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Old 01-05-2015, 11:40 AM   #41
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I also enjoyed reading I retired 20 years ago. I think MMM provides a valuable service & for many on his forum it provides motivation to keep going since many do not get the same support from their friends, family, etc. At age 60 I was raised frugally & raised my family the same way. I also think some things he does like the bike riding is for the environment & the exercise. He continues to work when he wants to because he enjoys it which makes sense to me. HIs dramatic style is really the hook to pull people in to reading his blog which is fine. I think this is especially true for younger people. My hubby & I are actually doing more things now & spending more $ because we want to enjoy ourselves while we can-you never know what will happen. We tend to spend on experiences versus things because that is what we value. Some on the blog are retiring young at a bare bones budget & I would think that would grow old with time but maybe not.
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Old 01-05-2015, 12:32 PM   #42
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Thanks too for the Greaney article. He was one of my favorite guys to read during the Motley Fool heydays.

In regards to MMM, I'm surprised by the consensus of him in negative terms. I'm a huge fan of his. For me, my life is forever changed for the better from reading his blog.
What changes did you make in your own life after reading his blog? Many here are older and were already fans of previously published books like the Millionaire Next Door and Your Money or Your Life, so perhaps the LBYM message was not as new to the old timers here.

That leaves the INTJs time to pick mercilessly on the specifics of any new ER material that comes along and look for any and all math flaws, logic flaws, not factoring in sequence of returns risks, not factoring in the costs of yourself (increasing health care costs, LTC, help around the house) or your kids getting older (eating more, insurance costs, braces, prom, sports, college), poor tradeoffs between money and personal safety (riding bikes in heavy traffic, putting a roof on a house if you are not an experienced roofer) and all the other stuff pointed out here, Bogleheads, fatwallet, Reddit, even the naysayers on the MMM forums, etc.
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Old 01-05-2015, 01:27 PM   #43
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I read MMM's blog for motivation/ideas, but you have to take it with a grain of salt. Some facts about his financial situation to keep in mind:

1) He owns his home, worth about $400k I think, and it is paid off, so no rent.
2) He has had rental properties in the past which generated income. May be down to his last one or sold them all by now, but that also generated some additional capital.
3) Claims to not need a car, which I can believe if you live in a small town and don't have a job.
4) Claims to travel using credit card miles and looking for discounts. Believable.
5) I asked him about health insurance on his blog and he does not have it and does not budget it as an expense for retirement. He self insures. This is the biggest departure from mainstream financial advice. He is definitely one bad diagnosis away from financial ruin.
6) By his own admission he is not saving a lot specifically for his kid's college. He can probably get away with that. Colorado has a good state university system and maybe he is counting on scholarships and his kid borrowing money.

So, I cannot copy his plan, but his philosophy is very helpful. Whenever I buy something now, I ask myself, do I really need this or is it just a luxury. MMM's blog has helped realize that I have WAY MORE than I need.
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Old 01-06-2015, 07:14 AM   #44
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" I asked him about health insurance on his blog and he does not have it and does not budget it as an expense for retirement. He self insures. This is the biggest departure from mainstream financial advice. He is definitely one bad diagnosis away from financial ruin."

That runs contrary to what is actually on his website. It seems that he indeed has health insurance and has had it for years.

Our New $237/month Health Insurance Plan

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Old 01-06-2015, 08:01 AM   #45
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Retiredunder50 - my mistake. He told me he does not budget for health insurance when I asked about his long term retirement plan. I took that to mean he was self-insured.
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Old 01-06-2015, 01:08 PM   #46
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4) Claims to travel using credit card miles and looking for discounts. Believable.
Maybe for the first trip...but spending $25k/year doesn't rack up too many airline miles for future trips.


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In regards to MMM, I'm surprised by the consensus of him in negative terms. I'm a huge fan of his. For me, my life is forever changed for the better from reading his blog.
In my view, MMM is kind of like Dave Ramsey - both have really awesome advise and encouragement to live a thrifty/fiscally sound lifestyle in the here and now, in order to have fiscal independence and strength down the road.

