Minimizing the "Skim" -- the Key to Retiring Early

[ncbill]

Minimizing the "Skim" -- the Key to Retiring Early

Especially #3, The Wall Street "Skim":

"If you're paying the 2% of assets in annual fees, expenses and trading costs that Wall Street's business model demands, you need to save about twice as much money for retirement."

https://retireearlyhomepage.com/mini..._the_skim.html

[Magus]

Good article overall and he's right about investment fee skim but, I have some gripes with #4

Houston 1981 vs today is not representative of the overall US RRE market or the rent market due to the oil boom/bust nature for that city and the years they represent (near end of a huge oil boom, and oil so so after several years of lagging)

-housing in the US as a whole has increased >7x since then vs just over 2x for Houston,
-rents in houston only increased barely higher than 2x over that time while nationally they've gone up ~4.5x times

Additionally, he doesn't add principal paydown, the fact you don't actually need 20% down (and can skip PMI most of the time even without it) and a few other things like renting is more expensive than mortgage payment in most of the US.

It's hard to ignore the fact that homeowners have significantly higher NW than renters and most of that is in their home. My general rule of thumb is cap rates are sub 4%, renting makes sense. If cap rates are 6% or higher, owning makes sense. If between 4-6% it depends on how long you want to own the property. Markets like NYC and SF where cap rates are 2-3% would be rental preferred markets whereas most of the US would be own markets.

That said, I agree transaction cost for RRE are insane.

[ncbill]

Oh, and I solved the college "skim" by making my kids pay for most of it on their own.

One went to a service academy, so I didn't even have to pay room & board. Now on active duty.

The other used a campus-based Army ROTC scholarship to cover tuition/fees (even the school's health insurance, "gold" equivalent) at a pricey out-of-state private school.

They'll pay that back via serving with the Army National Guard for a few years after graduation.

Both plan to stay long enough to get their military retirement even with civilian careers via Guard/Reserve.

It always surprises me how few here in the U.S. take advantage of the military money available for post-secondary education, even for graduate school.