– no windfalls or inheritances 321GleichReich thank you. First comment here – although I have been obsessively reading for the past 3 weeks after I heard your Tim F podcast. « previous next » Print; Pages: 1. This has drawn criticism from people who are quick to point out that he is not really retired, since he continues to do work and bring in money. January 16, 2012, 7:14 pm. The Man Who Retired at 27: Why You Should Consider House-Hacking. Excitedly, I think I actually might be well ahead of my retirement track if I take on a few more of your suggestions. . Yes we pay higher taxes, but don’t underestimate the cost savings for health care. The Best Retirement Calculators (160,520) Choosing a Compact RV or Camper for Retirement Travel (109,741) Hello, I’m Not Mr. Money Mustache (70,051) Getting a Mortgage When You Have Assets But No Income (52,652) One Solution for Cheaper Retirement Travel: A Small RV (49,825) 4 Things I Gave Up to Retire Early (47,726) My Investment Portfolio: 2017 (44,968) DIY Investing … could provide you with a pretty big head start. If you look up historical returns on the S&P 500 index for the period from, say, 1950-2010 (i.e. Good advice, I will keep that in mind. :), drewstees There’s a moderate chance you can beat it, but not a guarantee. I used to only pay attention to the earnings side of the equation – I wanted to make enough money so that I could save more. This would mean dying with a sizable estate, but I believe it would actually mean that the required assets would be lower than other methods, if structured right. So, I guess the answer to your question is that mortgage payments are both saving and expense. So if you wanted to have $40,000 a year in retirement income, and are making $15,000 a year from rental properties, you would only need $25,000 passive income. Sorry if this is complainy pantsy. Sounds like your “adviser” is wearing the the standard consumer blinders. Choosing a Compact RV or Camper for Retirement Travel. Of course, if you do plug in a <1% return instead of 0.04 because your stash is entirely in a savings account, you'll see the numbers look much worse! I wrote a perl script long ago where it relied on downloading historical “adjusted close” data from Yahoo – which takes dividends into account. I’m Canadian too and I have to agree with mugwump. No Name Guy Like MMM says, cutting an expense and adding it to the savings has an amazing affect on the time required! But unfortunately, “better than average” is still pretty bad, since they are on track for having to work for 51 years. There is something very reassuring about the simplicity of the math. Mortgage paydown definitely has a compounding effect! If you plan to live with say $35,000 a year in retirement (which any Mustachian can do! Right now my blog doesn’t really have much of a readership, so it wouldn’t make that much sense. A blogger named Pete, who runs a site called Mr. Money Mustache, decidedly favors early retirement over other alternatives, having himself left the workforce while in his thirties. ;-), John Cheever The only reason Mustachians will remain a rare breed, is because this article will never appear in USA Today. April 3, 2012, 8:10 pm. I’m kindof new to the whole maths of early retirement. http://the-military-guide.com/2011/01/03/how-many-years-does-it-take-to-become-financially-independent-2/. I’ll make some conservative assumptions for you, and you can just focus on saving the biggest percentage of your take-home pay that you can. January 13, 2012, 2:22 pm. If you know the percentage of your take home pay that you live on, then why does it matter how much you take home each year? January 13, 2012, 6:51 am. I recently saw this XKCD comic over on the reddit FI forum, and it really bugged me as anti-Mustachian, on multiple levels: http://xkcd.com/947/. I’d be interested if it also factored in assumed inflation rate the interest the invesmtment would make. I thought I would give an update about my situation now that a few months have passed, and since we’ve had a major bull market run since then that is only recently starting to soften up. I would disagree and suggest that 4% is still not all that far off the mark. that if judiciously used can result in strengthening families. pay for some dental coverage, money towards textbooks, few clothes, track fees even in their 20’s we keep helping them out. Does this sound reasonable? I retired from full time work about 18 months ago. Personally, I think the “be as efficient as possible and save as much as you bloody-well can” method is the mustachian ideal, if your goal truly is to achieve financial independence as soon as possible. If you still drove to work you can largely ditch your car outside special trips not possible on a bike, a huge savings right there. I am 35 we are pretty low on debt besides our mortgage and according to your advice, below average savers but def better than a lot. Andrew – after reading more of MMM’s articles and thinking about this more myself, my plan of action is to actually reduce my contribution to my 401(k) down to 6%. There are ways to tap a 401k / IRA. I don’t want them waiting on my death to get rich and feeling rooked if I preserve my life and drain my funds to do it. I just bought my first foreclosure and am fixing it up now. January 19, 2013, 10:42 pm. Nords did a similar post with the math behind early retirement here: If you’ve not checked out his site yet, you should really head over there now and take a look. Interesting set of results tunesmith, although I’m not sure I believe you (I could be convinced with a spreadsheet). 3-5 years and I’m there! My time frame is around four years, so I’m not as assured that the numbers will work. Bullseye While the investment shows an obvious compounding effect. Check it out on the IRS web site. If a figure looks surprisingly high, you can click in to see the detailed transactions in the various accounts that were added together to make that category. Mad Fientist: That’s the end of the first Mad Fientist Financial Independence Podcast. I have saved for retirement pretty consistently since then, and that consistency has been affected only by things that would reasonably affect anyone. Mr. Money Mustache retired in his early thirties and has recently emerged as one of the most inspiring personal finance authors in cyberspace. If you think you are hardcore enough to handle Maximum Mustache, feel free to start at the first article and read your way up to the present using the links at the bottom of each article.. For more casual sampling, have a look at this complete list of all posts since the beginning of time or download the mobile app. There are social aspects, educational opportunities, satisfaction with completing a project and so on. Mr. Money Mustache As a guy who spent >30 