However, MMM's trumpeting of the 4%SWR is just as dangerous as Dave Ramsey's "you can save and assume 12% annual mutual fund returns" - or, perhaps even more dangers than Dave Ramsey. Also, IMO, MMM is more of a snake-oil salesman in his story not quite being a complete picture and adding up (for example, things like his Hawaii vacation where he provided construction labor in exchange for a place to stay - which, as one person pointed out, is in violation of IRS rules and regulations).

MMM has MANY young people on his forum drinking the 4% SWR kook-aid without realizing what exactly is in the brew, and convinced with unshakable faith that anyone can retire on 4% in their 30s on a budget of $12k-$15k/year, and many are locked in on doing just that. But what MMM (and even MMM's wife) have failed in is abusing the 4%SWR references.

Granted, I haven't read MMM's postings or blogs recently and he may have started making correct statements, but for the first, say, 18 months of his site getting up and running, he bandied about the 4% SWR reference and statements of "You, too, can retire in your 30s on just a 4% SWR of whatever budget you want....JUST LIKE I DID" enough to make you sick of hearing it. And when I called his wife out on it in one message thread about the errors of their ways in miseducating people about the 4% SWR, MMM's wife tried to defend it by saying the 4% SWR meant you never have to touch your principal, and someone could retire in their 30s/40s with a 4% SWR and never worry. I pointed out the grave errors in her understanding, but she never replied to my post.

Furthermore, he never points out many serious implications of people calling it quits on a microbudget of $12k-$15k/year with a 4% SWR. With such a tight budget, it doesn't matter how resourceful you are, as you are just 1 health issue away from a potentially MAJOR derailment of your entire retirement plans. Not to mention a plethora of other possible things that could happen to such a tiny budget (car accidents, stuff needing fixed around the house, car maintenance, the list goes on and on). By making people insanely sensitive to ANY fiscal shock, it makes their entire 50+ year retirement like living on eggshells.

Imagine spending 40-50 years of your life, every year/month/week/day, just waiting for the inevitable whammy (or two, or three) that shows up to force you back to work at a moment's notice. Some pollyanas might be fine without a care in the world and simply struggle to find a minimum wage job if they are forced back into the working world at age 45, or 55, and then work the rest of their lives until they are simply physically unable to work anymore (and be subject to whatever nursing home accepts medicare)....but I fear that many of MMM's disciples are blindly following the Pied Piper without realizing that his tune has them walking on an incredibly narrow bridge that is more like a tightrope, where just the slightest unexpected gust of wind will send them falling into the abyss of fiscal calamity, impacting the rest of their lives.

Could they sail through life without issue on their micro budget and a 4% SWR? Sure....but I definitely am not betting money on it.

Some will point out that some people do, in fact, eek out a living on $12-$15k/year....but those are the same people who live in poverty, and are just one accident/incident/unforeseen problem away from bankruptcy (or have already filed for bankruptcy once/twice/multiple times).
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Old 01-06-2015, 01:55 PM   #47
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Some will point out that some people do, in fact, eek out a living on $12-$15k/year....but those are the same people who live in poverty, and are just one accident/incident/unforeseen problem away from bankruptcy (or have already filed for bankruptcy once/twice/multiple times).
Actually, it is quite a bit worse than for people who are genuinely below the poverty line in the US. These people all qualify for numerous benefits in cash and goods, that a middle class person(ie one with assets) will not be able to get. Also, people who are like their neighbors can live cheaply in bad neighborhoods, share information about welfare, etc.

Some "retired" millionaire or $400,000aire or even $40,000aire is in a whole different position. To my eyes, it is worse position and I cannot understand why anyone might choose it. Of course I couldn't understand why many young people back in the 70s emigrated to Jonestown.

Just believers in fantasy I guess. Everybody needs to carry a shovel to help avoid getting buried in horse manure,

Ha
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Old 01-06-2015, 01:57 PM   #48
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For someone who claims to be so happy living simply, I sense an attitude in his articles, like crankiness sometimes. Or "everyone else is pretty much an idiot but me and my kind." I've read a lot of the articles. Sure there are some things to take away from it too that will be useful to others. Heck I have a Republic Wireless phone deal for $10/mo with WIFI/text/calls, so that was worth it!

