For RE, we all work for pennies a day?

dimwit

Dryer sheet wannabe
Sunday on a cool (almost summer) night before the chaos of a monday work day... does it bother anyone else besides me that when you sum up the widsom of this board - whether it's a 2% SWR or 4% ... a full days days work - if saved for FIRE afetr basic expenses - only adds between 2 or 3 cents a days to the retirement portfolio.

That is if you make 100K per year and can save \$300 a day after expenses, that gives you \$300 in the investement portfolio and now you can wiithdraw another 3.2 cents a day.

Sure, that 3.2 cents a day for the rest of your life, and it adds up like to almost 75 cents for a month's work. But the point is, another day worked only adds 3.2 cents to the daily retirement withdrawl.

So ... am I really going to work tomorrow just for a few pennies ... I guess so. Glad it accumulates overt time, but it sure seems slow at times.

I want to reply but I don't speak dimwit

I'll give you the benefit of the doubt--check your math, you're wayyyyy off.

Do like Munger and Buffett - carry around or keep handy - a compound interest table.

You will feel better.

Martha said:
I'll give you the benefit of the doubt--check your math, you're wayyyyy off.

I think he's right Martha.  Saving about \$300 a day adds only about 3.2 cents a day to the SWR. Or about \$11.68 a year. Unfortuanately, one of the real benefits of working is that you have one less day to draw down your pile.

But then there is the real advantage of the compound interest also.

Well then I am the dimwit. I don't get it. This was my thinking: first of all, he can't save 300 a day if he makes 100,000 a year. 300 times 365 is more than 100,000. If he did save 300 a day anyway, 4% of that is \$12 a day. In one year he would have 109,500 and 4% of that is \$4360.

If he instead saved 30 a day, 4% is still 1.2.

"That is if you make 100K per year and can save \$300 a day after expenses, that gives you \$300 in the investement portfolio and now you can wiithdraw another 3.2 cents a day"

"If he instead saved 30 a day, 4% is still 1.2. "

This kind of minutia and such calculations of ER bring back my final 5 years on the job. With a big smile on my face, I feel good that actual ER brings peace of mind, stress reduction, and freedom from the internal driver that produces this stuff.

I do enjoy seeing it on this forum and can identify with the need to do this type of 'work'.  Hopefully it is done while on the clock at the job. I call this searching for the 'light at the end of the tunnel'.  Hang in there, your ER will come to pass, I promise.

Martha said:
Well then I am the dimwit.  I don't get it. This was my thinking: first of all, he can't save 300 a day  if he makes 100,000 a year.  300 times 365 is more than 100,000.  If he did save 300 a day anyway, 4% of that is \$12 a day.  In one year he would have 109,500 and 4% of that is \$4360.

If he instead saved 30 a day, 4% is still 1.2.

Martha,

4% interest on \$300 is \$12 per year interest. Or about 3.28 cents per day!

I'm not sure how he came up with Saving \$300 for every Working Day. But, If you had enough Vacation, and didn't work weekends, You Might be able to save \$300 for every Working Day. - A bit of a stretch though for 100K per year though.

Eh, it may be a few pennies for SWR, but you are also working so you can eat, have a roof over you head, enjoy fun stuff on the weekends and vacations. Too much focus on retirement will drive you mad ( I had to take a step back myself recently).

A much happier thing to watch progress on is what kind of income you could generate from your portfolio if you retired now. At my young age it could already generate over 500 dollars a month in a conservatively diversified portfolio. Not enough to retire on, but it's way cooler to think about than pennies a day!

Thanks for trying to 'spain for me CT. I should never go near math. I still have to count on my fingers. I was thinking the whole year at 109,500 giving you 4380 a year at 4% or 12 a day. I still don't get it, but you don't have to try again.

Martha said:
Thanks for trying to 'spain for me  CT.  I should never go near math.  I still have to count on my fingers.  I was thinking the whole year at 109,500 giving you 4380 a year at 4% or 12 a day. I still don't get it, but you don't have to try again.

Martha, I'm with you.    Forgetting the fact you can't save more than you earn, and probably not even close,  for the sake of argument, say he saves \$300 per working day.  \$300 x 260 = \$78,000

If at the end of the year you have \$78,000 more in the bank, your SWR of 4% of that is going to be \$3,120.    Averaged over a year of living expenses  \$8.50. per day.

Not a windfall, but not pennies.

What are we missing?

And Rancher, yes, I'm doing this at work, on work time.

Clearly I have a math disability. Sheryl, I think I finally get it. Let me see if I can explain. If you only saved \$300 in a year, it will have a 4% return of \$12 for the year. That gives you 3.2 cents a day roughly. But if you do that every day, each of your \$300 days will accrue \$12 in a year or 3.2 cents a day. You then multiple 365 days times the \$12 you get from each \$300 to get your yearly \$4380.

