Big numbers (serious question)

[SecondCor521]

I hear you, but don't think a 50% savings rate is realistic (at least for the first 5-10 years). That timeframe is some of the most costly in my opinion, and you are not going to get out of SS, etc. JMHO. Otherwise, I agree with the simplistic assumptions.

Flieger

It might be uncommon but it's certainly realistic.

My youngest just graduated from university this spring and started their first job. Their savings rate in October - they share this with me voluntarily - will be 60-75%, and it should continue at that rate as long as they are in their current set up:

Living with older brother who only charges utilities for rent
Paid off / gifted car
Works from home
Cooks from scratch
Inexpensive hobbies
Gets bonuses at work due to doing a good job
Graduated debt free (state school, lots of scholarships, some grants, work study, living off campus)

Probably few young people have all of these combined, but individually they're pretty realistic.

 

[Keim]

Hows that working out for Shannen Doherty?

Worked ok for George Burns.

 

[Lorenzo]

I recall when I was in my first year of life after college (mid-1980s) visiting the home of a guy I worked with, and I happened to notice two apparently uncashed paychecks from Megacorp sitting on the kitchen table of his shabby apartment. I asked him about this, incredulous. He said, "You're living too high off the hog, man!" And there I was, thinking I was all frugal, living with two roommates, driving a new but low-end car, rarely going out to eat, etc. Yet there was someone living even more austerely than me on more or less the same electrical engineer salary. He probably had no student loan or car payments, but still .... In retrospect, I wonder if that guy was not thinking about financial independence and retiring early even before the term "FIRE" was coined. I wonder how it all worked out for him.

 

[marko]

Wow, that’s impressive!

Maybe not as the numbers have me confused (per usual).
I retired in 2005 with a portfolio at $X. Over the past 20 years, I've withdrawn that same $X amount. Now my portfolio balance is $2X+ which is only slightly more than my original $X adjusted for inflation.

So now, I have no idea how much I've gained when inflation adjusted. The math says that by including my withdrawals I've "made" $3X in non adjusted gains.

Lost as usual.

 

[audreyh1]

Maybe not as the numbers have me confused (per usual).
I retired in 2005 with a portfolio at $X. Over the past 20 years, I've withdrawn that same $X amount. Now my portfolio balance is $2X+ which is only slightly more than my original $X adjusted for inflation.

So now, I have no idea how much I've gained when inflation adjusted. The math says that by including my withdrawals I've "made" $3X in non adjusted gains.

Lost as usual.

Well I just compare my existing net worth with my starting net worth inflation-adjusted. My 30% ahead of inflation does not include spending over those 25 years. I’m not trying to compute my investment performance over that time period, just how we are currently keeping up with inflation even after all that spending.

 

[marko]

Well I just compare my existing net worth with my starting net worth inflation-adjusted. My 30% ahead of inflation does not include spending over those 25 years. I’m not trying to compute my investment performance over that time period, just how we are currently keeping up with inflation even after all that spending.

OK. In that case (I think I'm up 20%) not including withdrawals.

 

[Onda]

Maybe not as the numbers have me confused (per usual).
I retired in 2005 with a portfolio at $X. Over the past 20 years, I've withdrawn that same $X amount. Now my portfolio balance is $2X+ which is only slightly more than my original $X adjusted for inflation.

So now, I have no idea how much I've gained when inflation adjusted. The math says that by including my withdrawals I've "made" $3X in non adjusted gains.

Lost as usual.

Let me help

Inflation Calculator: Daily CPI since 1913 - Don't Quit Your Day Job...

This inflation calculator has daily inflation data for the US. It uses the Consumer Price Index and also uses monthly data to predict the current CPI.

dqydj.com

$1,655,961.54 today = 1M 20 years ago.
In order to double net worth you would need $3,311,922 Today.

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

In order to have it you need to earn 6.2 % annually. But you are withdrawing 9% so you really need to earn %15.2 which greatly outperforms Warren Buffets BRK-A over the same period and that does not even consider any taxes.

https://dqydj.com/stock-return-calculator/

Buffet finished with 8M+ and you, if you did not make any withdrawals would end up with cool 18M+.

 

[Walt34]

I have a feeling Urfe is no longer listening, but here's our story.

Oh, Urfe is listening. At this writing he (or she, I didn't look at the profile) was online 17 minutes ago.

 

[The Cosmic Avenger]

Can we stop with the sniping at the OP? There can be lots of reasons they didn't come back for a while, or are reading but don't want to or don't feel like commenting right now. It's very possible they just decided not to comment again after reading some of the responses about them, rather than about their post.

 

[Diogenes]

... I was a late starter on investing, but made up for it with a relatively high income starting in my 30's....

One finds this commonly in postings here, and at Bogleheads. The theme goes like this:

* Young person graduates from college with debt, and then goes to grad school, med school etc.
* More debt in grad school. Then entering the workforce comparatively late.
* By age 30-32, earnings finally start rising, but debt burden is crushing, and net worth is negative.
* But then earnings skyrocket, debt gets paid off, portfolio grows.
* By say age 45-50, our hero is quite affluent, and is wondering about early retirement.