I did post a scenario some time ago in the forum "Do you need advice? Do you like helping others? Post your financial or life dilemma here and see if MMM or one of the other readers can help!" and man I was ripped a new one because I had $60,000 in yearly expenses (which included several big ticket one-time items). It was down right hostile and unfriendly so I did not feel posting over there again.
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Old 01-06-2015, 02:00 PM   #49
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Ok, in defense of the one medical bill wiping out someone out who lives on 15k a year, they might have their money safe in a 401K or IRA.

Example. Fred quits work at age 38, has $500,000 in a IRA, $100,000 in a Roth and lives on $15,000 a year. He starts withdrawing his contributions from his Roth, tax free, and also converts $20,000 of his IRA to Roth each year. This gives him $20,000 of MAGI which allows him to qualify for a heavily subsidized silver ACA plan with additional cost sharing.

At age 43 he starts taking out the Roth conversion amounts he started when he retired (at 38) tax free. He uses these for living expenses.

At 49 he is found at fault in a car accident and gets sued for $2,000,000 but declares bankruptcy with no change in his financial condition since his IRA is protected from creditors.

Not seeing the problem here...
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Old 01-06-2015, 02:16 PM   #50
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I did post a scenario some time ago in the forum "Do you need advice? Do you like helping others? Post your financial or life dilemma here and see if MMM or one of the other readers can help!" and man I was ripped a new one because I had 60,000 in yearly expenses (which included several big ticket one-time items). It was down right hostile and unfriendly so I did not feel posting over there again.
Gina, thank you for posting this...it is a good reminder for us here in the kindlier (I hope) environs of E-R.org to be respectful of our fellow members, regardless of whether their expenses are higher or lower than ours, and remembering that everyone falls on a different spot on the spending spectrum.
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Old 01-06-2015, 02:43 PM   #51
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I did post a scenario some time ago in the forum "Do you need advice? Do you like helping others? Post your financial or life dilemma here and see if MMM or one of the other readers can help!" and man I was ripped a new one because I had $60,000 in yearly expenses (which included several big ticket one-time items). It was down right hostile and unfriendly so I did not feel posting over there again.
Yeah, it's funny how you have to pick the right forum to ask your question. If you spend $60,000 and are okay with it, post here. You'll be told you are just fine as long as you have $2 million and are okay with a 3% WR.

Go to the MMM forums if you want to be told how to cut it to $30,000 and how wasteful you are.

Go to the Early retirement extreme forum if you want to learn how to cut it to $15,000 and how that amount is still really wasteful.

Different strokes for different folks I guess.
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Old 01-06-2015, 02:45 PM   #52
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Yeah, it's funny how you have to pick the right forum to ask your question. If you spend $60,000 and are okay with it, post here. You'll be told you are just fine as long as you have $2 million and are okay with a 3% WR.

Go to the MMM forums if you want to be told how to cut it to $30,000 and how wasteful you are.

Go to the Early retirement extreme forum if you want to learn how to cut it to $15,000 and how that amount is still really wasteful.

Different strokes for different folks I guess.
Then go to Bogleheads and they will encourage you to wait until you have about $8,000,000.
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Old 01-06-2015, 02:58 PM   #53
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Then go to Bogleheads and they will encourage you to wait until you have about $8,000,000.
Crap. I'm about 3 ER forums and a MMM forum short of $8,000,000.

2B, thanks for sharing that Greaney article. Good read and great news that his plans worked out very well for him. As another 30-something early retiree, I hope I can write that same type of article in another 19 years. I figure there's a 95% chance I won't be in the 5% of firecalc scenarios that end poorly.
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Old 01-06-2015, 03:07 PM   #54
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With regard to MMM crankiness or arrogance, that's just part of his shtick. He's been on a number of podcasts, and freely admits that he's actually a mild-mannered programmer-type. It's definitely been successful at getting people talking about him and his ideas.

I think the main problem with his SWR advice is that he's really only semi-retired. He does things "for fun" (because he's retired, of course) that just happen to pay him. He's written that he doesn't worry about the future because he's got a good brain and tons of skills (carpentry, house-building, programming, etc.), so he can always run out and get a "real" job if he needs to. That might work well for him, but I don't think most of his readers would be so adaptable in tough times.

