Shiller: Live Like a Student and Save

[daylatedollarshort]

Robert Shiller has some interesting thoughts on savings and retirement for his students:

The investing golden age may be over: Robert Shiller | Watch the video - Yahoo Finance

He tells his students that they don't seem unhappy now, why not continue to live like that after graduation and save half their income? Stocks are high, bond yields are low, people are living longer, saving 5% a year might not be enough for retirement in 40 years.

"The first solution for an individual is to save more,” said Shiller. In fact, he advises his students to continue living like students even after they’ve entered the real world in order to get used to a high rate of savings."

I just thought this was interesting as we have many members here who chose this path to RE or FI.

 

[2B]

This similar to my bare bones budget if DW and I are reduced to just SS except I can live much larger on our combined SS than I ever did as a student. I could do better than my student days on just my SS.

 

[razztazz]

He tells his students that they don't seem unhappy now, why not continue to live like that after graduation and save half their income? Stocks are high, bond yields are low, people are living longer, saving 5% a year might not be enough for retirement in 40 years.

"The first solution for an individual is to save more,” said Shiller. In fact, he advises his students to continue living like students even after they have entered the real world in order to get used to a high rate of savings."

I just thought this was interesting as we have many members here who chose this path to RE or FI.

Ha, yes. That's me. I realized long ago that I was pretty happy day-to-day, month-to-month, even year-over-year. If I could just sustain that life, same car, same stuff, same friends, same location without working I'd be even happier.

Whenever I'd say something about having so much money I wouldn't have to work people would rag me about being "A millionaire" in the image of Thurston Howell III. Who says you need that much money to not work anymore and be happy?

Even when I left the military everybody said "You can't live on that pension. You'll have to do something. You'll need more money!" Speak for yourselves. I've already got more money. And I was not married, and had no second incomes. I was my own Swiss army knife.

Shiller. for all his knowledge and reputation in the field sounds like a bit of a hand-wringer. This might be the rumble of that gloom and doom that precedes a period of good times...? Not that I have any heavy bets either way.

All Man's miseries derive from his inability to sit, quietly, in a room alone. Blaise Pascal

There is no dignity quite so impressive and no independence quite so important, as living within your means. C Coolidge

 

[Totoro]

Just today had a conversation with a sort of special friend.

I have an Ikea couch which cost me exactly 0$ (gift), retail value $50.

She goes: yes, but of course you would want a more expensive one of $5.000 or so when you get a permanent home, don't you.

Me: Well, actually no. Why spend something like two months of a decent wage / living expenses on a couch?
She: It does last 10 years
Me: And then you need a table, kitchen appliances, chairs .. before you know it you are working full time to be able to afford your furniture.

I guess we dropped it at that.

Yeah, call me cheap. But you can also call me financially free.

 

[FUEGO]

That's pretty much how we landed early retirement.

I recently bumped into the son of a mega-billionaire on a side hustle I'm involved in. Being curious, I facebook snooped him. Guess what? His life is very similar to my own.

He's sitting on a boat hanging out with buds. In my case I do that on cruise ships, he's on his family's yacht most likely.

He's fishing in a pond from a jonboat. Check (well, no fishing but I go out rowing on jonboats for fun - rental = $3/hr IIRC).

He's in a restaurant or bar drinking beer. Yep.

Hiking up a hill overlooking the sea. Yep.

Wearing ironic goofy goggles at a pool party. Yep (well, I've been to a nice pool many times and snorkeled in the Bahamas).

You can spend a little or spend a lot and enjoy life regardless (above a bare minimum of course!).

 

[Bestwifeever]

Please don't make me eat those generic frozen pot pies every day for dinner again!

 

[haha]

Just today had a conversation with a sort of special friend.

Be sure she understands her position:not!

Ha

 

[Walt34]

I just thought this was interesting as we have many members here who chose this path to RE or FI.

That's where we are too. After I retired I could easily have found a mid-six figures job and most of the guys working in that field did so. But it comes at the cost of living in congested areas with heavy traffic, brutal commute times and all the stress that comes with that lifestyle. Had I done so we'd have another million at least in the bank.

I'd probably also be dead from the stress. Not much future going down that road. There are lots of people in WV who have made that choice.

 

[Totoro]

Be sure she understands her position:not!

Ha

Not really the correct place for this, so I'll keep it short: Appreciate the concern, and it is a regular topic for us.

 

[HFWR]

Please don't make me eat those generic frozen pot pies every day for dinner again!

You got to eat pot pies? I had to eat the boxes they came in, that I dug from the dumpster in a neighboring town, because our town was so poor we didn't have dumpsters...

 

[Bestwifeever]

You got to eat pot pies? I had to eat the boxes they came in, that I dug from the dumpster in a neighboring town, because our town was so poor we didn't have dumpsters...

That was you out there in the alley? Don't worry, the boxes tasted better.

 

[daylatedollarshort]

I have an Ikea couch which cost me exactly 0$ (gift), retail value $50.

We helped furnish an apartment for one of the kids from Ikea, upscale thrift shops, estate sales in ritzy neighborhoods and assorted family donations. I still can't get over how cute it looked when we were done moving everything in and how little it all cost.

 

[rodi]

Please don't make me eat those generic frozen pot pies every day for dinner again!

I lived on ramen, quesadillas, and mac-n-cheese. Supplemented with splurges of rolled tacos from the Robertos tacos.

My kids have mastered cooking these items so I figure they're ready for college.

 

[jjquantz]

Reminds me of a 30 something year old friend of ours who said, "When are you and DW going to stop living like grad students?" I think that the answer is clearly, "Never."

