Big numbers (serious question)

[yakers]

Like pacer gal, fed employee and teacher so ok/good pensions (DW is very modest), lived cheap, DS to public university, but mostly go back to basics, IMHO don't look for ER look for financial independence, then work or not as you like. I could have retired @55 but went at 57, liked my work a lot but a night in the ER changed outlook a lot. Work was great, retirement better. But work is not the enemy. Inheritance (9 years after retirement) was less than 25% of our $2M+ portfolio not counting paid off condo in SOCAL.
If your income is 'fixed' it all depends on LYBM. Others could persue increased income.

 

[RetiredAndLovingIt]

I see a lot of posts by people planning early retirement....Often, say, someone in their 40s who says they have anywhere from 2 to 3 million in total assets. Sometimes, they say their annual income is less than $200 k, which must mean they were saving close to half of that for the better part of two decades. Are these numbers real? How is this really possible? Seems like some of these numbers are inflated, but can't understand why someone has any incentive to do that.....

When I was laid off my company pension and profit sharing balance was close to 500K of which I never contributed a dime so that was a good incentive to consider early retirement. I wasn't 100% sure that I was going to be able to retire based on that amount plus my IRA balance and savings but I decided to give it a shot and I'm doing just fine. At this time I still have had no need to touch that money so it's just sitting there growing. I'm also a natural saver, have been since I was kid and I paid my house off before I was 40 and have zero debt. If you have no debt, it's quite easy to retire early at least it was for me. I did have a 6 figure salary in my final years and saved a lot of it in once the kids were grown and out on their own and I'm currently living off my cash stash and doing Roth Conversions to reduce my taxable IRA balance. My investments bring in more than I spend or need every year and I live on a lot less than that 6 figure salary that I once had and I'm happier now than I've ever been. I've never reached the 2-3 million balance and probably never will but nor do I need it to live comfortably for the rest of my life and I want for nothing. It's really all about having a goal and sticking to it and starting to plan early to reach your goals. Some people can do it and some people spend every dime they make and will probably go into retirement with little savings and having nothing more than their Social Security to live on.

 

[Onda]

I see a lot of posts by people planning early retirement....Often, say, someone in their 40s who says they have anywhere from 2 to 3 million in total assets. Sometimes, they say their annual income is less than $200 k, which must mean they were saving close to half of that for the better part of two decades. Are these numbers real? How is this really possible? Seems like some of these numbers are inflated, but can't understand why someone has any incentive to do that.....

If someone started investing in their 20s and got decent returns in the stock market (historically around 7-8% per year), their savings would compound. For example, saving $60k annually and getting only 7% returns could grow to $2 million in around 20 years.

 

[luckydude]

I see a lot of posts by people planning early retirement....Often, say, someone in their 40s who says they have anywhere from 2 to 3 million in total assets. Sometimes, they say their annual income is less than $200 k, which must mean they were saving close to half of that for the better part of two decades. Are these numbers real? How is this really possible? Seems like some of these numbers are inflated, but can't understand why someone has any incentive to do that.....

As other forum members have mentioned upthread, it is entirely possible to accumulate a few million dollars with a combination of LBYM and investing early in the market and letting time and compounding do their magic even with relatively modest lifetime earnings.

I suppose it's possible that a few people might tend to inflate their numbers as you say, but the one thing I love about this forum is that people who join have a genuine interest and common goal in FIRE and are willing to share their knowledge, insights and experiences to help themselves and others, so anyone using bogus or inflated numbers aren't doing themselves any favors in getting sound advice they need to achieve FIRE and thus defeat the purpose of joining this forum in the first place. Besides, these larpers (as I like to call them) are usually ferreted out pretty quickly .

 

[tulak]

It’s real and doable if you have the right mindset. I know many that had a bundle of cash through stock options and blew it all. Wrong mindset.

For me, it took longer to figure out, and mostly because I was never taught to save and invest. Once I figured that out, it’s been easy. Just add time.

 

[Slim11]

It’s real and doable if you have the right mindset. I know many that had a bundle of cash through stock options and blew it all. Wrong mindset.

For me, it took longer to figure out, and mostly because I was never taught to save and invest. Once I figured that out, it’s been easy. Just add time.

I agree 100 percent. Years ago out of high school I took a job as a fireman. I made 24k starting out max was 42k this was in 1997. My buddy made 200k a year in real estate, wanted me to quit and work with him. Fast forward to now, I am retired, good pension, he lost almost everything. He does ok, but the fancy cars and houses went when the housing bubble burst. He had to play catch up ever since. I did slow and steady and did well.

 

[HI Bill]

...someone in their 40s who says they have anywhere from 2 to 3 million in total assets. Sometimes, they say their annual income is less than $200 k, which must mean they were saving close to half of that for the better part of two decades. Are these numbers real? How is this really possible?...

