively play by different rules since the cost of living for a decent life is only a small fraction of the their total income, while reverse is true for lower income people. I don't see that as wishy-washy, I see that as acknowledging the messiness of real life.
Easier for me to estimate how much I'd like to spend today, then estimate a rate of return adjusted for inflation. Contributions also have to be adjusted for inflation. If I can get to the FIRE number with 3%, then great!
That said, that ship has sailed a long time ago. I started investing very late so just getting to regular retirement is the goal.😅
Bo is so excited.
I did fire to be a stay at home mom. I went back to work to enjoy giving to my kids. From what I see, retired people get bored.
Friday morning, a retired friend called and work me up at 7:15am. She talked for over 2 hours. When it's 100° on a hot August day, bored retired people will be on a golf course.
Wow, Annie. That’s impressive. How old were you when you were able to stop working, and how did you chirca FIRE?
Imagine the snark and backlash you’d receive if you made this comment on the Ramsey site.
I’m confused, can you please explain how this would be poorly received on Dave Ramsey? How do his concepts differ from these
I’ll be in the gym! Screw a golf course 😂
Your channel is exactly what I've been looking for thank you.
To add to these numbers...10% of Americans make at least 102k a year and only 1% of Americans make 400k a year. So, just to try and pull off this fire, you're most likely going to need to be closer to that 100k level of income, which excludes the mass majority of Americans. I was only making around 55k a few years ago and realized I had a lot of work and sacrifice to do in order to get where I wanted to go, so I started a side hustle. Now 4 years have passed and I'm making quite the income from the side hustle and my job is expecting to bump me from the 70k a year I'm making now, to 100k. So, paired with my side income from my business, I have a MUCH better shot to get to where I want to be...but that's not saying that I took it easy the past 4 years. I've busted my butt to get where I am today. Focused, but not finished.
I'm viewing this from a household income perspective as expenses are typically based on the household.
So I am saving 35% of my gross income pretty comfortably, so living on 65%. However ALL my tax is comign out of that 65%, so I don't really need to replace 65% of my income, I need to replace whatever my net income of that 65% is, which is probably actually just 35% (because my income is high and also I live in Canada lol)
Realistically for true FIRE, you need to save 50 to 75 percent of your income as well as invest almost all in stocks and hopefully over a 15 to 20 year period, you can capture average to above returns without significant drops like 2008
I’m all for calculating conservatively but this is overly so. Based on these numbers someone making $200k+ for 25 years needs to invest 40% to barely make the cut.
Cost of living in retirement is a major factor that needs to be taken into account. Aiming to replace 60% of income is definitely not needed for everyone.
Bear market usually lasts 1.5years. How about prepare 2years emergency fund besides investment portfolio in the market. As long as its a bearish market, instead of selling investment, spend the emergency fund on expenses. When the market is back to bull, withdraw and fulfill the 2year emergency fund. Will this way get the first case better?
Honestly, if I’m able to retire by 60 I’d be beyond happy. I wouldn’t even be mad at 65
The first time these guys did a show on FIRE, they missed the mark so badly with their math and when I tried to comment on it, my comment somehow never didn't show up. Now they are pretending to understand the movement (and the math behind it) and doing that backhanded compliment, two-faced thing that smarmy salesmen do. People who pursue FIRE often do their own research and ditch their financial advisors and that's all this overly cautious "make sure you measure twice and cut once" feigning concern stance is about. Guys, your AUM is not threatened by FIRE. There are enough people not pursuing FIRE for you to still do really, really well. You can't sit this one out.
Best episode in a great time guys! A lot of useful information even for people not interested in FIRE...
I'd love to see the calculations redone to account for the fact that if your savings rate is ~40% then the number to maintain your pre-retirement lifestyle is no longer 60% of your gross income anymore. That may help make those numbers seem a little less dismal!