years in the investment business, I’m pretty sure (you can never be 100% sure) that 5% is high from today’s starting point. If you want to break it down just a bit further, your savings rate is determined entirely by these two things: While the numbers themselves are quite intuitive and easy to figure out, the relationship between these two numbers is a bit surprising. I can show the derivation of this formula if anyone is interested. I’m a 20something professional living in a Third World country (which makes it harder, but also more imperative, to save). One problem I find with retirement calculators is they don’t take into account income from a Rental Property. I think I have just learned we are certainly SUKKA’s. For a savings rate of 20%, the number of years needed goes up from 37 to 49. In 2010, I saved 47% of my take home pay. Money Mustache by Pete Adeney. Unscientifically How to retire early: the shockingly simple math youtube. It’s posted at the bottom of Nord’s post, and is also here: January 13, 2012, 1:02 pm. However, I wasn’t lucky enough to have cheap rent with my parents, so you’ve got me beat there (hence why I had to work two jobs as well as school full-time). very interesting and I’d like to hear more about the unique challenges pursuing this in the 3rd world presents. Ensure that the income is inflation protected. January 13, 2012, 8:35 am. I simply have a goal of having it paid off when I retire and I base my extra payments on that goal. ** definition of take-home pay: gross income minus all taxes. January 13, 2012, 8:59 am. I even hacked together a crude spreadsheet to do all the calculations on early retirement for you, given a set of assumptions (saving rate, spending rate, rate of return). In fact, for the MMM lifestyle the differences are probably much smaller than for most. http://www.moneychimp.com/features/market_cagr.htm. But most old people can’t predict when they are 15 years from death.. at age 55, you may have 15 years to live, or you may have 45 years. Literally started the ‘Maximum Mustache’ effort this morning and hope to read ALL the posts! Really, there has to be consideration for the lifestyle required after retirement in determining the saving level. If your increased taxes are roughly equivalent* to an insurance premium, your savings for that tragic event were just over $5,000, not $495,000. I understand the desire to be conservative, but I would still totally disagree with the idea of going for an even lower SWR. Most of my own retirement stock holdings were bought between 2001 and 2005. On the scale of Mass Consumer Deceptions, at least we can say that financial companies are on the low side, because they are selling you something that can benefit you. Logged FireLane. When I look at this I figure it this way, If I die five years into retirement, my 30 and 40 year old kids get a lot of money at a tough point in their lives. I think early retirement is a great goal to have, but I think some of the assumptions are a bit rosy. And having expense flexibility is a point that is often overlooked. I take $1,000,000 x 5% (income produced from nest egg) and get $50,000. And that doesn’t even include the fact that the rate should be grossed up by your marginal tax rate, so if that’s 20%, your effective rate is getting close to 5% — risk free (minus deductions of course). RichUncle EL Now that I have a baseline I can work on improving my saving/spending rates! For a single person, it might be difficult to slice it in half because you lose some benefits from sharing a house and car. Since retiring as an engineer, Mr. Money Mustache has developed a massively successful blog. It’s the simple idea behind owning a business (either a real business, or rental houses, or a business through stock ownership which pays dividends). re: RRSP’s, as MMM says, you can withdraw these at any time without penalty. Historically, that’s usually a good sign that economic growth is about to go ABOVE AVERAGE for a few years. Almost like FI and mustachianism were complete mysteries to us before we stumbled upon this blog or our first FI book and began to question our spending lifestyles, investments/income generators if any, and future goals. But MMM is talking about 5% over inflation. Found MMM via Tim Ferriss and am loving this site! Gänzlich auf ein Einkommen verzichten möchte Mr Money Mustache dann aber offenbar auch nicht. It’s only in the last 15 years of your life that you would really start sucking away that stuff. Am I missing something? January 15, 2012, 2:44 pm. BTW, thanks for the quick replies to my questions. 4.57%. I’m trying to find one, but there seems to be nothing about that on the site. I overlooked the very important point you both made. https://docs.google.com/spreadsheet/ccc?key=0AhDLWD_ESOY_dFhFMmNfR3YzWWg1UEpZcWpZdWM3Wmc, Bullseye This “percentage of income” concept is one of the most anti-Mustachian ones out there. But once it’s paid off, you have permanently wiped out the largest expense in most people’s lives. In addition, the Internet presents us with retirement calculators, competing opinions from a million financial advisors and financial doomsayers, unpredictable inflation, and a wide distribution of income and spending patterns between readers. January 14, 2012, 10:26 am. Education – Without the college degree I received via scholarship and the two Masters I earned with my employer paying for it I would have been in dead end, physically debilitating jobs or saddled with big school loans. Then, as you get close to the goal, you can start working out the details of said rounding errors and work a bit longer or shorter to accomodate, similar to what your friends are doing. (I’m not super rich, I am just Canadian). *If you want to play with the (rather basic) spreadsheet I made to generate this table, you can download it in OpenOffice format (.ods) here: Retirement Savings vs. Years. Sounds good to me! Of course the leveraging is eliminated as the mortgage is paid off but so is the risk of foreclosure. This conflict leaves me gridlocked into inaction. Many of us have discovered that a simple life, with a few luxuries here and there, is far better than wasting cash on lattes and cable TV. This tends to overestimate the years to retirement by about 5-10% but gets more accurate for higher savings rates. I mean, killing my mortgage in less than 10 years is my main financial goal (we are already down 7% in less than 8 months…) but this won’t bring me any dividends… It’ll just lower my expenses… (unless I buy another house and rent the current house…) So in a Growing your dividends point of view, I am unsure of my own strategy…, I should specify that my mortgage rate is 3.9% right now, thanks to the ultra low interest rate days we are livinig in….
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