Blogger Joe Udo says 25x expenses not enough for early-retirees

[Big_Hitter]

^ He's not retired, he's a FERB

 

[thefinancebuff]

Something that might be of interest is reading MMM's article about IRP.

Mr. Money Mustache vs. the Internet Retirement Police

Worth another reminder:

Name calling is pretty much playbook technique #1 for deflecting valid criticism of facts or assumptions, instead of addressing the actual issue at hand.

 

[Major Tom]

Something that might be of interest is reading MMM's article about IRP.

Mr. Money Mustache vs. the Internet Retirement Police

From the above article, in which he talks about his definition of retirement -

"Why does Mr. Money Mustache get to define it? Because I have the biggest Early Retirement blog. If the Internet Retirement Police would like to supersede my definition, they will have to start their own blog, calling it something like www. mrmoneymustacheisnotreallyretired.com, build it up to be more widely read than this one, and then propose their own definition. Only at this point would the torch be passed and the definition of Retired be up for discussion."

Wow. He's cocky isn't he? He may well have the biggest Early Retirement Blog but I still think he's a cocky son of a gun. It's actually the main reason I don't like his site - the attitude.

If I were him, I wouldn't care that much what the naysayers thought of me, but I am entitled to my own opinion, which is - I don't like his attitude, and I'm not terribly keen on his site either. It is of no consequence to me how much he makes, I just happen to have a thing about not being fond of arrogance, and much preferring folk with a bit of humility and grace about them.

 

[haha]

Even the term "naysayer" is a sometimes effective attempt to quiet criticism
IMO we might benefit from more "naysaying"- like before we entered Vietnam, before we toppled Saddam, before someone decided that the Watergate burglaries were a great idea. Etc., etc..If anyone can shut up criticism by those who are afraid of today's mortal sin of negativity, even more stupid decisions will be made than already are. Though I must admit that this might be difficult.

Ha

 

[daylatedollarshort]

At Theranos the employees used to chant expletives at townhall meetings about the WSJ reporter who wrote stories that started their downfall:

Exclusive: How Elizabeth Holmes's House of Cards Came Tumbling Down | Vanity Fair

The CEO's net worth went from $4.5B to zero and she has been banned from owning or operating a lab for two years. So good for the naysayer reporter from the WSJ who persisted despite not just name calling but legal pressure. Most other reporters seemed to be asleep at wheel on that one:

"Holmes adorned the covers of Fortune, Forbes, and Inc., among other publications. She was profiled in The New Yorker and featured on a segment of Charlie Rose. In the process, she amassed a net worth of around $4 billion."

 

[daylatedollarshort]

Since retiring at the age of 31, (of course he's not retired by many definitions here) his annual spending is ~$25K.

Does that include big ticket expenses like home repairs, income taxes, travel and any significant medical expenses or reserves for medical / dental expenses, home repairs, car replacements?

We have insurance but will pay over $10K in medical expenses this year between premiums, deductibles ($12.6K family deductible with a Bronze plan) and some out of network and uncovered expenses.

 

[Markola]

Wow, when I retire, I'm not telling anyone, especially the skeptics of early retirement who populate early retirement forums.

 

[Helena]

.

I ignored all the financial gurus who said NOT to retire early, NOT to take SS early and work until you drop unless you have several million dollars [I still think some of the gurus are paid government agents.]

Now I have been early retired 10 years, living frugally but comfortably and have added to my nest egg every year.

The one major rule I follow... zero debt... everything including the house was paid off before I retired.

.

 

[urn2bfree]

Two points that have yet to be made:

1) The 4% SWR is a WORST CASE SCENARIO that barely makes it to 30 years. I believe the majority of the time the portfolio at 30 years is LARGER (nominally) than at its start. 30 years at 4 % SWR historically can go much longer most of the time.

2) The first 10 -15 years is overwhelmingly the determinant of whether the portfolio will glide on or crash. If one is cautious and flexible in those first 10 years, the odds are good for success. At the very least it would give plenty of warning that things will or will not end well.


