Middle Class Assumptions on ER

[stepford]

The main question many posters ask in their first ER forum post is "Do I have enough?" The answer, as many always helpfully chime in, depends strongly on age and spend rate. But I've noticed, almost independent of these factors, we tend to say NO to any nest egg under $1M and some variant of "You have so much you should have retired years ago" to anything over about $4-5M.



Granted this is a fairly broad range, but I think it reveals our assumptions about spending - that pretty much everyone needs something over $30-40K/yr to live on and anyone should be happy with anything over about $200K. While there are clearly those for whom these assumptions are incorrect I see this bias time and again in our responses to these initial posts. In other words, we mostly have middle to upper middle class ER lifestyles and tacitly assume everyone else should do the same.

 

[haha]

The main question many posters ask in their first ER forum post is "Do I have enough?" The answer, as many always helpfully chime in, depends strongly on age and spend rate. But I've noticed, almost independent of these factors, we tend to say NO to any nest egg under $1M and some variant of "You have so much you should have retired years ago" to anything over about $4-5M.



Granted this is a fairly broad range, but I think it reveals our assumptions about spending - that pretty much everyone needs something over $30-40K/yr to live on and anyone should be happy with anything over about $200K. While there are clearly those for whom these assumptions are incorrect I see this bias time and again in our responses to these initial posts. In other words, we mostly have middle to upper middle class ER lifestyles and tacitly assume everyone else should do the same.

How else to answer the essentially meaningless question of how should I live and how much will that cost?

 

[marko]

The main question many posters ask in their first ER forum post is "Do I have enough?" The answer, as many always helpfully chime in, depends strongly on age and spend rate. But I've noticed, almost independent of these factors, we tend to say NO to any nest egg under $1M and some variant of "You have so much you should have retired years ago" to anything over about $4-5M.



Granted this is a fairly broad range, but I think it reveals our assumptions about spending - that pretty much everyone needs something over $30-40K/yr to live on and anyone should be happy with anything over about $200K. While there are clearly those for whom these assumptions are incorrect I see this bias time and again in our responses to these initial posts. In other words, we mostly have middle to upper middle class ER lifestyles and tacitly assume everyone else should do the same.

That's why most vague posts of 'can I retire?' are greeted with "tell us more about your financial condition".

I'm not aware of many threads where folks get a yes/no answer without a fairly full disclosure of income/assets/spending.

 

[Major Tom]

No argument with you there, stepford. With an annual spend of ~$18K, it's a little lonely here at my end of the income spectrum. I have never felt "lonely" though, probably because I enjoy plenty of company in my approach to investment/asset allocation and withdrawal practices. Plus, the same general principles of mindful living are in effect for most folk here, regardless of their income in dollar terms.

Some folk seem to have trouble understanding that we all have different chosen lifestyles and, while $50K per annum might be plenty for some, it would be woefully inadequate for others. I think there is more of a bias against high income individuals here than to folk like me. I think that's because $40K/yr is closer to $20K/yr than, say, $250K/yr or more. There's no sin in wanting to live a lifestyle that requires a high income, though I think that some would like it to be


PS - as usual, Ha has crafted a one-liner that makes my morning, and causes me to wonder why I expend so much time and effort creating full paragraphs and lengthy replies that say so much less!

 

[Nemo2]

How else to answer the essentially meaningless question, how should I live and how much will that cost?

How long is a piece of string?

 

[ExFlyBoy5]

I don't think this is an easy question to answer given the lack of information people share (or don't share) on the forum. Plus, even though most of us have the common like of early retirement, what it means is wide and varied. Sure, I can live pretty easy on $50K a year, but that doesn't mean that someone else "needs" $15K a year or $250K a year.

Besides, isn't that the point of the FIRE Calc?

 

[Amethyst]

Here, it's really about "How badly do you want to escape work, and what price freedom?"

I think it just so happens that "freedom," in the U.S., comes with a minimum $30K price tag for all but the most frugal, whereas >$200K per year = freedom + more bennies than most people feel they need (unless you live in a high-cost-of-living place).

 

[Dtail]

No argument with you there, stepford. With an annual spend of ~$18K, it's a little lonely here at my end of the income spectrum. I have never felt "lonely" though, probably because I enjoy plenty of company in my approach to investment/asset allocation and withdrawal practices. Plus, the same general principles of mindful living are in effect for most folk here, regardless of their income in dollar terms.

Some folk seem to have trouble understanding that we all have different chosen lifestyles and, while $50K per annum might be plenty for some, it would be woefully inadequate for others. I think there is more of a bias against high income individuals here than to folk like me. I think that's because $40K/yr is closer to $20K/yr than, say, $250K/yr or more. There's no sin in wanting to live a lifestyle that requires a high income, though I think that some would like it to be

+1 agree on the upper income being more of a bias. The LBYM pre- retirement lifestyles of many here could come into play.
Plus a 250k spending lifestyle probably has more discretionary spending to cut easier in bad times.