 

[Lorenzo]

One finds this commonly in postings here, and at Bogleheads. The theme goes like this:

* Young person graduates from college with debt, and then goes to grad school, med school etc.
* More debt in grad school. Then entering the workforce comparatively late.
* By age 30-32, earnings finally start rising, but debt burden is crushing, and net worth is negative.
* But then earnings skyrocket, debt gets paid off, portfolio grows.
* By say age 45-50, our hero is quite affluent, and is wondering about early retirement.

There's also the scenario that starts out as you describe but gets derailed at maybe age 40 by any one or more missteps or misfortunes, such as getting burned out and changing careers from the profession to something more pleasant, or getting the short end of a divorce, or a serious medical issue, or having to unexpectedly take care of a family member, or any of I'm sure many other things that don't even occur to me. Those people don't post here or on Bogleheads as often.

 

[Diogenes]

There's also the scenario that starts out as you describe but gets derailed at maybe age 40 by any one or more missteps or misfortunes, such as getting burned out and changing careers from the profession to something more pleasant, or getting the short end of a divorce, or a serious medical issue, or having to unexpectedly take care of a family member, or any of I'm sure many other things that don't even occur to me. Those people don't post here or on Bogleheads as often.

Of course! It's self-selecting. Persons embattled with such troubles tend not to prioritize early retirement in their thinking, and tend not to post on forums related to retirement, investment or portfolio-management.

But for those who do post, I notice a frequent trend, where folks started out in quite strained and burdensome circumstances, but enjoyed a spectacular rise in their 30s or thereabouts. My point is that the contrary path, of already starting out securely (but modestly) at age 20, is comparatively rare.

 

[Gumby]

I think part of the story is that the lifestyle we establish in our 20's often sets the tone for the rest of our life, especially with respect to spending. Those of us who got a late start in our profession were accustomed to a more modest lifestyle in the years before we "made it". So we probably spent less and saved more than those who shot out of the starting blocks into their high paying professions when they graduated at 22.

 

[Diogenes]

I think part of the story is that the lifestyle we establish in our 20's often sets the tone for the rest of our life, especially with respect to spending. Those of us who got a late start in our profession were accustomed to a more modest lifestyle in the years before we "made it". So we probably spent less and saved more than those who shot out of the starting blocks into their high paying professions when they graduated at 22.

Or perhaps the other way around. Nerdy, insular and phlegmatic kid hits the books in college, lives modestly, and life revolves around classwork. Said kid graduates, gets a job at GE or GM or Boeing or whatever, rents a cheap apartment in the crummy part of town, and saves 70% of his after-tax salary.... and keeps doing that, in his 20s, 30s and beyond. His peers marry, have kids, buy houses and so on... while our hero remains stuck at age 19. It doesn't take a high salary or investing in Nvidia to attain a handsome portfolio by late middle-age. But then what?

 

[Koolau]

The market has indeed been powerful.

I haven't worked or "saved" in almost 20 years now, yet I'm twice as wealthy as the day I retired despite some heavy (8-10%) withdrawal years. I suspect it's only going to continue that trend as age will dampen my spending as time marches on.

Yeah, it seems like some kind of myth that I could be retired 19 years and still have over twice what I started with at the time of retirement. But it's true. YMMV

 

[kgtest]

I didn't get going until I was 26. I was an alcoholic. DW works in social services, me in IT as a consultant.

We have "over 1 million" and DW is only 41. We were millionaire's by 40 after 14 years of saving.

We had a few things going for us, and other's we took risks.

We also have 3 little kids. If we can double our money twice in a decade, then we can easily retire in 10 years.

If not, we will get close enough.

The trick is to pay yourself first, and put as much money as you can into index funds, as often as possible.

When you start saving $1000 a week it all happens quickly.

There is a bit of planning that goes into this. Don't limit your opportunities, and keep your fees low.

 

[Gumby]

Or perhaps the other way around. Nerdy, insular and phlegmatic kid hits the books in college, lives modestly, and life revolves around classwork. Said kid graduates, gets a job at GE or GM or Boeing or whatever, rents a cheap apartment in the crummy part of town, and saves 70% of his after-tax salary.... and keeps doing that, in his 20s, 30s and beyond. His peers marry, have kids, buy houses and so on... while our hero remains stuck at age 19. It doesn't take a high salary or investing in Nvidia to attain a handsome portfolio by late middle-age. But then what?

Certainly, there are those who live frugally from the start, even though they may have well paying jobs. Those people will always do fine on the road to retirement. But it seems to me somewhat more likely that young people who step into those jobs straight out of college will become accustomed to spending more. And if they do, it will be far more difficult to scale back their spending when they are in their 40s or 50s and starting to think about retirement. Or, even worse, having been forced into retirement and now trying to cope with suddenly reduced income. I think it far easier to come into money later, after you have spent a long time living modestly. You can always upscale your spending if you choose at that time.