I’m 25 making 85k currently. I will have at least one rental if not two, I’m really hopeful that that can help boost my chance to fire
I think though this was well put out, but it isn't for me. Considering a mid income, short minded person with constant need for cash, are these still recommended? I have over $142k in my portfolio, I'll appreciate a short term profitable investment that could say turn $142k to $300k
Geoarbitrage and 60% of your income may not be necessary. We are planning on retiring at 50/51 years old as a perpetual traveler. Not quite F.I.R.E by the strict definition, but close enough.
The only variable changing these numbers are the income increases. One thing to keep in mind is the higher the savings rate, the less you’re spending. If you save 40% of gross and are taxed at 25%. If you can replace 40% of gross income, you were only spending 35% of gross (100-40-25) before and will actually get a pay raise in retirement.
Weird that the most aggressive savings rate they are modeling is 40%, even though the typical FIRE approach sets 50% as the MINIMUM savings rate
Is Bo ever NOT excited about a show??
This was depressing and im not even trying for FIRE. Just started late and work in a job i love but that is notoriously low paying. It feels like ill never retire.
Thought this was going to be an encouraging video. Nevermind...
I would think most firees would move internationally after retirement which would greatly reduce the 60% income replacement requirement. For instance, you can live pretty solidly in a big city in SE Asia or S America for 2k a month.
Coast FI, is where it is at imo
Something I don't like about the sharing of 60% retirement percentages of final income. Say you are making 100k, but you are living like the 50k person or you continue to live like you make 100k towards the end, which is 209k after 25 years. Think about it you're already throwing that extra money into retirement you are used to living on less, so your COL is lower than the final retirement. That's why I like the beginning slide that shows what if I pull a static number vs 4% each year.
Buckets are the answer to the sequence of return problems.
In the sequence of return example, I feel like the examples aren't very comparable. The person with $1million at 2003 would've presumably endured the downturn of 2000-2003 so one could assume they would've had a higher wealth at 2000 than the first example. Mathematically, of course the sequence makes a HUGE difference.
In order to visualize sequence of return risk without other variables, you must start with the same portfolio value at different points in time or only work in percentages.
People making $400k usually have a lot of student loans or business owners who pay a ton in healthcare. I've seen people in these situations lose everything due to healthcare cost.
You were lied to
@@dietbajablast5790By who? Statics show that doctors and dentists do not retire early. My plumber who owns his own business all these years hasn't retired early. My buddy who had his own business fixing planes hasn't retired. Infact, he works two jobs. He flies for Delta and fixes planes on his days off. He needs benefits from Delta. My buddy who owns his own trucking company went to work driving a train for benefits and hire another driver for his trucks.
I did very very well during the housing crash and took time off to be a stay at home mom. I got by on rental income. I was very healthy and instead of health insurance, I paid cash. One of my tenants worked at a local clinic that only had a nurse practitioner. So, I got special treatment. I think I went twice all those years. I retired at 32 to raise a child. I know the downside of it. As long as people are healthy, there isn't a problem. I've seen videos of couples who retired early and when sickness hit, now they are broke.
Being in real estate, I had a builders discount at the local builders supply store. The owner is a great guy but now he works as a cashier after his wife got cancer. Business owners DO NOT have the same benefits as a W2 worker.
I'm well aware that people who have NO LIFE can aquire wealth a lot faster than a normal adult. But living at home with mommy, never having a spouse or partner, and never having any children isn't much of a life. I know that guy and it's sad. I feel bad for his sisters. He clings to them and I can only imagine how bad it is after retirement.
Last week, my coworker was telling me how much he makes rewiring homes and other electrical work. Then he tells me how much it cost to carry insurance in case there is an incident. Again, a person who has his own business but working a full time W2 job for benefits.
I've been a landlord since I was 19 years old. I understand what it takes to reach fire because I retired for 14 years...and that works fine until someone gets sick. $400k per year doesn't mean much when chemotherapy is $200k per year. My father in law owned his own business when he was diagnosed. He retired early after his diagnosis. The sickness drained a ton of wealth even though he had a cancer policy. This was after a life of camping for vacation with a wife and 4 sons.
I'm saving 70% of my income, i make around 100k a year, not sure what the numbers are, I'm just grinding.