 

[stepford]

That's why most vague posts of 'can I retire?' are greeted with "tell us more about your financial condition".

I'm not aware of many threads where folks get a yes/no answer without a fairly full disclosure of income/assets/spending.

But even those that do provide such info, and are broadly consistent with some metric like the 3-4% rule, are often greeted in the manner I describe if they fall outside the "accepted" range. The replies from forum members are usually very helpful and do provide useful analyses, but the bias I describe is often pretty apparent.

 

[youbet]

But even those that do provide such info, and are broadly consistent with some metric like the 3-4% rule, are often greeted in the manner I describe if they fall outside the "accepted" range. The replies from forum members are usually very helpful and do provide useful analyses, but the bias I describe is often pretty apparent.

If most answers imply the retiree living a middle class lifestyle, it's because most of the replying folks here prefer to have the resources to live a middle class lifestyle. Nothing wrong with that. There are members here living a more minimalist life with astonishingly low spend levels which is great if that's what they choose to do. For DW and I, we're more mainstream, want our own home, some travel, some entertainment, etc. So that's what we planned for. We seem to have lots of company here.........

 

[Rianne]

Lifestyle can mean flying first class or hunting for best bargain on flights. When someone tells me they went to Europe, I don't ask if they found a bargain price for everything. Clothes can be misleading. A $25 outfit can look like a $250 outfit if worn right and fits well. It's easy to create the lifestyle of the rich on a bargain budget, just takes time.

I will say many who go first class will make sure you know it! Or how much they spent on a new BMW. I proudly say my DH Camry has 260K miles on it. Here's a bit of wisdom from the master, Warren Buffet.

5. Watch Small Expenses

Buffett invests in businesses run by managers who obsess over the tiniest costs. He once acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only the side of his office building that faced the road.

10. Know What Success Really Means

Despite his wealth, Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself-no Warren Buffett buildings or halls. “When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you’ve lived your life.”

There are 8 more, but I liked these 2 the most.

 

[REWahoo]

... some variant of "You have so much you should have retired years ago" to anything over about $4-5M.

I wonder if what you see as "middle class assumptions" isn't simply economic reality.

People come here for advise and I see nothing wrong with telling them what most of us believe to be true regarding their financial ability to retire. Viewed from the perspective of the vast majority of of those of us living in the US, it is difficult to understand how someone with a nest egg of $5M or more could not retire and live very comfortably. No bias there, just fact.

 

[Rosie]

Some folk seem to have trouble understanding that we all have different chosen lifestyles and, while $50K per annum might be plenty for some, it would be woefully inadequate for others.

Which is why my eyes always glaze over when someone asks (wo any clarification) if something is "affordable".

I've never been good at mind reading.

 

[karen1972]

I try to help keep the forum average low. I think sometimes people overlook what people's goals for ER are.. some want to continue to live a lifestyle they became accustomed to and some just want freedom as long as they can maintain a minimum lifestyle.. those are often 2 very different goals.

When one gives advice its often from your perspective, thus I'm never surprised by the advice I get on here or elsewhere. I'm also aware people don't always pay attention to the details. ie are you single, married, or have kids makes a big difference. HCOL/LCOL, want to leave money at the end, amount of risk one is willing to tolerate and how much padding one has in their budget.

Most of the naysayers for me were risk adverse and you could see several were sub 3%ers..so you have to take that with a grain of salt. I don't dismiss their advice but I do weigh it accordingly.

As for "middle class", that whole concept I find funny.. poor and rich alike, like to claim they are middle class... its the "in" thing. I was poor as a kid (dad made $28K for a family of 8) and we lived in a mobile home but made it all fancy as parked it on a basement we dug. I was rich most of my career (my salary was in the top 5% of all female income earners). and now I'm middle class in ER. However, I still find myself giving advice that maybe its not enough because in the end.. I was poor and a little scared to go back to that which does influence my opinion, yet can retire with the low end of the spectrum because well $40-45k a year is like "rich" compared to where I have been.

 

[W2R]

Granted this is a fairly broad range, but I think it reveals our assumptions about spending - that pretty much everyone needs something over $30-40K/yr to live on and […].

We do?

I don't know about other forum members, but personally I make no assumptions about how much others want to spend in retirement. Part of what makes this forum so rich in information and so much fun, is the broad range of incomes and spending here. A salute to members such as Major Tom, Shawn, and others at the LBYM end of spending, and also to those members at the high end such as Danmar, all of whom open our minds to the possibilities life presents.