Sent from my iPad using Early Retirement Forum

 

[GravitySucks]

From the above article, in which he talks about his definition of retirement -



"Why does Mr. Money Mustache get to define it? Because I have the biggest Early Retirement blog. If the Internet Retirement Police would like to supersede my definition, they will have to start their own blog, calling it something like www. mrmoneymustacheisnotreallyretired.com, build it up to be more widely read than this one, and then propose their own definition. Only at this point would the torch be passed and the definition of Retired be up for discussion."



Wow. He's cocky isn't he? He may well have the biggest Early Retirement Blog but I still think he's a cocky son of a gun. It's actually the main reason I don't like his site - the attitude.



If I were him, I wouldn't care that much what the naysayers thought of me, but I am entitled to my own opinion, which is - I don't like his attitude, and I'm not terribly keen on his site either. It is of no consequence to me how much he makes, I just happen to have a thing about not being fond of arrogance, and much preferring folk with a bit of humility and grace about them.

Seems most of these famous money experts are. Dave Ramsey, MMM, Suzy Orman..... All pretty much espouse a my way is the only way approach. MMM is the more annoying of the bunch, gets the biggest market.
It's what sells.

 

[photoguy]

Personally I think people should be actively discouraged from ER. It's a very risky journey and likely a one way street in terms of one's career. If someone wanting to retire early hasn't done the math and scenario planning they will likely be unable to defend against a robust attack on their plans by the naysayers.

The problem with paying too much attention to early retirement bloggers is survivorship bias and right censoring of data. Survivorship bias because we rarely hear from those that tried to ER and failed. Right censoring because most ER bloggers are young and we don't know if their plans will fail down the road.

I think it's naive to believe that there isn't a significant amount of earnings management in self reported finances in the ER blogging world. There's lots of incentive, opportunity, and pressure to do so.

Finally, it's one thing to drop out of college to found a start-up when you have a safety net (family wealth). It's quite another thing when you have nobody else at all to rely-on and maybe you have a number of dependents of your own. I rarely see any discussion of how various safety nets factor into early retirement decision making. I certainly wouldn't have FIREd as early as I did without the option to return to canada for healthcare (even with guaranteed issue under ACA). That option is probably worth 5-10x yearly expenses to me.

 

[haha]

Wow, when I retire, I'm not telling anyone, especially the skeptics of early retirement who populate early retirement forums.��

i don't think you get it. nobody cares what Markola or Joe Blow or HaHa is doing, but they rightly care what bloggers who are selling their "success" to others say.

Ha

 

[haha]

Two points that have yet to be made:

1) The 4% SWR is a WORST CASE SCENARIO that barely makes it to 30 years. I believe the majority of the time the portfolio at 30 years is LARGER (nominally) than at its start. 30 years at 4 % SWR historically can go much longer most of the time.

2) The first 10 -15 years is overwhelmingly the determinant of whether the portfolio will glide on or crash. If one is cautious and flexible in those first 10 years, the odds are good for success. At the very least it would give plenty of warning that things will or will not end well.


Sent from my iPad using Early Retirement Forum

These pooints have been made many times. However, it may well mean nothing, because that is history, this is now.

We are all participating in a giant social experiment. It will likely tirn out well enough, but we really do not know.

Ha

 

[samclem]

Personally I think people should be actively discouraged from ER. It's a very risky journey and likely a one way street in terms of one's career. If someone wanting to retire early hasn't done the math and scenario planning they will likely be unable to defend against a robust attack on their plans by the naysayers.

The problem with paying too much attention to early retirement bloggers is survivorship bias and right censoring of data. Survivorship bias because we rarely hear from those that tried to ER and failed. Right censoring because most ER bloggers are young and we don't know if their plans will fail down the road.

I think it's naive to believe that there isn't a significant amount of earnings management in self reported finances in the ER blogging world. There's lots of incentive, opportunity, and pressure to do so.

Finally, it's one thing to drop out of college to found a start-up when you have a safety net (family wealth). It's quite another thing when you have nobody else at all to rely-on and maybe you have a number of dependents of your own. I rarely see any discussion of how various safety nets factor into early retirement decision making. I certainly wouldn't have FIREd as early as I did without the option to return to canada for healthcare (even with guaranteed issue under ACA). That option is probably worth 5-10x yearly expenses to me.