Yes, these numbers are real. For 17 years of my 30-year career, made less than $100K. I started saving at age 30, and hit $2M just 22 years later. I started out saving 6% to get the company 401(k) match. I gradually increased this to 50% at which time my salary was about $125K, so I enjoyed only a few peak earning years. Living below my means, saving, investing consistently in diversified MFs and ETFs, 'staying the course', and compounded earnings. The math is simple and real. BTW, my lifetime total earnings were only $2.5M.

 

[Sunset]

I was homeless at 39.
Strived for work wherever they would pay the best, around the country.
Rented a bedroom in house to live.
My rules were:
Live below your means.
Shun debt (except to buy SMALL house).
Invest in stocks and don't sell on downturns or recessions, but buy more.

Retired at ~57 no pension, no stock options, no lottery. It can be done.

 

[DrRoy]

I have a nephew with a CIS degree that started out working for Amazon at $200K/yr and now makes double that.

 

[Winemaker]

Started my career saving 16% in an investment plan. they matched 6%.: did that for 35 years. When IRAs and Roth IRAs were created, we contributed to the max, including the catchup contributions when allowed.. We have 7 figures, and we saved too much. We will be retired 10 years 10/14, and even with taking withdrawals, our nest egg has almost doubled. Yes, it can be done.

 

[Koolau]

I see a lot of posts by people planning early retirement....Often, say, someone in their 40s who says they have anywhere from 2 to 3 million in total assets. Sometimes, they say their annual income is less than $200 k, which must mean they were saving close to half of that for the better part of two decades. Are these numbers real? How is this really possible? Seems like some of these numbers are inflated, but can't understand why someone has any incentive to do that.....

Okay, if you can't believe someone amassing 2 to 3 million over a w*rking life time, can you believe this?

I often speak here of my BFF (who passed last year at 79.) We w*kred at the same place. We made about the same money. He bought every toy, lived on his credit cards, had motorcycles, wave runners, boats, cars, nice clothes, professional hair care (male perm), two different wives, 6 total kids, lake house, etc. He died with half a million dollars in debt.

Which is easier to believe - that one could blow all their money and die half a million in debt or that someone could save and invest and live a retirement with 2 to 3 million?

OP are you still there?

 

[The Cosmic Avenger]

If someone started investing in their 20s and got decent returns in the stock market (historically around 7-8% per year), their savings would compound. For example, saving $60k annually and getting only 7% returns could grow to $2 million in around 20 years.

I didn't even make $60K/year until I was 40, although since we have always been a two income household, we were saving more than $60K/year by then. But I'm not sure how many people in their 20s could save $60K/yr on their own, that may have been the OP's thinking. It definitely helps when you have two incomes.

 

[Midpack]

Aggressive saving (which means aggressive LBYM), smart investing, a fortunate career, and a little luck? I’d share our details, but they’re even more seemingly improbable than post #1. Compounding/reinvesting over 30 years is miraculous, some people don’t fully grasp that as it’s not as apparent for the first decade or so. And our NW has doubled since we retired, with no pensions…

 

[Onda]

Aggressive saving (which means aggressive LBYM), smart investing, a fortunate career, and a little luck? I’d share our details, but they’re even more seemingly improbable than post #1. Compounding/reinvesting over 30 years is miraculous, some people don’t fully grasp that as it’s not as apparent for the first decade or so. And our NW has doubled since we retired, with no pensions…

2 Software engineers LBYM in high income Silicon Valley, Seattle or Boston and you are looking more likely at 10M+ in investable assets by the time they are 55+.


Retired at age 57, WR LT 2% Those are our numbers as well.

 

[Surewhitey]

I would question why you stopped working at 40 with 2M-4M. Most of these folks have salaries greater than 200K, so why not work until 50 and double their money?

In our case, we always talked about the possibility of trying out south of the border. Had some friends do the same in China. DW was ready for a change (LA burn out managing a large office). We took an 8 month at first to try out, returning to LA for a year and then took another 2 years back after questioning why we came back. Returning to my employer was super easy so there was that.

We found, again, in 2015 returning to the careers easy to do & we've almost tripled the booty along with starting a small biz & DW going to 4 day w*rk week. Also living 1 street over from the DGK's.

At the end of the day, I'd ask the same type of question, but in reverse. Why w*rk 60 hrs /wk for 40 years just to raise the money you likely will not need?

Huge difference in quality of life? Getting to do what you want? It’s always a more time versus more money decision.

Exactly this. And letting our location preferences wag the employment location, if needed. Now working on the next stage... full time RE...

 

[pjigar]

Assuming you are not a troll, I will bite. FIRE crowd is a different breed. Once I woke up from matrix, we have been saving anywhere from 50-65% or net earned income annually (for over 15 years and counting). It is very easy to spend it all but it takes a great effort to save. Most people can't do it because everything/everyone takes a path of least resistance.

