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What’s the logical basis? It’s that I put all that money away every year all those years I was working, so that I would be ABLE to consume without “producing anything in trade”, in retirement. That’s just common sense. Just like canning veggies from the garden, and freezing perishables, so you have food in winter or lean times. No difference. I already produced. I’m just consuming at a later time.
That's money madness... the belief that money has intrinsic value independent of the marketplace. The preserved vegetables are the reality, not the price in money associated with them.
If you 'hoard' money - taking it out of circulation - you defeat its purpose - facilitating trade when barter is insufficient.
But what you really mean is to indirectly loan that money out at usury (the abomination) which involves all manner of scams to operate. (Which is why usurers are sent to the lowest level of hell in the Divine Comedy).
You can't really 'save' money any more than you can save up hours of a plumber's visit or good will or next year's harvest.
Worse, there is no correlation between the volume and value of circulating monies and the marketplace. If there was a sudden doubling of output, there would not be a doubling of money tokens to facilitate trade of that output. Why else do farmers with bumper crops have to suffer a drop in price? "Too little money chasing too much goods?" Bah. Nonsense.
If you really think money is what makes you 'set for life,' let's just credit everyone with 22 billion billion dollars. No one 'needs' more money. So now that everyone is 'set for life' who will bother to work and trade their labor and property for more money they don't need? Even the starving children are phenomenally wealthy. But unless folks get busy and productive, civilization collapses.
In the old days before socialism and pensions, the only security in old age was a large family or private charity.
If you don't have a family, time to get adopted by a rich one!
That's money madness... the belief that money has intrinsic value independent of the marketplace. The preserved vegetables are the reality, not the price in money associated with them.
If you 'hoard' money - taking it out of circulation - you defeat its purpose - facilitating trade when barter is insufficient.
But what you really mean is to indirectly loan that money out at usury (the abomination) which involves all manner of scams to operate. (Which is why usurers are sent to the lowest level of hell in the Divine Comedy).
You can't really 'save' money any more than you can save up hours of a plumber's visit or good will or next year's harvest.
Worse, there is no correlation between the volume and value of circulating monies and the marketplace. If there was a sudden doubling of output, there would not be a doubling of money tokens to facilitate trade of that output. Why else do farmers with bumper crops have to suffer a drop in price? "Too little money chasing too much goods?" Bah. Nonsense.
If you really think money is what makes you 'set for life,' let's just credit everyone with 22 billion billion dollars. No one 'needs' more money. So now that everyone is 'set for life' who will bother to work and trade their labor and property for more money they don't need? Even the starving children are phenomenally wealthy. But unless folks get busy and productive, civilization collapses.
It appears the rational mind is giving way to the emotional & critical, making FI/RE seem like a complex and strange concept that is somehow wrong. As I opined in the past I think the "r" word is the trigger. Someone says they're retired and all kinds of red flags go up and people get defensive about their own situation.
Saving and investing is a choice and it does not require living in a tent and eating beans & rice and forgoing all pleasures to be able to build up a robust portfolio over time. It also does not require saving 50% of your income. If someone *wants* to be intense about saving because they want to have other options before age 55 then it's doable and they will generally need to save more than 20% of their income.
Consider people age 50 to 60 are managing to retire, even with no pension. That's also "early" retirement. Some manage to do so in their 40s. My college roommate's brother retired in his late 40s.
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But back to the topic of the thread. If you found yourself jobless at some point (say age 50) would you prefer to have a nest egg that would sustain you in case you had a protracted length of unemployment or not?
Hoping you were not aiming that at me? I’m not defensive about my own situation at all. Many of the examples in the “FIRE” posts that I have read here and there, simply don’t appeal to me. It’s fine for those that want to live that frugally. I don’t, and thankfully I don’t need to. Saving money for my retirement and for the possibility of a debilitating medical issue is my goal. If others have different goals, there’s nothing wrong with that.
Just so I understand, the whole premise Is based on saving enough money in the market so you can collect 4% each year to live on and at that point you are fi? We’re not talking about any other method like real,estate investing, right?
Not exactly. The whole premise is having a portfolio that will fully support expenses each year over a span of 30 years, without the person or couple having to withdraw more than 4% on average (year 1, adjusting upwards each year thereafter for inflation). 4% is considered a safe withdrawal rate where one's chances of running out of money before they run out of time is minimal.
What is a portfolio? Total amount of assets minus liabilities. What will provide income? Many things. Rental income can certainly be something that provides what is needed. So can selling real estate holdings. Social security provides income, as does a pension or annuity. There's no requirement that someone must have stock holdings, though many people do. If a portfolio can support a person or a couple over a span of 30 years, on average they are considered FI (financially independent). Whether they choose to retire or not is a separate decision.
Last edited by lottamoxie; 04-29-2019 at 01:54 PM..
There is a bit more to it then draw 4% ,have a nice life ...... the 4% is a ball park for day 1 ....
If you lived and died by just a 4% inflation adjusted draw 90% of the time you died with more than you started with 30 years later ... 67% of the time you died with 2x what you started and 50% of the time 3x what you started with ..
So in practice most of us will really want to have a system of raises in place besides just inflation adjusting .
I know I certainly have no reason not to enjoy more of what we worked and saved for .
So the rule of thumb for someone using the constant dollar method which is what the 4% safe withdrawal rate is called , is every 3 years look at your balance ..... if you are 50% or higher above where you started retirement at then take a 10% raise plus the inflation adjusting ...repeat every 3 years
Just so I understand, the whole premise Is based on saving enough money in the market so you can collect 4% each year to live on and at that point you are fi? We’re not talking about any other method like real,estate investing, right?
Okay here is the deal ...
Rentals , social security, pension , alimony , annuities ,working , owning a business etc are all what are called income SOURCES.
If income sources provide all you need to live on ,great ... but for most of us we have savings too we want to draw from .... so here we have this pile of money saved or invested and we want to know how much can we spend and count on in good and bad times so we can add that in with all our other INCOME SOURCES.
So we have to treat that pile of money separately and based on how we will allocate it ,how long it has to last and how much we hope to draw we have to stress test it against the worst of times to insure a high rate of success of not running out of money.
So we stress test against the worst cycles for retirees to date , 1907,1929,1937,1965,1966..
To get a high rate of success under those worst outcomes you need to initially start at 4% with a 30 year time frame and at least 40% in equities ,and if things are better than those worst time frames to retire , start taking raises
Just so I understand, the whole premise Is based on saving enough money in the market so you can collect 4% each year to live on and at that point you are fi? We’re not talking about any other method like real,estate investing, right?
Some people, like Paula Pant, achieve FI through real estate investing. Other people, like MMM, do so through a mix of both; although most people are primarily one or the other (MMM was primarily stocks).
The rub, however, is that as one approaches 50 or so, one comes to realize that all sorts of career-benefits and retirement-benefits and so forth, begin to snowball. Every additional year of slogging it out, persevering at the workplace, carries nonlinear accumulation of benefits. So, why stop then?
The point is you don't have to stop if you don't want to, but you CAN stop and/or won't have to take a drastic lifestyle cut if you lose good paying employment. It's about having options. Even if you don't exercise those options, just knowing you have them is a relief. I'm not far from 50, and while it's not a magic happy pill, I am relieved to know my portfolio is large enough that I could manage if I lost my job or decided to quit tomorrow. It would certainly require a move to a cheaper location for me, but at least I have options.
Last edited by mysticaltyger; 04-29-2019 at 05:52 PM..
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