Money Mustache Fires Back at Suze Orman ($500K to retire vs $5 Million)

[Out of Steam]

About 10 years ago, then in our late 40s with a middle-schooler, I figured that an as-is, where is retirement in the DC suburbs with no pension would take roughly $5 million.

So, the figure isn't as crazy as it sounds.

 

[marko]

I think this is for folks who want to retire extremely early, and are willing to be extremely frugal to do so and live a frugal lifestyle all their lives. It’s an option.

I believe there are some folks for whom any lifestyle, however meager, is preferable to having to get up in the morning and going to work.

I'm related to a few of them! (on DW's side)

 

[audreyh1]

I believe there are some folks for whom any lifestyle, however meager, is preferable to having to get up in the morning and going to work.

I'm related to a few of them! (on DW's side)

Well there is also the philosophy of living a minimalist lifestyle. That appeals to some folks.

 

[Fedup]

The minimalist people I know has been living off his mom’s house, serves at a soup kitchen sometimes, siblings have to pay for his dental. Refused to work for some reasons.

 

[FreeBear]

Used to like Ms Orman, but she has become tiresome for me. While I’m sure she and anyone in her business has seen many cases where retired ran into a problem and didn’t have as much left they had counted on, I have come to realize that even in retirement stuff happens and you have to adjust. Happens all through your working years so why would you expect that it will stop once you retire.

+1


That's it! In life, FIRE'd or not, "stuff happens and you have to adjust". Seems obvious...

With FI, "adjustment" typically yields more palatable options though.

 

[clifp]

About 10 years ago, then in our late 40s with a middle-schooler, I figured that an as-is, where is retirement in the DC suburbs with no pension would take roughly $5 million.

So, the figure isn't as crazy as it sounds.

Well yes and no. For many of us who had good salaries than replacing those salaries (say $200K) then yes on the surface you'd need $5 million.

But with lower taxes and no need for saving the actual income needs are lower.

But more importantly, even for really HCOL place like DC, SF Bay Area, or NYC. The median household income is $100-120K . Once you figure in the lower taxes and expense associated with retirement, a 2-3 million stash lets you have an average lifestyle. Maybe somewhat below average for $2 million. But really $2 million plus a paid off house is enough for middle-class lifestyle pretty much anywhere. But obviously middle class isn't enough for Suze Orman.

 

[razztazz]

Well there is also the philosophy of living a minimalist lifestyle. That appeals to some folks.

I understand both analyses perfectly. I am one of those minimalists. It doesn't take much to be happy and feel secure. But marko's relatives might be related to some of mine. There might be a fine line between minimalist contentment and just being a bum or refusing to consider the vicissitudes of life. I could not live with myself if I were the latter. The former, I'm OK with.

 

[Independent]

4. You can be happy on ANY level of spending

No, that's too simple.
This is better:

I can survive at a very low (by US standards) income.
I might enjoy life more with a higher income.

Barring overwhelming medical or economic situations, we each make a decision on when the positives from a year on non-working time exceed the positives from spending a year's more wages.

There are things that money can buy that might be worth the extra work.
I might prefer spending my last years in a nice, private-pay old folks home instead of in a Medicaid only facility.
I might enjoy traveling to Europe or Alaska or the Virgin Islands or the western US national parks instead of staying home.
I might enjoy being able to help some people who've had bad financial luck - possibly relatives.
I might prefer going to bed knowing I have more financial cushion than going to bed feeling that I've cut is pretty close.

Or not.

I probably retired on less than most people here, but I had enough for a few things that looked like luxuries to me.
MMM seems too quick to set priorities for other people.

 

[NW-Bound]

We are not minimalists, but could be if we need to. There are a lot of things we can cut out, and it does not make life miserable for us, such as travel, gifts/donations, and the 2nd home.

I have always liked to have more money than I spend. The higher the margin, the more serenity it provides, so that our mind is free to think of other things, such as what new dish we want to try to make, and what is the best way to do a certain aspect of my hobby DIY home energy storage system.

 

[marko]

But marko's relatives might be related to some of mine. There might be a fine line between minimalist contentment and just being a bum or refusing to consider the vicissitudes of life. I could not live with myself if I were the latter. The former, I'm OK with.

+1
Hey cuz!
Yes that's what I was referring to...those on the other side of that fine line.

 

[GravitySucks]

MMM seems too quick to set priorities for other people.

That's the same problem I have with Suze. But it's like the economic prognosticators - the surer they sound the more eye balls they get. The more eyeballs they get, the even more eyeballs they get.
Thought with an explanation of how it could be different gets you no where.

 

[daylatedollarshort]

I have always liked to have more money than I spend. The higher the margin, the more serenity it provides, so that our mind is free to think of other things, such as what new dish we want to try to make, and what is the best way to do a certain aspect of my hobby DIY home energy storage system.

I like that feeling, too. I wouldn't feel good retiring on a very low amount with no margin for error, but I'm okay with saving more than we might spend and having a cushion.