Speaking of broad ranges of spending, since we are at the mid-year mark I carefully re-examined my projected 2018 spending, and found out that it is down tremendously compared with prior years. At $20K for the year before income taxes I am getting down almost to Major Tom territory (well, not quite). Wanna know why? No dental implants this year, and no big unusual expenses like replacing the AC or buying a Dream Home or hurricane evacuations.

Oh well, I know my lower spending will evaporate as soon as the next big unexpected expense comes up, but right now it's sure nice to add it up and do the projections. These "lumpy" expenses are something that prospective retirees sometimes do not fully consider unless they have several years of meticulous spending records.

 

[RunningBum]

But even those that do provide such info, and are broadly consistent with some metric like the 3-4% rule, are often greeted in the manner I describe if they fall outside the "accepted" range. The replies from forum members are usually very helpful and do provide useful analyses, but the bias I describe is often pretty apparent.

Are you sure you know where the bias comes from? The last time I saw someone with a high budget questioned, it came from someone who has one of the lowest budgets of anyone I see on here, at least who lives in the US. There was nothing wrong with it, just basically a "Can I retire?" response that there were fine (in the 3% range for yearly spending/assets) but probably had plenty of room to cut back if needed. Can't blame us middle class folks for that one.

Besides, if someone asks if they can retire on $10M with a $250K budget, it's totally correct that they could have retired earlier. And if someone wants to retire on $500K with a $20K budget, it seems legit to me to ask if they are sure that $20K budget is accurate and includes irregular expenses.

 

[Oz investor]

marko ,

being a person with less than $US 1 million in liquid ( non-property ) assets

i can see some issues with some folks hopes and dreams ( luckily ones the might be corrected )


until an unexpected inheritance in 2010 , i had one property ( but rented closer to employment ) low savings and no long term plans to retire ( or even slow down the just one full time job ) and lived a frugal life .. who needed a wide-screen TV , i was rarely there to watch it , no car ( nowhere to park it and i could walk or bus it to work , because i rented nearby )

HOWEVER most of the newer members have families ( or MIGHT yet have a family ) AND they hope to live another 20 plus years . that is crystal ball territory to me ,

HOWEVER some have vastly different lifestyles and plans

my last plane trip was in 1990 ( and i might never travel internationally again unless i migrate ) traveling around the country i did some of that as a child , more recently i rock up at the Greyhound Bus depot with a wad of cash and go where and when i want in the next empty seat out .

this does mot mean other folks must be equally frugal ( they accumulated their money i don't worry how they choose to spend , unless there is a major impact on me )

some could also have higher expenses because of aged relatives.

 

[Oz investor]

RunningBum,

my main issue on budgets ( planned over multiple years ) is budgets can blow out

say we get rampant inflation or say unexpected medical costs and you are already drawing on the nest egg , how do you get back on track ??

if getting budgets into shape was easy most national economies would be in surplus ( you are hiring some of the brightest minds to look after the finances , after all )

surely a budget that doesn't rely on regular withdrawals is a better metric

 

[flintnational]

$1M to $4M would replace the income for the vast majority of Americans. The following data, for 2015, shows the upper limit for each income quintile in the US.

	Upper Limit		Mean		Assets @ 4%
Lowest	$22,800		$12,457		$570,000	UL/4%
Second	$43,511		$32,631		$1,087,000
Third	$72,001		$56,832		$1,800,000
Fourth	$112,262		$92,031		$2,806,000
Highest	*****		$202,366		$5,059,000	Mean/4%

So, yes you can retire with more or less than the above but you would be at the extremes.

 

[scrabbler1]

No argument with you there, stepford. With an annual spend of ~$18K, it's a little lonely here at my end of the income spectrum. I have never felt "lonely" though, probably because I enjoy plenty of company in my approach to investment/asset allocation and withdrawal practices. Plus, the same general principles of mindful living are in effect for most folk here, regardless of their income in dollar terms.

Some folk seem to have trouble understanding that we all have different chosen lifestyles and, while $50K per annum might be plenty for some, it would be woefully inadequate for others. I think there is more of a bias against high income individuals here than to folk like me. I think that's because $40K/yr is closer to $20K/yr than, say, $250K/yr or more. There's no sin in wanting to live a lifestyle that requires a high income, though I think that some would like it to be


PS - as usual, Ha has crafted a one-liner that makes my morning, and causes me to wonder why I expend so much time and effort creating full paragraphs and lengthy replies that say so much less!

I have to agree with this. I am pretty close to Major Tom's spending, in the $20k-$28k range in my 10 years of ER although it has been creeping up to (gasp!) $30k in the last few years, mainly due to rising medical costs (HI and my recent health issues being kept under control).

Whenever there are polls about spending or lifestyle issues here, I'm always at the "no or low" end. I'm always amazed at how much travel many of you do and how much you spend in general per person.

