I've always been ambivalent about financial independence and early retirement or FIRE. I am so impressed by those who do it Mr Money Mustache and quit a few other blogs like the frugalwood, Dr Doom, root of good, etc. Now the only one who really retired was Dr. Doom. Frugalwoods, root of good, and even Mr M stayed at home with small children and a spouse that worked. By that logic I'm RE. But I don't see it that way. Mr M now has the the benefit of a multi million dollar blog, but the others aren't there yet.
I guess that's the million dollar question. I've also read a blog about a young 30 year old couple who did choose to FIRE on $1M literally and that's it. I guess I'm unsure since retirement will last say 50 years you can't draw 4%/year. And honestly I worry about the cost of healthcare as we age.
For those couples who still have one spouse working it's fine. You get employer provided health insurance. But for those who really pull the trigger, after our "sabbatical" year I have to say that health insurance makes both people in a couple with kids especially dicey to retire early and not worry about it.
Who knows if Obamacare will ever be repealed. If so will those on it with pre-existing conditions be relegated to "ghetto" pools? Paul Ryan mentioned how much cheaper it would be to repeal Obamacare and toss everyone who is expensive into one pool. But what happens to those people? We know many people don't want to subsidize them but that's how forcing insurers to not exclude them makes Obamacare work. I'm not sure what the answer is. I guarantee and so has every economist said that an open market health policy that allows insurers to not provide insurance to those most at risk mean more people would go without.
So how can one FIRE as a couple in the US without substantial assets? I fully support the idea of living frugally. I also support the idea of financial independence. But I am not sure how to fully determine financial independence? Also how will we know if the retire early part of the equation is successful? That FIRE on $20k/year or $12k/year for a family of four will work in 20 years?
Is the only answer to wait and see? What happens if in your 50s after 20 years of retirement big expenses and medical bills crop up? Do you go back to work then? What happens if you don't have a cushion for your living expenses?
I like SA because people here seem to have a balance of saving and spending. I've realized I can't FIRE like others who are mustachian. I don't want to live on $12k or $20k/year. I guess there is a lot of truth that while we try to live frugally we still have a lot of excessive spending. And without inherently changing our "wants" LAL and Mr LAL won't be retiring without a lot more in the bank.
Do you picture yourself retiring on $12k or $20k/year? Could you? Would you? Have you?
thoughts on FIRE?
May 1st, 2016 at 04:36 am
May 1st, 2016 at 12:18 pm 1462105101
I could only live on $20K if I had a house that was paid for...
May 1st, 2016 at 02:15 pm 1462112111
May 1st, 2016 at 07:08 pm 1462129705
To live on 30K a year your lifestyle has to conform to that lifestyle Frugal living. We consider ourself frugal but where we live Northern Cali with private school tuition & taxes not a frugal state...expenses monthly are huge. Sure we defer on many aspect of our lives to buy cheaper car, prefer home cook meal. We are not a couple that treat friends to restaurant, or go out a lot touring Wine country like Napa. We save instead as much as we can so we can save more on retirements, EF, pay for tuitions and vacation cash. We budget monthly and not spend more than we make.
We live on $81K a year expenses for a family budget of 5 in-law included.
In retirement without a mortgage payment, our expenses will be mostly on transportation, home maintenance, food, & utilities, taxes. So our expenses will drop dramatically. I suspect our expenses in retirement will in $40-50K range a year or $3333 to $4166 a month in expense. Our heath care cost will be 100% state covered when I retire in public sector job with a nice pension + SS + wife.
May 1st, 2016 at 10:13 pm 1462140829
Dido the 4% rule also is only applied to a maximum 30 year retirement length. When you are more than 30 years of retirement, ie early retirement then it doesn't preserve your capital and the chances of failure is very high. Of course also retiring early makes your SS much lower than someone who works until SS because usually in your 40s and 50s are your peak earning years and the highest working quarters so the average later in life makes your SS payout much higher.
Tripod I agree it's much higher depending on where you live. Also there are just higher costs like health insurance premiums if you aren't medicare age to pay for a family if you FIRE early. Of course a number of early retirees don't buy health insurance but self-insure. But I worry doing that and even if we didn't have our small kids I think we'd still buy it.
May 2nd, 2016 at 12:15 am 1462148120
I do think the healthcare part in this country makes early retirement risky. It's the one place where you can't always be frugal, no matter how hard you try to stay healthy and avoid accidents. Something might come up that's beyond your control.
May 2nd, 2016 at 04:04 am 1462161870
So I don't know what we would do except the person not sick would probably have to go back to work at a company for the health insurance coverage alone. I have meet more than a few people who work for the health insurance because buying your own is so expensive and it's usually just health insurance. Not including vision, dental, or prescription.
May 2nd, 2016 at 08:03 am 1462176211
May 2nd, 2016 at 06:48 pm 1462214891
May 2nd, 2016 at 08:26 pm 1462220811
Yes my mom took it at 62 though it made more sense to wait until FRA of 65. But she was desperate because I think she retired at 55 and was nervous. Truthfully it would have been worth it to wait until 70 because she has a pension but she's too crazy to wait.
Also dido you forgot you can take SS at 62 then freeze then take spouse, then go back to your SS at FRA. Also you after your spouses death you get a different benefits. I've found a lot of people in thei 60s now still have pensions so it affects how they retire. People in their 30s I doubt as many have pensions.