 

[chemEguy]

Speaking for myself, I lived frugally after college through to age 29. When I got married, we did more of the same but now had two college grad salaries.

We relocated to a less pricey area and built a nice home.

Salaries kept increasing and we were saving and investing and company matching hard into our early 40s. Salaries continued to rise but we started to level off the dollars saved so our savings rate went down while savings amount flattened out. The extra money was funneled into some lifestyle upgrades.

By mid 40s the snowball was rolling pretty hard downhill and it’s still picking up speed now in our very early 50s. We have not increased total dollars saved in some time and are now funding college tuitions.

Our salaries today are primarily defensive…I’m using them to shield our portfolio from expenses during the last few years of planned employment so it can continue to grow.

So yeah, we’ve loosened the purse strings a bit because life should be have balance.

 

[Diogenes]

Certainly, there are those who live frugally from the start, even though they may have well paying jobs. Those people will always do fine on the road to retirement. But it seems to me somewhat more likely that young people who step into those jobs straight out of college will become accustomed to spending more. And if they do, it will be far more difficult to scale back their spending when they are in their 40s or 50s and starting to think about retirement. Or, even worse, having been forced into retirement and now trying to cope with suddenly reduced income. I think it far easier to come into money later, after you have spent a long time living modestly. You can always upscale your spending if you choose at that time.

It's the engineer's mindset. Find free food whenever possible. Eschew possessions, as it's just stuff that's liable to break anyway. Linger longer in the office, not because one happens to be dedicated to work, but because it's free heating and air conditioning. Work on your car yourself - if possible, in the company garage, using company tools. Vacation? Go to a conference, and maybe tack-on an extra day for sight-seeing.

The bigger challenge is to invest with sufficient aplomb and conviction. These penny-pinching folks tend to be perma-bears, never trusting the stock market. At first their wealth grows sprightly, just from savings. But their compound returns are crummy, so as the portfolio grows from additional savings, its CAGR falls. These folks become affluent, but rarely become outright rich.

Anyway, to my earlier points, we for some reason don't hear often on sites like this, from such champions of frugality. More common is the fellow who majored in psychology, graduated with $70K in debt into a $12/hour McJob... but then had an epiphany, "learned to code", and at age 37 suddenly is commanding a $300K/year salary from Facebook or Google or whatnot... then 8 or 10 years later, starts wondering about FIRE. That is the "big number" trajectory that befuddles me... not the frugal kid who saved his newspaper route money and already has a net worth of $50K at age 20.

 

[marko]

Anyway, to my earlier points, we for some reason don't hear often on sites like this, from such champions of frugality. More common is the fellow who majored in psychology, graduated with $70K in debt into a $12/hour McJob... but then had an epiphany, "learned to code", and at age 37 suddenly is commanding a $300K/year salary from Facebook or Google or whatnot... then 8 or 10 years later, starts wondering about FIRE. That is the "big number" trajectory that befuddles me... not the frugal kid who saved his newspaper route money and already has a net worth of $50K at age 20.

Beg to differ. There's been hundreds of threads on this forum about frugality, LBYM, saving money on X, Y and Z and so on. Most here are here as the result of careful and thoughtful spending rather than those who hit the big time financially.

 

[kgtest]

The simplest answer to OPs question... compounding. The earlier you start, the more you save, the more often, the better the compounding.

DF is up almost as much as what they retired on entirely 9 years back in 2024 alone.

2.5x in 9 years. That is the power of compounding.

It helps to not be terribly conservative. DF is 100% equities at 73. Mostly tech. Has never taken a withdrawal outside RMD. Doesn't gift. Just lets it pile up, lol.

 

[disneysteve]

But the more amazing thing is how that sum literally explodes from the late 40s to the late 50s. Compounding really takes off during those years, especially if they've been saving and investing consistently. Even if the growth seemed slow at first, with a solid portfolio and good market returns, the wealth starts multiplying quickly. Those last 10 years before full retirement can really be game-changing!

So true. I basically retired at the start of this year. We draw from our portfolio monthly. Still year to date we are up over $500,000. It’s insane but I’m certainly not complaining.

 

[Lorenzo]

The simplest answer to OPs question... compounding. The earlier you start, the more you save, the more often, the better the compounding.

DF is up almost as much as what they retired on entirely 9 years back in 2024 alone.

2.5x in 9 years. That is the power of compounding.

It helps to not be terribly conservative. DF is 100% equities at 73. Mostly tech. Has never taken a withdrawal outside RMD. Doesn't gift. Just lets it pile up, lol.

It helps to have a crystal ball to foresee a long bull market.

 

[chemEguy]

It helps to have a crystal ball to foresee a long bull market.

It hasn’t been a continuous bull since 1998, the year I got started.

 

[livingalmostlarge]

My friends paid off their house and rental and are working and earning a good salary. They are easily $5m plus if i had to guess and i bet i'm not wrong with one income the entire time.