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I understand the idea of withdrawing money from an S&P index fund in order to endlessly draw 4% of the value from the fund and retire quicker. Though the job I’m doing now is the best job I’ve ever done, I still really just want to retire so I can live life completely on my own terms. I could live easily on 50k income since I do fine on 45k income right now. I recently made a thread on saving 5 million, but come to think of it, even if inflation is especially harsh in the next few decades, I bet 3 million would be enough (since 1.25 million would replace my income and then some in today’s money). That said, I am mostly opted out of social security (I should get a little from my time as a pharmacy tech, but it won’t be much) in favor of teachers retirement system based on the forumla (0.025xp, where x is at least 20 and equal to the number of years I teach and p is my final pay...x already equals 1, so 19 to go and I can cut my minimum savings goal in half). I just turned 23 in march. If I wanted to completely retire at 42, what should I do these next 19 years? Should I take an online side job tutoring chinese kids online 5 hours every saturday night for $22 an hour minus tax?
This job may be much better than anything I’ve ever done, but I seriously doubt anything is as great as just doing what you want and maybe even experimenting to find a way to make extra money that’s actually fun (without really needing the extra money so I really have ultimate freedom).
I guess tge other thing I should work on is losing weight since in the couple years after my grandmother died, I went from fit to morbidly obese and barely have the energy to move and it feels like I’ve gotten slower at processing things than I used to be.
Health insurance from 55 to 65 will run you around 550 to 850 a month for catastrophic coverage. 10k deductibles and no co pays just all you up to 10k before insurance pays a cent. Who knows what will happen with subsidies. Being obese in your 20s is a bad sign because your body is going to go through a lot of changes as you get older. Big time changes and it's going to get much harder to not be fat and remain healthy.
Medicare is a finish line people feel good about crossing because they can finally get the treatment they should of had. Costs drop substantial but even then you'll be looking at $280ish in today's dollars for Medicare and supplement.
So factor those costs in.
50k a year today, in 20 years will be the equivalent of 33k today. Assuming 2% inflation.
That isn't a lot of money, when you factor in health insurance costs it is even less deducting car and housing. The essentials will drain that quickly.
That gets you to your early 40s with another 20. So let's push that inflation number out further.
At 63 that 50k a year would be equal to about 22k s year today.
It's it possible? Sure, people live on that and less now. If everything works out, you stay healthy and survive the crappy health insurance and beat the health factors you have you might be able to do it.
You wont be living as well as you think you will though. Better not have any health issues before 65 or you better pray single payer comes through because one event will bankrupt you.
You don't want to be 55, 15 years out of work and needing a job. That is what makes what you're doing so financially dangerous. It can be done, there are a lot of risks and 2% inflation might be low, we are looking out 40 years. You'd have to have cheap, paid for housing and enough money for replacement transportation. Food is obvious. Plus life expenses.
I understand the idea of withdrawing money from an S&P index fund in order to endlessly draw 4% of the value from the fund and retire quicker. Though the job I’m doing now is the best job I’ve ever done, I still really just want to retire so I can live life completely on my own terms. I could live easily on 50k income since I do fine on 45k income right now. I recently made a thread on saving 5 million, but come to think of it, even if inflation is especially harsh in the next few decades, I bet 3 million would be enough (since 1.25 million would replace my income and then some in today’s money). That said, I am mostly opted out of social security (I should get a little from my time as a pharmacy tech, but it won’t be much) in favor of teachers retirement system based on the forumla (0.025xp, where x is at least 20 and equal to the number of years I teach and p is my final pay...x already equals 1, so 19 to go and I can cut my minimum savings goal in half). I just turned 23 in march. If I wanted to completely retire at 42, what should I do these next 19 years? Should I take an online side job tutoring chinese kids online 5 hours every saturday night for $22 an hour minus tax?
This job may be much better than anything I’ve ever done, but I seriously doubt anything is as great as just doing what you want and maybe even experimenting to find a way to make extra money that’s actually fun (without really needing the extra money so I really have ultimate freedom).