 

[ER Eddie]

I've always identified with the frugal/minimalist folks. Back when I first got into it, 20-30 years ago, it was called "voluntary simplicity." I am not as radical about it as some people, but I live that way. Way below my means, pretty simple/humble, no keeping up with the Joneses. That's a big reason I'm FIRE.

I don't see how the MMM crowd covers health insurance on 500K total, though. That seems pretty risky, given that you're retiring at, say, 40, and you've got 25 years of payments and rapidly rising healthcare costs. Maybe I'll ask on their forum.

 

[Fedup]

If they don’t have much income HI is free isn’t it, well almost.

 

[catotx]

MMM is not entirely a new concept. I know he's been around awhile but I understand he's making a nice income on his blog and possibly some other outside sources. He preaches just as Suzy does.

^This.

Many of these bloggers preaching FIRE are actually using their blogs to supplement their income.

 

[Dtail]

Well yes and no. For many of us who had good salaries than replacing those salaries (say $200K) then yes on the surface you'd need $5 million.

But with lower taxes and no need for saving the actual income needs are lower.

But more importantly, even for really HCOL place like DC, SF Bay Area, or NYC. The median household income is $100-120K . Once you figure in the lower taxes and expense associated with retirement, a 2-3 million stash lets you have an average lifestyle. Maybe somewhat below average for $2 million. But really $2 million plus a paid off house is enough for middle-class lifestyle pretty much anywhere. But obviously middle class isn't enough for Suze Orman.

Had a great salary, but cut expenses by 60% with moving to FLA in order to FIRE. Still we are looking at ~110k yearly in a MCOL led by a 26k rent.
However the DGF is already receiving SSDI and other payments coming in currently cover 67k. This will drop in a few years.
We have less than 2mm without a paid off house, but believe in history/calculators with an ultimate WR% under 3.5% will last us through.

 

[scrabbler1]

I like that feeling, too. I wouldn't feel good retiring on a very low amount with no margin for error, but I'm okay with saving more than we might spend and having a cushion.

One condition of my being able to ER was that my ER budget would include a surplus, or cushion, to allow for the somewhat frequent, smaller, unforeseen expenses which can arise in a given month. If I g on a minor spending spree once in a while, I don't have to worry about my budget being unable to cover them. All that will happen is my surplus gets eaten up for that month, not a big deal.

I do have a larger "slush fund" to cover me in case there are larger, unforeseen expenses. It is a second-tier EF I can tap into once in a while.

 

[Teacher Terry]

Eddie, they are using Medicaid and ACA , health ministries or going without.

 

[street]

I have not listened to Suze O in years. I was liked to listen to her advise and took most of it as humor. LOL

I have tried to register on MMM but I couldn't pass the test of 2 or 3 questions to get excepted. LOL I tried to find the answer to the one question and couldn't find it so I never went back there to try again.

 

[cyber888]

I think $2 Million minimum is about right if you retire in California. My brothers and several friends live - it is way too expensive. I'm in N.C, where cost of living is much cheaper. And you can do fine with $1 Million.

It also depends on the location of residence too. May not be possible in some HCOL in California.

But I’m thinking every 7 years, the amount that you need tend to double.
So in 2000, you need $500k, in 2008, you need $1 million, in 2018, that might be $2 million. Plus retiring in a bull market like 2000 and 2008, the amount might be reduced after the crash. So if you retire now, it might be reduced in the future.

 

[Teacher Terry]

Street, what questions to get accepted? I don’t remember doing that.

 

[RobbieB]

Hahaha...you have to pass the "test" eh?

Amazing.

 

[gauss]

It also depends on the location of residence too. May not be possible in some HCOL in California.

But I’m thinking every 7 years, the amount that you need tend to double.
So in 2000, you need $500k, in 2008, you need $1 million, in 2018, that might be $2 million. Plus retiring in a bull market like 2000 and 2008, the amount might be reduced after the crash. So if you retire now, it might be reduced in the future.

Not sure if I am following this.

Are you suggesting 10% personal inflation rate?

-gauss

 

[Fedup]

Not sure if I am following this.

Are you suggesting 10% personal inflation rate?

-gauss

No, It’s just an observation that back in 2000, the amount suggested for retirement from the media was $500K. The amount seems to be doubled every 7-8 years.

If you have $500K in 2000, at the low of 2002-2003, it dropped 40-50%, so your stash is halfed to about $300k.

Same with 2008, if you start out with $1million, after 2008-2009, it dropped 40-50%, your stash is halfed to about $500k.

I have no idea what’s suggested now, but I’m guessing it’s double 2008 level so that’s why the amount $2 million was suggested.

 

[street]

Street, what questions to get accepted? I don’t remember doing that.

LOL! I can't remember for sure but if I remember right one was "what was the first word on the first MMM forum board". Any way is was something like that.

I haven't been back there and it was over a year ago and I haven't bothered to even try.

I got the one question right because it is a saying of some sort that is right on their home page.

It seemed bizarre to me. LOL