I like the blog, but take everything in it with a grain of salt. His wife posted a while back about visiting her parents, and starting to feel increasingly anxious as they drove around town to a movie and then for dinner. All because of the wastefulness of using a car for those errands. That seems waaaaaaay overboard to me.
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Old 01-06-2015, 03:16 PM   #55
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Ok, in defense of the one medical bill wiping out someone out who lives on 15k a year, they might have their money safe in a 401K or IRA.

Example. Fred quits work at age 38, has $500,000 in a IRA, $100,000 in a Roth and lives on $15,000 a year. He starts withdrawing his contributions from his Roth, tax free, and also converts $20,000 of his IRA to Roth each year. This gives him $20,000 of MAGI which allows him to qualify for a heavily subsidized silver ACA plan with additional cost sharing.

At age 43 he starts taking out the Roth conversion amounts he started when he retired (at 38) tax free. He uses these for living expenses.

At 49 he is found at fault in a car accident and gets sued for $2,000,000 but declares bankruptcy with no change in his financial condition since his IRA is protected from creditors.

Not seeing the problem here...
1. Pulling $20k out of his traditional IRA to roll over into a ROTH requires him to pay taxes on that $20k. Sure, he gets deductions, but will still owe some taxes. That tax money has to come from somewhere, so his budget is $15k + his taxes on the ROTH rollover.

2. That 'heavily subsidized Silver' plan has a many thousand dollar deductible. Does Fred have the ability to spend 1/3 of his entire budget on healthcare? Yes, he can then deduct it against his taxes the following year, but he still needs to be able to have that cash available to spend if need be. And that's only if he hits his deductible. If he wants to go to the doctor or need any single kind of healthcare expense, he is on the hook for the first $6k, +/-.

If Fred lives in a state with expanded Medicaid, he can qualify for much lower cost healthcare...but then he has to drive to wherever they accept it. Which could be very far, and/or otherwise undesirable healthcare providers.

3. Is Fred's checking account exempt/immune from lawsuit protection? Does the creditor have the power to tell the bank to garnish the account when he transfers money into it from his traditional IRA? Or when he takes his withdrawals out each year from his ROTH IRA? Is he able to spend directly from his ROTH with 30+ withdrawals a month between his ATM/check card/etc. transactions?

4. And how does Fred pay for filing bankruptcy? It's not free, you know... Would be a big percent of his $15k budget.

Is Fred able to eke out an existence? Sure. Does it afford him much choice, much less any flexibility? Hardly, if any at all. Many of the readers aren't fully wrapping their heads around the fact that retiring in your 30s (even 40s) will leave you not working for longer than they have been alive up to that point! There's a LOT that can happen between retirement and death, which I don't think they are fully considering.

Imagine someone retiring in 1980 at age 35. Today they would be 70, and still likely have 10-14 more years to go - possibly more! Ignoring the stock market and just focusing on lifestyle and how the world is - do you think someone retiring at age 35 in 1980 would feel the same about life, the world, and their budget now as they did then?

When I make reference to a possible disaster impacting things, I'm not referring to the small chance of a $2MM lawsuit. I'm referring to the more frequently occurring things that happen in life - airfare to visit people, car repairs, homestead things (appliances, house upkeep), etc. - that, while much smaller impact, do add up and can have a big hit to a micro budget.

Or, even the simple act of a SCHEDULED medical procedure that ends up having 3 people who are involved who aren't in-network (even though the hospital and doctor are in-network), and which ends up billing you at the "out of network" rates that you might negotiate down a little but still are higher than your network rates.
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Old 01-06-2015, 03:17 PM   #56
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I like the blog, but take everything in it with a grain of salt. His wife posted a while back about visiting her parents, and starting to feel increasingly anxious as they drove around town to a movie and then for dinner. All because of the wastefulness of using a car for those errands. That seems waaaaaaay overboard to me.
I think they are big into environmentalism. I doubt they really care about saving the couple of bucks of gas it takes to cruise around town to dinner and movies. It's the pounds of CO, CO2, NOX, etc pumped into the air and damage done to Mother Earth from extracting oil and refining it into gas.

