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3. Because there is no good way in the US for early retirees to get health insurance.
4. Because most "passive income" isn't really passive, and turns out to be just another job, possibly more annoying than a regular job. See postings from landlords with problem tenants.
This is another misconception with the FIRE concept. The real goal is the FI portion -- financial independence. The RE piece of it -- retire early -- is completely optional. There are many people who love what they do and have no desire to stop doing the work or being in their career, and *that's fine!*
It *does not* require skimping & saving to get there. It does require being committed and putting aside a portion of one's paycheck or income to retirement and other investments. It does not mean you have to do it to the point where you subsist on beans and live in a tent. You put regular contributions of money into 401K and IRAs, you opt for equity funds, and you allow your money to grow without touching it. And then you live your life so you're not burying yourself in a deep pit of debt that you can never get out from under.
That's really all it takes: consistent saving and lots of time for compounding to do its thing automatically. The trick is in 30+ years while you're living your life, your investments are growing.
The rest is emotion and lots of excuses and whining on why it's sooooooo hard and unfairrrrr.
Oh I completely agree, I'm just telling you what I've seen. To them their job is their identity, so financial independence falls way down the list of important things because they always see themselves working, so why give up something today to get to FI, if they don't ever see themselves needing it.
I think I tend to be similar to this, but I have more of a delayed gratification muscle (which I think I learned from bodybuilding). I really enjoy what I do, probably don't have the "power" drive a lot of my friends do as far as politicking my way to VP, etc., but I see myself working until my kids are at least in college, which puts me into my late 40s/early 50s, but I plan to reach FI in the next 4-5 years. a good decade before that point.
I don't know why, but I'm actually shocked at the level of financial ignorance & naivety I see displayed by people who I would think would know better, because they are otherwise engaged and interested in financial topics.
One of my growing interests is 'paying it forward,' specifically the good financial lessons I got from my father, as a way to honor his memory, since he told me his last year alive he was most proud of the way he raised me to be a financially responsible person who then embraced those lessons.
I think there's a need for financial literacy and from what I'm seeing on C-D, it's not just high school or college age who need some educating.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by rational1
> Why isn't passive income and early retirement everyones goal?
1. Because some of us spend a long time learning a profession and want to spend a fair amount of time practicing it.
2. Because some of us end up in good, enjoyable jobs.
3. Because there is no good way in the US for early retirees to get health insurance.
4. Because most "passive income" isn't really passive, and turns out to be just another job, possibly more annoying than a regular job. See postings from landlords with problem tenants.
I disagree with number 4. I make double what I did working with real estate. I spend about an hour a month usually. When you se people complaining about problem tenants it is often brought about by their own actions. It’s not rocket science. Screen your tenants, provide them a safe place to live and treat them as you would want to be treated fairly.
Socking away 20-30% for over 18 years and living on less made the transition to retirement EASY.... we're actually going to have more income to live with - which is good considering we moved toa more expensive locale to retire to. After awhile living on less was normal.
Matter of fact we still have that slappy hand feeling now when confronted with a potential large purchase - saying "Should we?"..... It's good to have that handy... makes it so hard to go overboard....
I do know where we got this trait from - our Depression era parents.
I don't know why others missed this important lesson. It is something that is taught by example - and learned at home. Not in school.
I’ve “socked away” over 20% for nearly 15 years now. That certainly is not enough to get me to an early retirement. Obviously the higher your income, the easier an earlier retirement is.
I’ve “socked away” over 20% for nearly 15 years now. That certainly is not enough to get me to an early retirement. Obviously the higher your income, the easier an earlier retirement is.
Yup, 20% will need roughly 30-40 years, that basically puts you at traditional retirement age. You'd need 30-35% for late 40s/early 50s.
You don't need to save 30% to get to retirement. You certainly can and you'll get there faster, but it's not required. 20% works and if you invest in equities and are consistent, you will get there. Retiring at age 50 or 55 is still considered "early."
Also, one can setup a roth ira at any age, parents can set it up for a child, and contributions can be made. A kid working a summer job can put some of that money into a roth. I'm not saying a kid would want to, but they certainly could.
Remember: someone putting $250 a month (only $3K/year) into an S&P Index fund, every month, in 40 yrs will have amassed over $2M if the average S&P ROI is similar to the past. Most people who are in their career job can afford to do that, if they do nothing else. It's half the amount of a full IRA contribution.
I don't know why, but I'm actually shocked at the level of financial ignorance & naivety I see displayed by people who I would think would know better, because they are otherwise engaged and interested in financial topics.
One of my growing interests is 'paying it forward,' specifically the good financial lessons I got from my father, as a way to honor his memory, since he told me his last year alive he was most proud of the way he raised me to be a financially responsible person who then embraced those lessons.
I think there's a need for financial literacy and from what I'm seeing on C-D, it's not just high school or college age who need some educating.
Oh dear, another self-anointed savior.
I hope your father was wiser than to call people he hoped to enlighten "ignorant and naive."
You don't need to save 30% to get to retirement. You certainly can and you'll get there faster, but it's not required. 20% works and if you invest in equities and are consistent, you will get there. Retiring at age 50 or 55 is still considered "early."
Also, one can setup a roth ira at any age, parents can set it up for a child, and contributions can be made. A kid working a summer job can put some of that money into a roth. I'm not saying a kid would want to, but they certainly could.
Remember: someone putting $250 a month (only $3K/year) into an S&P Index fund, every month, in 40 yrs will have amassed over $2M if the average S&P ROI is similar to the past. Most people who are in their career job can afford to do that, if they do nothing else. It's half the amount of a full IRA contribution.
This of course all depends on your modeled return, I'm typically pretty conservative and tend to estimate a real return of 5-6%.
This math is independent of income, but assuming (for simplicity sake) you consistently earned $80k/yr for those 30 years and saved 20% of that, it would be approximately $1,333/month. If you invested that at 6% real return it would work out to approximately $1.34 million at 55, but remember you need $64k/yr as living expenses and at 4% that 1.34 million, would only give you $53.6k/yr. So you'd either need about a 4.8% withdrawal rate after the 30 years or you'd need ~ a 25% savings rate for 30 years.
And all of this of course assumes simplistically that you will always earn a consistent amount. What's more likely to happen is that between the ages of 25-30 your earning a lower income and only saving 10-15% and as your income goes up so do some of your expenses, but so does your savings rate. The % saved in the real world is largely a factor of your long term needs, so 20% of $50k when you are 25 might be feasible when you are single living with roommates, but isn't the same amount of the 20% of the $80k you'd need to actually be financially independent 30 years later and remember the money put in early is more valuable from a compounding perspective, which makes the math even more complicated. The likely reality is that your weighted savings % based off of your final needs is much lower than 20% even if you are consistently saving 20% of that given year's salary each year.
The funny thing is the math gets less complicated the higher the % savings rate goes because you aren't stretching out the timeline as far.
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