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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-20-2006, 04:01 PM   #41
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Re: FIRE - A Guaranteed Decline in Standard of Living?

What luxuries do I enjoy today that I would not have consumed 30-35 years ago?

Basic cable tv - $12/month
High speed internet - $30/mo
Computers - $400-500 at least for a replacement
Microwave - $40?
Health care - much better/higher tech, at a higher price
Dining out - 16 times per month now, with an average expense of $9/outing - in 1971, I don't think eating out was as common or as high-class as it is today - maybe the average meal was burger, fries and shake at the local burger joint or a steak at the steakhouse? Now it's $10-15 plates at Macaroni Grill/Chili's and similar sit down restaurants?

Housing - my 1800 sf house was probably above average when it was built in 1972, but now it is definitely below average (median) in terms of size and amenities as compared to new homes.

I can't really think of many ways that I consume much more now than what I would have spent in 1971. I wasn't around back then, so maybe I'm missing a lot. And I do live pretty frugally now. What has changed, consumption-wise, in the last 35 years?

"Everyone" now has:

A cell phone
tons of new electronics
more/better/fancier cars
bigger houses
more stuff in general - compare the tiny closets of the typical 1970's era home vs. the humongous walk-in closets found throughout new homes today.




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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-20-2006, 07:14 PM   #42
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Re: FIRE - A Guaranteed Decline in Standard of Living?

Quote:
Originally Posted by justin



"Everyone" now has:

A cell phone
tons of new electronics
more/better/fancier cars
bigger houses
more stuff in general - compare the tiny closets of the typical 1970's era home vs. the humongous walk-in closets found throughout new homes today.


But none of this is necessarily a good thing.

More junk = more space = more cost for upkeep.

btw... I don't have a cell phone... don't need one.
don't want one.





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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-20-2006, 07:23 PM   #43
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Re: FIRE - A Guaranteed Decline in Standard of Living?

Quote:
Originally Posted by claire
This is very interesting.

Early ER can be done, I know some people frown and say you have to pay your dues and be producitve for as long as possible, why? to conform?

This hit home with me today. A co-worker who I always thought was living well filed for bankruptcy. New car, fine dining, but obviously not LBYM type. Since he is 55, he will be working forever. And, he seems "productive" always working long hours, etc. But, in my opinion, productive people have something to show at the end of the day, and this poor soul will be forced to be "productive" for a long time. I am not going to feel guilty when I ER, since I parked next to him for years in my beater.
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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-20-2006, 07:25 PM   #44
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Re: FIRE - A Guaranteed Decline in Standard of Living?

I got a cell several years ago because of work issues. Still have the same phone. They are offering a free new phone to get everyone on newer system.

17 year old 21" TV.

18 year old econobox car.

~50 year old ~1000 sq ft house on 5000 sq ft lot (been here 18 years).

backyard garden
compost pile
clothesline (umbrella type)

no iPod

hey, I'm frugal
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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-20-2006, 07:58 PM   #45
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Re: FIRE - A Guaranteed Decline in Standard of Living?

Quote:
Originally Posted by Khan



~50 year old ~1000 sq ft house on 5000 sq ft lot (been here 18 years).

I am thinking of downsizing to a 1000 sq ft house.
I have a 40 year old 2222 sq ft house now... it is
valued at about $150,000... its paid for... but the
insurance/taxes are awful... what is the value
of your 1000 sq ft home ?


btw... my 40 year old home has a walk in closet
in every bedroom and two walk in closets in the
master bedroom... it has more storage space
than most new homes its size. New homes
devote too much space to bathrooms.



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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-20-2006, 08:16 PM   #46
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Re: FIRE - A Guaranteed Decline in Standard of Living?

Quote:
Originally Posted by Helena
I am thinking of downsizing to a 1000 sq ft house.
I have a 40 year old 2222 sq ft house now... it is
valued at about $150,000... its paid for... but the
insurance/taxes are awful... what is the value
of your 1000 sq ft home ?


btw... my 40 year old home has a walk in closet
in every bedroom and two walk in closets in the
master bedroom... it has more storage space
than most new homes its size. New homes
devote too much space to bathrooms.
Typo on years: 28 not 18

Value: somewhere between 80K and 100K
3 bedroom
1 1/2 bath
partial finished basement

small closet in each bedroom, none full

insurance and taxes quite low
(house and car ins: $50/month)
(property tax: less than $1000/year)
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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-21-2006, 02:21 AM   #47
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Re: FIRE - A Guaranteed Decline in Standard of Living?