I guess tge other thing I should work on is losing weight since in the couple years after my grandmother died, I went from fit to morbidly obese and barely have the energy to move and it feels like I’ve gotten slower at processing things than I used to be.
I'd be more worried about the obesity thing than the money thing. I tend to notice that people who manage money well tend not to be overweight.
Maybe instead of taking an extra job, you should go to Overeater's Anonymous. A friend of mine did that more than a decade ago. She lost 60 lbs and has kept the weight off.
Retirement isn't any good if you retire in poor health or end up with high health care costs which prohibit you from retiring in the first place.
Max out your Social Security contribution for 35 years. Defer collecting it until age 70. That’s $46k of COLA-protected passive income that is largely tax free so it spends the same as a $50k 401(k) distribution. That’s the core of my retirement math.
The only true passive income is from FDIC-protected bank accounts and government bonds. You but or save and let it ride. Any stock investments are, by their nature, not passive. You have to pay attention to stock investments and what type of stock investments you have and need. I'm not suggesting trying to time the market or follow the hot trends, but you need to rebalance your investments from time to time and change your investment philosophy. You also need to take inflation into account as $50K when you're 70 buys a lot less that $50K when you're 35.
The only true passive income is from FDIC-protected bank accounts and government bonds. You but or save and let it ride. Any stock investments are, by their nature, not passive. You have to pay attention to stock investments and what type of stock investments you have and need. I'm not suggesting trying to time the market or follow the hot trends, but you need to rebalance your investments from time to time and change your investment philosophy. You also need to take inflation into account as $50K when you're 70 buys a lot less that $50K when you're 35.
You can let an index fund run with no attention at all .. rebalancing is only for when you want to have other investments but it is not needed until you need to raise spending cash
You can let an index fund run with no attention at all .. rebalancing is only for when you want to have other investments but it is not needed until you need to raise spending cash
Or simply hire a professional to manage your stocks and such. I haven't hardly actively managed the bulk of mine for a long time now.
I think the OP means passive as opposed to active work or labor.
Max out your Social Security contribution for 35 years. Defer collecting it until age 70. That’s $46k of COLA-protected passive income that is largely tax free so it spends the same as a $50k 401(k) distribution. That’s the core of my retirement math.
This is crucially important and good advice. I'm shocked that so many go to prodigious effort to do something more clever, which ultimately pays less, and requires more work.
Aside from the issues of personal health, of which nobody is immune (pun intended), it's hard to overestimate the utility of steady, well-paying employment. My own evolving belief, is that it is better to be profligate and rubbish at money-management (so long as one doesn't incur debt!), but to have a stably high salary, than to be thrifty and a wise investor, but low-income.
The first reason is that accumulating a substantial "stash" (as some luminaries in the FIRE community term it) is a pleasant sensation, but it hurts and irritates one to start spending it. The "stash" becomes more a badge of inner honor, than a source of income. If Magic Qwan attains his three million or whatever, at age 42 or whatever, that's knee-slapping fantastic... but thereupon, how would he feel about spending it?
Second is Geoff's point, or my rendition of it, about the potentially ditzy employee who spends all of his money on sports-cars and posh vacations, having nothing to show for it... except for a fat Social Security earning stream good for perpetuity (barring some nasty change in the law, of course).
In other words, earn well, stay healthy and retire late. That [perhaps] is a better strategy than the millionaire-treadmill... or at least an alternative worthy of consideration... if only the health-part stays reliable.
Max out your Social Security contribution for 35 years. Defer collecting it until age 70. That’s $46k of COLA-protected passive income that is largely tax free so it spends the same as a $50k 401(k) distribution. That’s the core of my retirement math.
How do you max out your Social Security contribution?
Uh, they can change the rules on SS at will. They cannot fund the promises they already made. The most likely (in my estimation to go) will be the 70 full retirement age and the cap on earnings. Note that the changed the retirement age rule in 1983 and made massive change in the past few years with the elimination of file and suspend. Also since the amount that is tax free is not adjusted for inflation they are clawing back more in tax revenue from those collecting each year, among other issues.
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