+1. Anybody thinking about jumping out of their job/career should not be encouraged to "just do it!". In some cases there is no way back for that person--some positions and some expertise are quite specialized. There are big bureaucratic hurdles to coming back to some positions (try to get back onto active duty after leaving the military . . .). So, I don't think there's any problem at all with there being resistance and hurdles as a way to encourage people to really think it through before making the jump.
But, I wish it were harder to vote, too.

 

[FIREd]

Personally I think people should be actively discouraged from ER. It's a very risky journey and likely a one way street in terms of one's career. If someone wanting to retire early hasn't done the math and scenario planning they will likely be unable to defend against a robust attack on their plans by the naysayers.

The problem with paying too much attention to early retirement bloggers is survivorship bias and right censoring of data. Survivorship bias because we rarely hear from those that tried to ER and failed. Right censoring because most ER bloggers are young and we don't know if their plans will fail down the road.

Good points. Let's also remember that some of the more successful "ER" bloggers make enough money from their blog to not dip at all into their portfolio (in fact many continue to add to their portfolio using their excess blog income). Yet they encourage people to do something they have zero experience doing themselves - live solely on one's assets, with all the intricacies and risks that come with it (safe WR, sequence of return risk, etc...). They will say that, in theory, they could live on their assets, which makes them qualified to give advice on ER, but they are taking far less risk than the people whom they encourage to retire. It goes back to this post by HaHa: http://www.early-retirement.org/for...og-by-the-finance-buff-83336.html#post1777295.

Finally, it's one thing to drop out of college to found a start-up when you have a safety net (family wealth). It's quite another thing when you have nobody else at all to rely-on and maybe you have a number of dependents of your own. I rarely see any discussion of how various safety nets factor into early retirement decision making. I certainly wouldn't have FIREd as early as I did without the option to return to canada for healthcare (even with guaranteed issue under ACA). That option is probably worth 5-10x yearly expenses to me.

I agree. When someone encourages others to ER, it should come with disclaimers. Whether you are expecting a pension or an inheritance, whether you qualify for a boatload of free or discounted public services, or whether you have guaranteed access to affordable healthcare for the rest of your life, it changes your outlook on retirement dramatically. You may feel more comfortable using a higher WR, taking more risk with your investments, or retiring earlier than usually recommended.

 

[Helena]

Interest rates have been declining globally for decades. There is an interesting chart on the link below called "10 Year Treasury Rates vs. Historical Economic Forecasts" that kind of shows how most economists seem to miss the big picture on where interest rates have been headed and have for some time:

https://www.whitehouse.gov/blog/2015/07/14/decline-long-term-interest-rates

I wish I'd viewed this chart a few years back. I would have bought more 2% real yield 30 year TIPS and 4% Treasury bonds.

It could get a lot worse...

Some European banks have negative interest rates. Depositors pay the bank to hold their money.

" Royal Bank of Scotland (RBS), an entity in which the British Government controls a 72.6% stake, will begin charging its institutional customers for their deposits in the bank in order to cope with the last rate reduction interest held by the Bank of England (BoE) on August 4. In addition, two other German companies will do the same to cushion the negative rates implemented by the ECB. "

more at link

https://mishtalk.com/2016/08/20/rbs...rge-e3-9-per-month-negative-interest-roundup/


Some are suggusting negative interest rates might be necessary in the USA too.

" The U.S. Federal Reserve might need to cut interest rates to as low as negative 2 percent, far lower than levels other global central banks have tested, a former Fed economist said. "

more at link

Why the Fed might need to cut rates to minus 2 percent: Former Fed economist

.

 

[HFWR]

The FRB decided early on that pumping up the economy was better than the "austerity" others tried, so I think the EU is behind the curve. Short of external events, I think we (the USA) will/are gradually normalizing rates. Of course, rates too high, relatively speaking, leads to lower rates/higher prices as money flows to safety/yield, so the FRB is handcuffed somewhat from raising too fast, not to mention that the economy is still tepid at best. But I don't see negative rates here, except maybe in "real" terms, unless the shtf overseas somewhere.

I have 40% short- and intermediate-term bonds for my ballast, to protect against interest rate risk, but that means my yield is pretty low...