I don't personally care a whole lot about the environmental side of things. I would care more about spending a few bucks and all the time wasted driving around when I could do dinner and a movie at home for nearly free and to my exact preferences.
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Old 01-06-2015, 03:35 PM   #57
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1. Pulling $20k out of his traditional IRA to roll over into a ROTH requires him to pay taxes on that $20k. Sure, he gets deductions, but will still owe some taxes. That tax money has to come from somewhere, so his budget is $15k + his taxes on the ROTH rollover.

2. That 'heavily subsidized Silver' plan has a many thousand dollar deductible. Does Fred have the ability to spend 1/3 of his entire budget on healthcare? Yes, he can then deduct it against his taxes the following year, but he still needs to be able to have that cash available to spend if need be. And that's only if he hits his deductible. If he wants to go to the doctor or need any single kind of healthcare expense, he is on the hook for the first $6k, +/-.

If Fred lives in a state with expanded Medicaid, he can qualify for much lower cost healthcare...but then he has to drive to wherever they accept it. Which could be very far, and/or otherwise undesirable healthcare providers.

3. Is Fred's checking account exempt/immune from lawsuit protection? Does the creditor have the power to tell the bank to garnish the account when he transfers money into it from his traditional IRA? Or when he takes his withdrawals out each year from his ROTH IRA? Is he able to spend directly from his ROTH with 30+ withdrawals a month between his ATM/check card/etc. transactions?

4. And how does Fred pay for filing bankruptcy? It's not free, you know... Would be a big percent of his $15k budget.

Is Fred able to eke out an existence? Sure. Does it afford him much choice, much less any flexibility? Hardly, if any at all. Many of the readers aren't fully wrapping their heads around the fact that retiring in your 30s (even 40s) will leave you not working for longer than they have been alive up to that point! There's a LOT that can happen between retirement and death, which I don't think they are fully considering.

Imagine someone retiring in 1980 at age 35. Today they would be 70, and still likely have 10-14 more years to go - possibly more! Ignoring the stock market and just focusing on lifestyle and how the world is - do you think someone retiring at age 35 in 1980 would feel the same about life, the world, and their budget now as they did then?

When I make reference to a possible disaster impacting things, I'm not referring to the small chance of a $2MM lawsuit. I'm referring to the more frequently occurring things that happen in life - airfare to visit people, car repairs, homestead things (appliances, house upkeep), etc. - that, while much smaller impact, do add up and can have a big hit to a micro budget.

Or, even the simple act of a SCHEDULED medical procedure that ends up having 3 people who are involved who aren't in-network (even though the hospital and doctor are in-network), and which ends up billing you at the "out of network" rates that you might negotiate down a little but still are higher than your network rates.
Ok, you also make a few mistakes.

1) Taxes for a single person with a $20,000 income are not $5,000. You would not pay SS or Medicare taxes on a IRA to Roth conversion, just the federal tax rate. I would have to run the numbers, but perhaps as little as $1,500 in federal tax, leaving you with $18,500 and a $15,000 budget.

2) The cost sharing feature of ACA for silver plans gets rid of a large portion of the out of pocket costs. It can bring a $6000 max out of pocket down to $1200 or even lower. Most people do not really understand cost sharing they only are thinking about the subsidy for the premium.

3) I do not know the ins and outs of bankruptcy...that was sort of tongue in cheek of me. Likely a person who only had significant assets in a IRA and no job would not even have to file bankruptcy. There would be nothing to garnish and the IRA assets are untouchable by creditors up to a pretty large limit for our fictional Fred's meager net worth. As for money he has under his mattress for day to day living expenses between Roth withdrawals, I think it would be extremely hard to target by creditors. If he owns a car outright, then that might be a problem. Fred rides a bike though and uses public transportation.

4) I agree the living is meager, but there sure are a lot of people who manage. Fred spends a few hours at the local library playing chess with a friend, then walks in the park for some exercise. He enjoys the simple things and really doesn't miss catching the norovirus on a cruise ship.

