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Look at MMM espousing how his family lives off of less than $25k/yr. He has a paid for car (now he just calls it a company/blog expense and buys new ones that he doesn't count as part of his yearly expenses). He has a paid for $300k+ home, etc. For a normal couple that would need to work and have a kid you are talking about $12-$15k more for daycare, a $2k/month mortgage, commuting expenses for work, etc.
So now that same couple that lives just as frugally as MMM and his wife are spending $70k/yr. to live the same lifestyle they live on $25k/yr.
And I don't think the article was meant to say that frugality isn't good, just to say that it alone won't allow millennials (specifically) to live the lifestyle of freedom they see these bloggers and podcasters espousing.
All these people who are becoming rich and making a living off from their books, lectures, blogs, etc about preaching early retirement in their 30's should be largely ignored. Unless that is a person's objective, to become the next retired frugal thirtysomething making a living off suckers.
But, I also wouldn't want to live and die by the trinity study, which only looks at the US markets during a time when the US was the only world power in manufacturing (40s-60s) and when the US started the computer/internet revolution (80s-2000s).
Trinity Study was done in 1998 and used market data covering a period up to 1995, so saying it includes the computer/internet revolution to 80s to 2000s isn't really accurate since the associated market runup happened mainly from 1996-2001.
Either way, does anyone really live and die by the Trinity Study? There are far more tools available now that use current data and allow a much more dynamic analysis, I could be wrong but I'd assume most of these FIRE millennials types aren't looking at a 20 year old research paper. They are using online calculators where one can plug in expected social security, all sorts of different portfolio mixes, etc. to arrive at their maybe safe number. Sure the time frame includes when US was the dominant manufacturer but also includes the Great Depression, the dotcom crash, the S&L crisis, stagflation, the period from 1961-1993 where the stock market didn't budge, etc.
This time it's different = something that could be said at any point in history. Pick a number you feel comfortable with that has a good historical chance of success, have a backup plan, and hope for the best.
All these people who are becoming rich and making a living off from their books, lectures, blogs, etc about preaching early retirement in their 30's should be largely ignored. Unless that is a person's objective, to become the next retired frugal thirtysomething making a living off suckers.
I think naysayers should be ignored.
According to naysayers:
--They don't have enough in their portfolios to last a long time even if they use a super conservative 3% withdrawal rate.
--They aren't really retired/financially independent because they earn money and are getting "rich".
--They're lying/misrepresenting their financial situation...the real money they make is from their blog/book, etc.
--They can't have a decent life on X income regardless of how high X is. Suze Orman recently said in an interview that a $2M portfolio that generates 80k (4% rule) plus a paid off house still wasn't enough.
The naysayers never consider that sometimes when you're not trying so hard to earn money you sometimes can actually make more than when you were working a traditional job. However, this process usually takes several years to bear fruit. And the beauty of FI is that you have the ability to take risks that you couldn't when you didn't have a safety net of a $1M portfolio. And taking calculated risks can really pay off....sometimes much more than an hourly or salaried job can. And if it doesn't, no big deal, you've still got your portfolio.
It works like this....You have a portfolio that generates a livable income (whatever that is to you)...then you do stuff you've really wanted to do that a working 9-5 job got in the way of. Could be personal training, writing a blog, writing children's books, doing consulting, analyzing stocks for a web site, personal finance consulting. For most FI people, these activities probably will never generate a huge income. But over time, if these activities even generate 10k per year, that 10k can be used to beef up the portfolio or some of it can be spent for one time expenses...either for fun stuff or maybe for a new roof on your house. For some people, these activities will generate more than that, so that maybe half or even more of their expenses are now paid for by doing work they're passionate about. But this process typically takes several years before there is any significant income from these projects. The paradox of being frugal and not needing a lot of money is that money often falls into your lap when you'renot striving so much for it.
It's ironic everyone believes retirement should be automatic. Nowhere in the Bible does it say retirement is automatic or that you need to be retired in order to be happy.
My goal is whatever p/t work I do in retirement, it is what makes me happy. Then I won't know it's work yet will be keeping my mind and body, fit.
Too many people retire, eat like pigs, then die quickly. Either due to unhappiness or they aren't healthy.
Trinity Study was done in 1998 and used market data covering a period up to 1995, so saying it includes the computer/internet revolution to 80s to 2000s isn't really accurate since the associated market runup happened mainly from 1996-2001.
Either way, does anyone really live and die by the Trinity Study? There are far more tools available now that use current data and allow a much more dynamic analysis, I could be wrong but I'd assume most of these FIRE millennials types aren't looking at a 20 year old research paper. They are using online calculators where one can plug in expected social security, all sorts of different portfolio mixes, etc. to arrive at their maybe safe number. Sure the time frame includes when US was the dominant manufacturer but also includes the Great Depression, the dotcom crash, the S&L crisis, stagflation, the period from 1961-1993 where the stock market didn't budge, etc.
This time it's different = something that could be said at any point in history. Pick a number you feel comfortable with that has a good historical chance of success, have a backup plan, and hope for the best.
The CAGR between 1985-1995 was 16.5% over 3% greater than the CAGR we’ve seen between 2010-2017, so I’d hardly say most of the run up was between 1996-2001 of that period. It was about the same. My point wasn’t that they aren’t using other calculators, just that they are leveraging the findings of that study. There aren’t a whole lot of 30 year periods to draw from and even fewer 40 year periods, which would apply to 30 or 40 year olds retiring. If you asked a statistician if they would feel comfortable using Ns of 120-150 to draw comprehensive inferences about the “truth” of the population you’d be hard pressed to find one that says sure. That’s roughly the number of 30-40 year periods the simulations are running.
Again, just pointing out that there is some really huge optimism about future market return expectations and we could very well have a market like Japan 15-20 years from now. To say it isn’t possible because the US market returns haven’t ever looked like that ignores all the other market data in the world. If you want to examine all possible outcomes why would you ignore other available data?
In all honesty I’m sure the people actually retiring are considering this risk, the group I see being the most optimistic are the people calculating their FI dates based off of CAGRs after inflation of 7-8%. I bet they are going to be disappointed. I model mine off of 3-5% CAGRs and even I might be disappointed.
Mr. Money Mustache did it first and wrote about it (still does). His angle is less consumerism and financial badassity.
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