Ah, college! Stack all my classes in the morning (I was and still am a morning person), finish homework by 2 or 3 in the afternoon. Then a long run in the cornfields, a little basketball at the gym. Evening with DW, perhaps a 25 cent faculty or student recital to attend.

Life really doesn't get much better - why change?

 

[athena53]

That's where we are too. After I retired I could easily have found a mid-six figures job and most of the guys working in that field did so. But it comes at the cost of living in congested areas with heavy traffic, brutal commute times and all the stress that comes with that lifestyle. Had I done so we'd have another million at least in the bank.

Yeah, I could likely have found another job in my field when I decided to pull the plug in May but it would probably have involved relocating to a suburb of Chicago, NY or LA, paying a ton more in carrying costs on a less-desirable house, and commuting in heavy traffic. My spreadsheets do show that if I'd worked till 65 we'd have had another $1 million or so. I'm glad that we appear to be just fine without it.

 

[friar1610]

That's where we are too. After I retired I could easily have found a mid-six figures job and most of the guys working in that field did so. But it comes at the cost of living in congested areas with heavy traffic, brutal commute times and all the stress that comes with that lifestyle. Had I done so we'd have another million at least in the bank.

I'd probably also be dead from the stress. Not much future going down that road. There are lots of people in WV who have made that choice.

I looked at your profile and saw that you are a retired police officer. What you say and your situation is also similar to many retired military. Although I took the relatively high paying job for a few years after I retired from the Navy, I didn't enjoy it and retired for good. Many of my friends, some of whom are in their late 60's/early 70's, are still making big bucks working in jobs like that (for Defense contractors.) Beats me why they do it. I've already proven you can live just fine on the pension that most of them have.

 

[Independent]

I really like his calculation for retirement savings:

Suppose you're going to work for 40 years, then live in retirement for 40 years.
If you save 5% of your income this year,
and find that you earn CPI + 0% on your savings,
your savings will replace 5% of your pre-retirement earnings.

For a young person, with so many unkowns in the future, this is better than a black box calculation.

I've used the same approach, but with more optimistic investment returns:

Suppose I get serious about saving 30 years before I retire, and expect to live 30 years in retirement.
Suppose that I invest in stocks and get the worst 30 year return in Shiller's data.
That would be inflation + 4.4% or a 30 year factor of 3.6.
So, a 10% savings rate could fund a 36% replacement ratio.

 

[aja8888]

Please don't make me eat those generic frozen pot pies every day for dinner again!

That's certainly more upscale that heating cans of Campbell's pork and beans on a steam radiator.

 

[Independent]

Regarding "live like a student" --

Room and board at Yale is $14,000 for 8 months. That would be $21,000 for 12 months. That's plenty high for a room with a shared bath and food. We still need transportation, medical care, clothing, and personal care items.

Actual Yale students get good neighbors, free or cheap entertainment, and near zero transportation costs as they can walk from dorm to class, and the walk is across a lovely college campus.

I think that's kind of a unique package that's not available after you graduate.

 

[haha]

Regarding "live like a student" --

Room and board at Yale is $14,000 for 8 months. That would be $21,000 for 12 months. That's plenty high for a room with a shared bath and food. We still need transportation, medical care, clothing, and personal care items.

Actual Yale students get good neighbors, free or cheap entertainment, and near zero transportation costs as they can walk from dorm to class, and the walk is across a lovely college campus.

I think that's kind of a unique package that's not available after you graduate.

Not to mention the favorite young person's hobby-copious sex with as many attractive partners as you fancy. Anyone who lives in the real world can testify that it would be essentially impossible for a man at least to replace that, for free or almost any realistic amount of money.

Ha

 

[Totoro]

Seems I went to the wrong university

 

[athena53]

Not to mention the favorite young person's hobby-copious sex with as many attractive partners as you fancy. Anyone who lives in the real world can testify that it would be essentially impossible for a man at least to replace that, for free or almost any realistic amount of money.

Ha

Ah, the 70s, when anything you caught could be cured with penicillin. It'll never be like that again.

I thought of going to law school after I got my Math degree and chose not to because I was tired of living like a student. I was living off my parents and sharing a squalid Victorian house with an assortment of people my age, some of whom were not serious students. I wanted a car, I wanted to see Europe, I wanted my own little apartment, so I got a job. I managed to get to Europe the first time by setting a goal of saving twice what the cost of the trip would be. That was helped by not going overboard on a car (although I should have done better than that used 1973 Hornet).

I agree with his basic premise, though: you don't have to drop all of your thrifty habits just because you're making money.

 

[Options]

This is not new news. So much of this stuff is just rehashed, repackaged, and resold (witness Anthony Robbins' latest book and the ensuing criticism).

Mr. Money Moustache does a better job of showing people how to be frugal.

 

[daylatedollarshort]

This is not new news. So much of this stuff is just rehashed, repackaged, and resold (witness Anthony Robbins' latest book and the ensuing criticism).

Mr. Money Moustache does a better job of showing people how to be frugal.

That is interesting because when I saw the video I thought the low kinds of rates of return to expect going forward that Shiller suggests to plan on and the kind of housing college students usually live in were pretty different from the kind of housing and expected future returns discussed in the MMM blog (not the forum - a lot of people who post there do seem to live like extended college students, living in low overhead apartments with roommates or significant others).

 

[aja8888]

Not to mention the favorite young person's hobby-copious sex with as many attractive partners as you fancy. Anyone who lives in the real world can testify that it would be essentially impossible for a man at least to replace that, for free or almost any realistic amount of money.

Ha

Looks like I went to the wrong Ivy League school.

I went to the University of New Haven which is a stones throw from Yale. The only thing I got to do was go to Yale's bookstore since we didn't have one. Oh, and I did heat beans on a steam radiator.