If Fred has to see out of network providers, then he will have to deal with balance billing. If it is a small amount, Fred pays it. If it is a large amount, Fred drops the bill in the trash can and waits for them to try and come after him.
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Old 01-06-2015, 03:36 PM   #58
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2. That 'heavily subsidized Silver' plan has a many thousand dollar deductible. Does Fred have the ability to spend 1/3 of his entire budget on healthcare? Yes, he can then deduct it against his taxes the following year, but he still needs to be able to have that cash available to spend if need be. And that's only if he hits his deductible. If he wants to go to the doctor or need any single kind of healthcare expense, he is on the hook for the first $6k, +/-.
The hypothetical Fred will have ACA cost sharing beyond a big fat subsidy. Fred's about at the same % of poverty level that we are, and we qualify for a $105/month "gold plated silver" (my term) family plan that has $0 deductible and $2000 max out of pocket. $0 for primary docs, $20 for specialists. $100 ER. I guess there is still some risk that you could end up with an out of network doc somewhere and pay more. But there's also an even better chance you'll pay $2000 max out of pocket in bad years, and close to zero in good years.

YMMV of course on the particular plans available in your zip code and your willingness to accept limited networks (which you can switch each year if the $hit hits the fan, for an additional premium of course).
And if you get really sick, you might not be spending as much money on entertainment and travel.

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When I make reference to a possible disaster impacting things, I'm not referring to the small chance of a $2MM lawsuit. I'm referring to the more frequently occurring things that happen in life - airfare to visit people, car repairs, homestead things (appliances, house upkeep), etc. - that, while much smaller impact, do add up and can have a big hit to a micro budget.
This is a good point, and the very early retiree will neglect to budget for these expenses at their own peril. Maybe some of those $15k/yr budgets don't cover these, maybe they do. We retired on a $32k/yr budget for a family of 5 (and a sub-3% WR) and my budget explicitly covers large and small capital items and routine maintenance.

Like replacing the roof, siding, appliances, HVAC, etc. And new(er) cars periodically. Car repairs are covered in regular maintenance and operation expenses (for me at least). Trips to visit people - all family is local or within 4 hour drive. If we had to fly, that would come out of the vacation/travel budget.

This past year we spent $2,500 above our budget because we did a major $8,700 exterior renovation (siding, windows, roof repair). We traveled for five weeks (3 international vacations covering 5 countries). DW had a crown put in.

Living on $30-40k a year isn't all that horrible. I think it's pretty sweet in fact! And if I was laid up with a major medical issue, odds are I wouldn't be traveling quite as much. Doctors appointments and follow ups would probably interfere with traveling when we want to.
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Old 01-06-2015, 03:40 PM   #59
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2) The cost sharing feature of ACA for silver plans gets rid of a large portion of the out of pocket costs. It can bring a $6000 max out of pocket down to $1200 or even lower. Most people do not really understand cost sharing they only are thinking about the subsidy for the premium.
Agreed here. If you're near the 133% FPL cut off, you qualify for "gold plated silver" plans. Low or no copays and low or no deductibles plus low out of pocket maxes. It's only on the silver plans, so you might end up paying a slightly higher premium than you would on a bronze plan, but it's really gold plated coverage (with the possibility that your network might not cover every single medical provider in the universe, like most insurance anyway).

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4) I agree the living is meager, but there sure are a lot of people who manage. Fred spends a few hours at the local library playing chess with a friend, then walks in the park for some exercise. He enjoys the simple things and really doesn't miss catching the norovirus on a cruise ship.
That's us, except we also enjoys cruises. If you can catch the last minute ones, they are dirt cheap. Figure about $400-500/person for a week of all-inclusive unless you're a heavy drinker.
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Old 01-06-2015, 03:56 PM   #60
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Agreed here. If you're near the 133% FPL cut off, you qualify for "gold plated silver" plans. Low or no copays and low or no deductibles plus low out of pocket maxes. It's only on the silver plans, so you might end up paying a slightly higher premium than you would on a bronze plan, but it's really gold plated coverage (with the possibility that your network might not cover every single medical provider in the universe, like most insurance anyway).



That's us, except we also enjoys cruises. If you can catch the last minute ones, they are dirt cheap. Figure about $400-500/person for a week of all-inclusive unless you're a heavy drinker.
My term for them is super silver plan with cheese. For low budget early retirees they are key.

We may have to look into last minute cruises when we ER this year. While having a bigger budget than Fred, I was not planning on spending more than about $5,000 a year on vacations. If I could get a one week cruise for two people for $1000 I might risk the viruses
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