I think several folks have good points and they are all right.

1) Real wages are going up over time. If you have a CPI-flat withdrawal, your consumption over time will decrease *relative* to your neighbors.

2) CPI overstates inflation. This is primarily because greater choice and product improvement are not (and probably should not be) weighted much in the index. The net effect is that a person making the same CPI-adjusted wage over time is much better off in later years. See links below for explanation.

3) Some improvements you cannot choose to go without, or probably don't want to. Even though cars have gotten cheaper and better and continue to do so, soon you won't be able to purchase a car w/o anti-lock brakes, side air bags, etc. You can't buy medical insurance that says you are only covered for 1992 level medical care. And some improvements you won't want to go without. Who doesn't want internet access? Who wants to go back to black and white TV. These are great bargains even though it takes something from your budget, etc. I think cell phones are a wonderful convenience and they are dirt cheap.

4) Medical inflation is a wild card and caveat to #2. The CPI index does NOT account for increased medical consumption due to medical advances (you can read this in the fine print at BLS). So if you are a retiree paying for health insurance, especially if not in a group risk pool, then #2 may apply differently to you.

Overall, I think you are OK having a CPI-flat withdrawal over many years. But you will probably want to grow the draw by something like 0.5% per year, on average (after 20 years this is a little over 10% more, for instance), to account for extra things that will be available that are a great bargain, as well as things that you can't opt out of. Aging and reduced desire for certain activities may partially counteract this desire for more money. Basically, life gets better with or without the extra adjustment (and I think this is from where the divergence of opinion stems)

BTW, I think that study on less spending when you are older was fundamentally flawed. Although I do think spending decreases slowly as we get older (until the very end spike).

Kramer

The following are informative and readable blog entries:

1975 Sears catalog test (vs. now):
http://cafehayek.typepad.com/hayek/2..._sears_ca.html

# hours to work for sears goods:
http://cafehayek.typepad.com/hayek/2...g_for_sea.html

Primer on standard vs. cost of living:
http://cafehayek.typepad.com/hayek/2...er_of_sta.html

CPI Bias:
http://cafehayek.typepad.com/hayek/2...i_bias_ii.html
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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-21-2006, 01:14 PM   #48
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Re: FIRE - A Guaranteed Decline in Standard of Living?

Quote:
Originally Posted by kramer
I think several folks have good points and they are all right.
That's never stopped a thread before!

Quote:
Originally Posted by kramer
3) Some improvements you cannot choose to go without, or probably don't want to. Even though cars have gotten cheaper and better and continue to do so, soon you won't be able to purchase a car w/o anti-lock brakes, side air bags, etc. You can't buy medical insurance that says you are only covered for 1992 level medical care. And some improvements you won't want to go without. Who doesn't want internet access? Who wants to go back to black and white TV. These are great bargains even though it takes something from your budget, etc. I think cell phones are a wonderful convenience and they are dirt cheap.
Safety improvements aren't free, but even so I think that the costs of incorporating new technology into one's lifestyle are cheaper than the costs of maintaining the old lifestyle. I think this is especially apparent when all costs are compared after adjusting for inflation. As for "which inflation" to adjust for, I agree that the CPI is flawed but it's the best common adjustment factor we have.

Quote:
Originally Posted by kramer
BTW, I think that study on less spending when you are older was fundamentally flawed. Although I do think spending decreases slowly as we get older (until the very end spike).
I think that study overlooked a lot of healthcare expense issues. However I agree that voluntary spending does decline.

Warren Buffett did a CNBC interview where the younger woman interviewing him expressed disbelief at how cheaply he lived. I gained the distinct impression that if she were in charge of his life there'd be a huge spending spree in many of Berkshire's finer retail outlets. Buffett simply said "I lack for nothing that I want to have and I'm already doing everything that I want to do. What would I spend it on?"
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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-21-2006, 01:25 PM   #49
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Re: FIRE - A Guaranteed Decline in Standard of Living?

