Would you retire at 30 with $1m?

[soupcxan]

Over at another FIRE message board, people were discussing this family (two adults in mid-30s and a baby) that were theoretically retiring on $1M at 4%. Another case was a mid-20s shooting to ER at 30 with $600k @ 4%.

I said these folks were crazy for using 4% and thinking these amounts could realistically last the rest of their lives. I got downvoted to oblivion for this opinion. Am I wrong?

 

[arky]

I would not say it can't be done, but I would not feel comfortable in either case mentioned.

 

[Walt34]

I would not say it can't be done, but I would not feel comfortable in either case mentioned.

Same here. Way too many things can go wrong - serious illness, accident (think falling off a ladder) rampant inflation, and other unknowables.

 

[eta2020]

No

 

[growing_older]

I am too concerned about safety to attempt 4% for a 60+ year retirement myself. But I can also see how it could work if you get a favorable sequence of returns to start and are able to lower the withdrawal rate over time. As long as you are willing to semi-retire or even go back to work for a few years if markets move unfavorably, it could be doable.

My other concern is that at such a young age, the idea of fixing one's lifestyle to the current ideas seems dangerous. There's a lot of years to change your mind, but you are committed in a way that would be hard to correct. While living a bare bones frugal lifestyle might be appealing at the start, it's hard to know I will continue to believe that for the rest of my life.

 

[Car-Guy]

At that age, with that small amount, I wouldn't even consider it.

 

[braumeister]

Retire from what?
They haven't lived yet.

 

[scrabbler1]

Maybe a single-person household could do it, but with a family of 3 I'd say "no way."

 

[jim584672]

Without knowing the spending rate the question can't be answered. A frugal person could retire with $1,000,000 at 30.

 

[thefinancebuff]

Over at another FIRE message board, people were discussing this family (two adults in mid-30s and a baby) that were theoretically retiring on $1M at 4%. Another case was a mid-20s shooting to ER at 30 with $600k @ 4%.

I said these folks were crazy for using 4% and thinking these amounts could realistically last the rest of their lives. I got downvoted to oblivion for this opinion. Am I wrong?

Depends on the definition of retiring. If it's like MMM just switching to self-employment on their own terms the answer would be yes.

 

[aaronc879]

If you retire into a bull market then it's certainly possible. Equities return 9% on average. If you spend 4% and earn 9% then you should never run out of money. The risk is losing money early in retirement. It's hard to come back from that.

 

[Texas Proud]

When I was by myself I could live on less than $30K.... so I could have retired with $1mill and started at 3%.....

Now with DW and two kids and expenses are over $100K.... could not even come close....

 

[MatatuPuncher]

Retire from what?
They haven't lived yet.

And that depends. Some people live boring lives. Others have spectacularly rich and fulfilling lives by age 30.

 

[sunsnow]

I didn't, so I guess it follows that I wouldn't. We wanted more security and income than 1M would have provided -- especially with such a long horizon.

 

[ERhoosier]

Utterly foolish, IMHO. The cone of uncertainty, especially for a family, is just too large.

 

[Major Tom]

I wouldn't have considered retiring in my 30's unless I could have comfortably done it with a 2% WR, or less. You'd have to be pretty sick of work to want to stop that early but I imagine some either get burned out, or never find work that they can at least tolerate.

 

[retirementguy1]

Let everyone live how they want. A lot of people misunderstand MMM's blog. I can't say I live his lifestyle but he has maintained mental and physical acuity and can return to a 40hr a week job whenever he likes and it won't take him long to make a considerable amount of money if he returns to work.

 

[robnplunder]

Retire from what?
They haven't lived yet.

+1.

To OP - Take time off from work if you must. Leave the retirement to people who are older.

 

[Bikerdude]

No

+1.

 

[Hermit]

I wouldn't retire on that amount at 60! (I did retire on something close, but I have a nice pension and SS.) And I live in an old motor home way up in the mountains. Very close to the idea of "living in a van down by the river."

I think it can be done, but not much room for fun, travel, or toys.

 

[brewer12345]

Depends on one's definition of retirement. If that means, "I will never work again," its not a good idea. If it means, "I will work from time to time when I feel like it and on my own terms," it could very well work out just fine.

 

[FUEGO]

I wouldn't personally want to do it on "only" $1 million, but we did it on just a bit more. $1.4 million plus a paid off house but with 3 kids instead of 1.

We spend around $32k/yr which works out to a little under 3% withdrawal rate after setting aside a couple hundred thousand for certain earmarks. A 20% drop in values from today would leave us with a 3.3% withdrawal rate. In other words, not the end of the world. I also have a small side hustle income which has increased steadily and comes close to covering our expenses some months. Will I ever work full time or part time again? I can't rule it out, and it might not even be for financial reasons. I might just get bored or stumble into an awesome opportunity.

As for the 30-something couple the OP mentions, if it's the Go Curry Cracker folks, I think the guy is 40 now. I also think they have maybe double that $1 million hypothetical amount but live off dividends from their taxable portfolio only. And their spending is very flexible because they don't have fixed expenses. Market crashes and they spend more time in Mexico, Central America, SE Asia, etc. The bull roars and they spend more time in western Europe. It's a pretty unique approach to spending since we can't really swing our expenses more than about 25% lower without making real sacrifices in quality of life.

As for $600k at age 30, I wouldn't personally do that. But maybe that's plenty for a single person who lives on the cheap and doesn't desire a lot of material possessions. $24k/yr isn't a lot less than what the five of us spend, but I don't rely on a 4% WR either.

 

[Fermion]

$1.4m here in mid 40s retired couple no kids. $1m is doable, but I think they should cut spending down to $30,000 a year. They won't have the SS backdrop we will have (wife qualifies for about $2000 a year at age 66 and I get half of that, so $3000 SS pension at age 66). If you started work at age 20 and worked until age 30, you would have a SS benefit of less than $1000 (maybe $2000 combined if both worked, otherwise $1500 combined).

Rampant inflation is not a issue, as that is controlled by the portfolio allocation and withdrawal rate. I mean, yes, pre WWII German style inflation would be bad, but it would not matter if you had $1m or $10m then.

 

[FUEGO]

$1.4m here in mid 40s retired couple no kids. $1m is doable, but I think they should cut spending down to $30,000 a year. They won't have the SS backdrop we will have (wife qualifies for about $2000 a year at age 66 and I get half of that, so $3000 SS pension at age 66). If you started work at age 20 and worked until age 30, you would have a SS benefit of less than $1000 (maybe $2000 combined if both worked, otherwise $1500 combined).

Those are monthly figures, right? DW and I will each get just over $1000/mo ($24k/yr combined) at age 66 and we each only have about 10 good years of earnings (plus 7-8 really lean years during HS and college with minimal earnings).

 

[Fermion]

Those are monthly figures, right? DW and I will each get just over $1000/mo ($24k/yr combined) at age 66 and we each only have about 10 good years of earnings (plus 7-8 really lean years during HS and college with minimal earnings).

Yes, monthly figures. My wife put in 25 years of earnings and the last 17 or so were at max SS limit. I don't have quite enough credits myself so will just apply for half of her benefits unless I do some sort of work between now (age 44) and SS retirement age. The spouse getting half of the other spouse's benefits is pretty damn sweet.