I probably made this worse with my ackward explanation, but I think I finally get it. Duh.

dimwit said:
That is if you make 100K per year and can save \$300 a day after expenses, that gives you \$300 in the investement portfolio and now you can wiithdraw another 3.2 cents a day.

Well, it was certainly confusing because dimwit (original poster) talked about saving \$300 per day on a \$100,000 per year income.  (Like Martha, I calculated \$300 x 365 = \$109,500 which is less than the hypothetical income.)

And if he meant saving \$300 per year, that's such a bafflingly small amount on a \$100,000 annual income.

Dimwit, don't be too depressed because you are probably adding a dollar or two a day to your SWR--check your figures--instead of just pennies a day.

OK, my turn to try to figure this out.

The basic premise is that if you save \$300 (whether in one day or not), you are only adding a few pennies to what you can withdraw in a year day.

If you use an SWR of 4%, assuming that you don't get any return on your investment of \$300, you will be able to withdraw 12 dollars extra per year because of that day's work.

But that ignores return on investment.  Let's say that you get a return of 6% on your investments, and you have 20 years until retirement.  At retirement, your \$300 has grown to \$962.14.   So, now you start withdrawing an extra \$38.49 dollars because of that one day's work.

But that's only for the first year.  If you figure you'll be retired for 30 years, you'll be getting \$1,154.57 for that one day's work.

And now, figuring that the money is still getting 6% while you are withdrawing 4% (2% effective interest rate), the investment will grow to \$1742 at the end of retirement, which means that you can withdraw \$70 in that last year.

This ignores inflation, taxes, all that stuff.

So, I'd say that for every day you work (or every \$300 you save), with the assumptions above, it means that you can withdraw an additional \$1,000-\$2,000 during the course of your retirement, or between 38 and 70 dollars a year.  Or between 10 cents and 19 cents a day.

So, basicly Dimwit got it right.  That is for that one day, you are getting "only" less than 20 cents a day.   But 20 cents a day for the rest of your life, for one day's work isn't too bad.

[Note massive editing to correct my stupid mistakes.]

Sheryl said:
Martha, I'm with you.    Forgetting the fact you can't save more than you earn, and probably not even close,  for the sake of argument, say he saves \$300 per working day.  \$300 x 260 = \$78,000

If at the end of the year you have \$78,000 more in the bank, your SWR of 4% of that is going to be \$3,120.    Averaged over a year of living expenses  \$8.50. per day.

Not a windfall, but not pennies.

What are we missing?

You are using 260 times the stated figure of \$300 per day, so your numbers are 260X too high.  For each DAY of work @ \$300 per day, the return would be \$300X.04=\$12.00/Year.  \$12/365=\$0.032 or 3.2 cents/day as Dimwit originally stated.  This is what you would get if you deposited the money on the last day before you retired and only represents the return from that ONE DAY.  With compounding over many years the return will be much higher, as Trombone Al stated.  But even if you use the 3.2 cent/day figure, after 1 year you would have \$8.32/day and after 10 years, \$83.20/day; 20 years yields \$166.20/day (assuming 260 working days per year).

I get it now after being distracted by the \$300 per day wow-savings amount.

Like Dimwit, I, too, am adding pennies per day to my daily SWR.

At least we seem to be on the same page after all the math headaches.

It all sums up to we are all just worth a couple pennies a day for an honest days work - near retirement (or at least the last day) in most cases of ER, since the benefits are usually far out in time.

I see no way out of this truth unless I take vacation after my last days work and let the compound interest do its magic and have that much more before officially retired. But it's still pretty close to \$0.03 a day.

Seems like everyone's calling me dimwit, that's only my screen name (I choose since I knew it wouldn't be taken).

What do we know?  I think you're trying to convince yourself and others that it's not worth saving \$300 a day since according to you, it only gives you 3 cents a day more.  So if you think you are right, will you be saving anything at all?

I look at it this way, if I could save \$300 per working day (\$6,000 per month) from age 22 to 40, assuming I can get a 6% average return, I would have \$2,300,000 at age 40.  Somehow that 3 cents a day works out pretty nicely over time.

It all sums up to we are all just worth a couple pennies a day for an honest days work - near retirement (or at least the last day) in most cases of ER, since the benefits are usually far out in time.

Again, to reiterate what laurence said, I hope that your daily work is funding more than just a few pennies of your retirement. I'll not speak for you, but my daily work pays my rent, cars, my Sallie Mae loan, electricity, Gas bill, SBC, groceries, entertaimnent, home furnishings, etc....

Does the present not have any value for you simply because you have to work?

Martha said:
Clearly I have a math disability.    Sheryl,  I think I finally get it.  [snip] I probably made this worse with my ackward explanation, but I think I finally get it.  Duh.

Yeah, I get it now. The numbers used in the example just made no sense to me.

Whatever.