Quote:
Originally Posted by Nords
Warren Buffett did a CNBC interview where the younger woman interviewing him expressed disbelief at how cheaply he lived. I gained the distinct impression that if she were in charge of his life there'd be a huge spending spree in many of Berkshire's finer retail outlets. Buffett simply said "I lack for nothing that I want to have and I'm already doing everything that I want to do. What would I spend it on?"
That's an interesting observation. DW and I are having what I would describe as a "bountiful" year (read: mor e money than I have ever seen), but we are hard-pressed to find much of anything we want to spend some of it on. We will have some work done on the kitchen (doors starting to fall off the cabinets, many cracked )&^(^%%! tiles, and POS countertop is dissolving), but we would have had that done anyway. Other than that, the only thing I have found really compelling is a significant charitable donation, most likely to a charitable giving account (under our control and can contribute appreciated securities). I don't feel a sense of avarice (or what DW and I refer to as the "let's go buy dune buggies!" impulse), I feel a sense of gratitude.
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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-21-2006, 01:37 PM   #50
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Re: FIRE - A Guaranteed Decline in Standard of Living?

Quote:
Originally Posted by brewer12345
That's an interesting observation. DW and I are having what I would describe as a "bountiful" year (read: mor e money than I have ever seen), but we are hard-pressed to find much of anything we want to spend some of it on. We will have some work done on the kitchen (doors starting to fall off the cabinets, many cracked )&^(^%%! tiles, and POS countertop is dissolving), but we would have had that done anyway. Other than that, the only thing I have found really compelling is a significant charitable donation, most likely to a charitable giving account (under our control and can contribute appreciated securities). I don't feel a sense of avarice (or what DW and I refer to as the "let's go buy dune buggies!" impulse), I feel a sense of gratitude.
Exactly-- same for us except we don't have a charitable-donation clue yet.

It's these 17% years that make us want to keep letting it ride. I didn't even get excited about that $400 nine-foot almost-new epoxy board.
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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-22-2006, 09:44 AM   #51
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Re: FIRE - A Guaranteed Decline in Standard of Living?

The young wife and I were recently discussing our desired income level after retirement. She named a figure and I pointed out that, after taxes and savings, we are currently living quite well on less than 2/3 of that amount. I asked her what she would do with the extra money and she couldn't think of anything. As it is, we can afford to do and have everything we want. It costs a certain amount and I don't see that changing significantly in the future.

We sat down last night to write the last few checks to get up to our charitable giving goal for the year. It was a very pleasant and satisfying activity. Next year looks to be better financially than this one, so we will likely increase our giving target. Especially since we can't think of anything else to do with the money.


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Re: FIRE - A Guaranteed Decline in Standard of Living?
Old 12-23-2006, 05:10 PM   #52
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Re: FIRE - A Guaranteed Decline in Standard of Living?

You bet
Quote:
The demise of the DBP pension and retiree healthcare actually has an upside. Without these "anchors" people might be more inclined to change jobs, start a business or new business, switch careers or whatever it takes to get out of a crap filled groove and do something new and more enjoyable during their working years.
I agree. My family has been self-employed for generations. My father never had a pension. Billy and I made our own. No one bought our health insurance but us. This is the way it has ‘always’ been. In my careers, I felt freedom to come and go, make changes, and take chances. I did work for the State of California for a while (when I was single) and all the paid holidays, paid sick days, paid vacation days, automatic wage increases (regardless of production output) and paid health care felt ‘strange’ to me.

I worked my pitutie off there at the State, but I saw that some old geezer was going to snooze away the day, get his raises and promotions simply from collecting seniority. My spirit was dying. I had to leave. 8) -- Just one person’s perspective….

Kcowan
Quote:
I think this is the best advice you can get. No one can forecast what is going to happen in 30 years. Just think where you were at 30 years ago. The key element is to be flexible. I'll bet B&A did not plan to build tennis courts (congratulations), live in Thailand or write a book. But they did have the attitude to get out and experience the world as they found it. This is the secret to successful ER. Leave The Jones in your dust!
Thanks, Kcowan! Flexibility does have its advantages. Many people like to have things all scheduled out decades in advance. B and I like more room to maneuver. Each to their own, I guess!

RE: the healthcare issue -- I do think that if people could put more energy into lifestyle changes - diet, exercise, watching their weight, drinking and smoking, maybe taking supplements, trying a different health approach for their answers, etc. and trying to stay off medications to begin with, then it would help with the healthcare expenses later on in life.

These western medical procedures are very expensive and many prescriptions have such awful side effects. If we could avoid them as much as possible to begin with…

We know a lot of older folks and I love the stories of the ones who are 80 and don’t take anything but an aspirin at night. It’s a goal that I hold in mind!

Be well,
Akaisha
Author, The Adventurer’s Guide to Early Retirement
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