 

[Midpack]

Assuming you are not a troll, I will bite. FIRE crowd is a different breed. Once I woke up from matrix, we have been saving anywhere from 50-65% or net earned income annually (for over 15 years and counting). It is very easy to spend it all but it takes a great effort to save. Most people can't do it because everything/everyone takes a path of least resistance.

I don’t disagree, but we found LBYM became a lifestyle habit. DW and I were taught to save from our childhoods (if we wanted toys etc.) and borrowing was a necessary evil, so it seemed normal to us as adults. We were never really tempted to BTD, still can’t.

We also realized ‘the richer your friends, the more it will cost you’ - and consciously steered clear of those potential friends. We had relatively modest homes, cars and vacations.

I understand BTD can be a hard habit to break as well - most of the people I’ve known personally were probably (or certainly) not savers. I had access to 80 employees 401k history, not pretty in most cases - but there were some exceptions thankfully.

 

[Lewis Clark]

In my case, my wife and I were DINKS (double income, no kids). Except for our first couple of married years we always lived on one salary and saved the other. Having a military pension and retiree health care also helps.

At our peak we were saving about 60% of what I considered our gross income (her job, my job, military pension). While the IRS considers dividends and capital gains from investments as income, we never thought of that as funds available for spending except in an emergency.

We never planned on early retirement. We were simply good savers and adequate investors. By the time I got interested in personal finance we were almost financially independent, and early retirement was possible.

And, of course, the unusually good market returns over the past decade have helped us all.

 

[ShokWaveRider]

I often speak here of my BFF (who passed last year at 79.) We w*kred at the same place. We made about the same money. He bought every toy, lived on his credit cards, had motorcycles, wave runners, boats, cars, nice clothes, professional hair care (male perm), two different wives, 6 total kids, lake house, etc. He died with half a million dollars in debt.

Which is easier to believe - that one could blow all their money and die half a million in debt or that someone could save and invest and live a retirement with 2 to 3 million?

One could say your BFF achieved the American Dream of living life to the fullest and dyeing in debt. But I know exactly what you mean, that sort of life is not for most here.

 

[Badger]

We were both 40 yrs old with very small 401k(s) when we married. We drove old cars and did our own maintenance until repairs were not cost effective. We had a house that I bought a few years earlier that nobody wanted. I did all the repairs for a few years so my then fiancee would agree to move in. We paid off our modest home in a few years by making extra payments on the principle then continued to save/invest the same amount by maxing out both of our 401k/403b. Any extra went to max out our Roth IRAs and taxable MFs. Our combined salaries never exceeded $85k. If we didn't have the cash to pay for something then we saved until we did.
Our investments are now past $3 Million since we only live off of SS, very small pensions, and dividends. We are now 76 and 77 years old.
Retiring with a substantial nest egg is possible if you are willing to make the sacrifices and understand the difference between Need and Want.

 

[Keim]

We just crossed the $2m networth mark this week. Take out RE and we are about $1.4. Our income certainly isnt amazing
And we have 2 kids in college, and recently paid for a wedding. Started saving in our early 20s. Now in our 50s.

The only magic was compound interest.

 

[Montecfo]

I see a lot of posts by people planning early retirement....Often, say, someone in their 40s who says they have anywhere from 2 to 3 million in total assets. Sometimes, they say their annual income is less than $200 k, which must mean they were saving close to half of that for the better part of two decades. Are these numbers real? How is this really possible? Seems like some of these numbers are inflated, but can't understand why someone has any incentive to do that.....

They are real. I think the biggest thing you miss is the gains from early investment compounded over along period of time.

I never saved anything close to half my pa but I started early. Usually did not have 401k match or pension type profit sharing. Made some decent gains with company stock, but also some losses. Also no dual income except first 2 years and last few. As mentioned, completely save that salary.

Also never went into debt except mortgage. Paid cash for cars, furnishings, travel etc. Never had any pension opportunity.

Bottom line: you have to live differently than your peers and prioritize financial freedom and security.

 

[yhoomajor]

I often speak here of my BFF (who passed last year at 79.) We w*kred at the same place. We made about the same money. He bought every toy, lived on his credit cards, had motorcycles, wave runners, boats, cars, nice clothes, professional hair care (male perm), two different wives, 6 total kids, lake house, etc. He died with half a million dollars in debt.

Who are we to judge
Looking from a different angle, seems like your BFF made the best of 79 years on this earth than rest of 95% humans on this earth do.

 

[Montecfo]

Marrying only one person and staying married helps. I know it does not always work. But some discuss getting your education, getting married, and having children (in that order) as a marker for financial success.

 

[stepford]

During my work years I had a 'rule of thirds' - 1/3 of my income went to savings, 1/3 to taxes and 1/3 to me to spend. Add to that always maxing out my 401K and getting the full company match. This was a while ago so my numbers are lower, but I started my career at 28 with zero savings and had made my first million 15 years later with an average salary around $70K over that time.

So with salaries now about double what I made I don't think it at all improbable that folks are amassing $2-3M by their md-40s.