As for WR, I'm sticking with 4% of current balance, rather than automatically adjusting upward for inflation. I'm hoping that my equities keep up with inflation, thus no need to bump the swr for inflation-tracking purposes. Of course, I could live, if necessary, on my SS and pension, shtf-wise, but I'm hoping not to have to do that...

 

[RobbieB]

I don't follow any blogs.
I don't give any advice.
I don't want any advice.
I just report what I do and have done.
I'll figure it out for myself -

 

[OverThinkMuch]

From the above article, in which he talks about his definition of retirement -

"Why does Mr. Money Mustache get to define it? Because I have the biggest Early Retirement blog. If the Internet Retirement Police would like to supersede my definition, they will have to start their own blog, calling it something like www. mrmoneymustacheisnotreallyretired.com, build it up to be more widely read than this one, and then propose their own definition. Only at this point would the torch be passed and the definition of Retired be up for discussion."

Wow. He's cocky isn't he? He may well have the biggest Early Retirement Blog but I still think he's a cocky son of a gun. It's actually the main reason I don't like his site - the attitude.

He's talking back to the "Internet Retirement Police", but you seem to feel targeted by his comment. You skipped over an earlier quote from the same article which seems to apply to retirees:

"Retired means different things to different people. But one of the rules of Mustachianism is that if someone tells you they are retired, you do not question them. You congratulate them."

 

[daylatedollarshort]

He's talking back to the "Internet Retirement Police", but you seem to feel targeted by his comment. You skipped over an earlier quote from the same article which seems to apply to retirees:

"Retired means different things to different people. But one of the rules of Mustachianism is that if someone tells you they are retired, you do not question them. You congratulate them."

As with name calling, that is just another way of trying to deflect legitimate criticism. None of it really changes the many thoughtful issues brought up in this thread and in the article in the original post. I could say a nickel means different things to different people, but that doesn't make it a true statement. Questioning is a basic component of critical thinking.

 

[Bestwifeever]

He should put out a "mustachian" dictionary so everyone knows what page he is on. Maybe some people would call what he did "changing careers" but he can call it whatever he wants in his world to his followers. There's no particular virtue in either term.

 

[thefinancebuff]

You skipped over an earlier quote from the same article which seems to apply to retirees:

"Retired means different things to different people. But one of the rules of Mustachianism is that if someone tells you they are retired, you do not question them. You congratulate them."

Isn't that like the emperor with no clothes? "One of the rules of the kingdom is that if someone tells you the emperor is wearing clothes, you do not question them. You praise the beautiful clothes."

 

[dd564]

What I learned today is that I have already retired.

Instead of blogging, I work as a project manager though. The income I make from that I use to buy additional real estate (pay mortgages).

Also, my wife still enjoys working part-time as a nurse to buy food and clothing for the kids and to pay for our extra vacations we take. So we're also retired but don't have the daily commitments of having to maintain a blog.

 

[ESRwannabe]

I've only read a few posts so far. So someone might have brought this up already. Anyway, IMHO for someone in there 30s-40s full retirement may not be possible, but I think semi-retirement is very achievable.

If you simply work a minimum wage job, let's say $8 part-time, i.e. 1,000 hours, you will make $8k. For a single person, you can enjoy a very nice lifestyle in the cheaper parts of the US on $30k or less. I live off around $28k a year easily and I could cut that back a lot (ex: I rent an overpriced apt and eat out almost every meal). So, just a part-time low stress minimum wage job will cover a third or more of living expenses. Then when you get to 60+ you replace that with SS and you can fully retire.

One benefit of the fact that I have a pension is that I don't need to worry about 60+, I just need to get there. I already have enough vested that pension plus SS will support my current life style. So my early retirement money is really only needed to get me from current age to 60. I'm 40 right now, and I'm thinking 45 will be when I switch to part-time work. I'd only need to ESR for 15 years that way. If I assume I need $20k from investments for 15 years (and $8k from working), I could just use $300k in cash and assume a 0% return...

 

[Forced to Retire]

If anything the four percent figure is way too conservative.

If the next forty years is the same as the last forty years, someone who invested in a 50/50 total stock and bond fund portfolio and took out four percent of their money each year and updated that amount to match inflation, would have 21 times their orginal investment. (If they reinvested the dividends)

You can verify it on this website:

https://www.portfoliovisualizer.com/backtest-asset-class-allocation