One unbreakable requirement of being able to ER 10 years ago was that there would be no change to my day-to-day lifestyle. If I wanted to splurge once in a while, I could do so without busting my budget. I just wanted to come and go as I please and the money would magically appear in my account, like it has done today (yay!) with the June monthly dividends appearing in my bank account on the second business day of the new month. Later this week, I will receive one of my additional quarterly (lumpier?) dividends as a bonus to help pay for the lumpier expenses.

 

[aja8888]

We do?

I don't know about other forum members, but personally I make no assumptions about how much others want to spend in retirement. Part of what makes this forum so rich in information and so much fun, is the broad range of incomes and spending here. A salute to members such as Major Tom, Shawn, and others at the LBYM end of spending, and also to those members at the high end such as Danmar, all of whom open our minds to the possibilities life presents.

Speaking of broad ranges of spending, since we are at the mid-year mark I carefully re-examined my projected 2018 spending, and found out that it is down tremendously compared with prior years. At $20K for the year before income taxes I am getting down almost to Major Tom territory (well, not quite). Wanna know why? No dental implants this year, and no big unusual expenses like replacing the AC or buying a Dream Home or hurricane evacuations.

Oh well, I know my lower spending will evaporate as soon as the next big unexpected expense comes up, but right now it's sure nice to add it up and do the projections. These "lumpy" expenses are something that prospective retirees sometimes do not fully consider unless they have several years of meticulous spending records.

I felt good about our low spending for the first half of the year then I remembered the two dental implants I had done and the cost of DD's April wedding. Oh well, maybe next year!

 

[exnavynuke]

But even those that do provide such info, and are broadly consistent with some metric like the 3-4% rule, are often greeted in the manner I describe if they fall outside the "accepted" range. The replies from forum members are usually very helpful and do provide useful analyses, but the bias I describe is often pretty apparent.

I agree with you on how we (as a group) sometimes come across to those with outlier expenses. If someone says they think they're cutting it close because they only have $10M then there is almost guaranteed to be at least one or two replies along the lines of "well if $10M isn't enough, then what hope do the rest of us have of ever retiring?" or some other similar response. Similarly, if someone says they are contemplating retiring with $300k, some would post that they need to keep working even if that person would have a 3% withdrawal rate with their current spending and that portfolio.

Of course, everyone looks at things through their own perspective. When I see a person say they have $10M, and then explain that they aren't going to stop working for another 10 years though they'd only need $2M to have a 4% SWR, I can't help but say (internally only) "well just give me some of that extra money now and I'll go ahead and retire for both of us!"

 

[Andre1969]

Y'know, as for that whole $1M rhetoric? Well, according to what source you want to believe, if you actually manage to amass $1M in net worth, that puts you in something like the top 8-9 percent of the population. So, even though $1M isn't what it used to be, it's still a pretty exclusive club.

Anyway, despite the fact that $1M is exclusive, the majority of people DO retire, eventually, so they must be doing it with far less than $1M.

Now everybody I know personally, who's retired (mostly relatives, friends of the family, etc) are making it because they have a pension, or some assistance from a family member. For instance, I have one relative who's in his mid 70's, and getting some kind of social security, disability, something like that...BUT, he's also living with his mother! When she passes away, I have no idea what he's going to do!

I can only think of one example in my life where someone amassed over $1M. That's my Mom and stepdad. However, they both retired back in 2011, and get good pensions that they can't even spend their way through. So in their case, they don't even need it.

So, just going from personal reference, I'm venturing into uncharted territory, with regards to retiring early, and relying mostly on what I've been able to save up over the years. I won't get a pension. I will get SS, but I'm guessing it will only be around $15-20K per year, tops. I have to admit, as the time gets nearer, the thought of it does become daunting. But, I have a feeling that it'll be like jumping into a swimming pool...once that initial shock is over with, the water's great!

 

[Lawrencewendall]

46k spending YTD.

 

[Ed B]

With regard to the categories mentioned in the OP, I and a significant minority of others on this forum fall into another category where our savings makes up a much smaller piece of the ER-FI equation. And I think it can be helpful for newcomers to recognize our different paths to FIRE.

My pension + DW's modest stipend provide a $60k floor on our annual revenue. We use our retirement savings, which is significantly less that $1m, to provide an additional $20k/year while we wait to start Social Security. Therefore, we don't need $1m or more to retire early and achieve our desired lifestyle.

Many of you rely much more heavily on your investments, sometimes exclusively so, while waiting for your start of SoSec if indeed it is available to you.

I think there is a bias toward retiring as early as our finances will allow, mainly because this is an ER community, but I haven't sensed a hostile bias against to $150-$200k/ year retirees. As mentioned in this thread everyone's view of what ER will be like and the financial requirements to achieve that vision, are unique to our respective households.