• 1 Post
  • 154 Comments
Joined 3 years ago
Cake day: June 8th, 2023
  • karpintero@lemmy.worldtoAsk Lemmy@lemmy.world•How much do you need to retire early?
    15·
    1 month ago

    As others have mentioned, the common guidance is to figure out your annual expenses, i.e how much you need to live off of, and divide that by safe withdrawal rate (typically ~4% based on the Trinity study) to come up with a total amount needed to retire early. So for example, if you determine you need $60k/year, the formula would suggest saving $1.5M (60,000 ÷ 0.04 = 1.5M).

    The basic idea is save a big enough nest egg so that you can live solely off interest, meaning you never touch the principal and your account grows in perpetuity.

    The hard part is two-fold IMO:

    1. Estimating your average annual expenses is difficult due to lots of variables, e.g.

    • Health care costs vary greatly (if you don’t have access to public healthcare depending on your country) and tend to increase with age

    • Housing costs are situational and can either decrease (if you own your own home and payoff your mortgage) or increase if you rent or have to move/refinance/etc.

    • Your family size may change. Kids can greatly throw off projections. Taking care of elderly parents. Having a partner start or stop working. All these things can impact your assumptions. Therefore, it’s usually good to add some buffer.

    • Inflation should also be accounted for. This can be difficult to project for the remainder of your life, so some tend to just look at historical inflation, but there’s no guarantee the future will follow the same trend. Same for lifestyle creep, but that’s (usually) more controllable.

    1. How to choose what investments will allow you to earn a return in excess of your withdrawal rate. For example, if you’re withdrawing 4%, you need your investments to earn a higher rate than that to avoid having to dip into your principal.

    • The common guidance (from say Buffet, Bolgeheads, etc.) for most people is to invest in low-cost index funds (availability depends on your country). I emphasize “low-cost” because there was another study that showed the only sure-fire predictor of alpha (performance above a certain benchmark, like the S&P 500 if you’re in the US) is the having low management fees. Historically, this should return anywhere from 5-10% but again past performance is not indicative of future returns.

    • While you’re young and have more time in the market, you genreally want to invest in higher risk/higher reward type investments. Idea being you benefit from higher returns while having more time to weather downturns. Then as you age, you can shift towards lower risk/lower reward investments, like bonds, so you’re not as exposed to market fluctuations.

    One last thought, there are also variations of FIRE, like Barista FiRE, Coast FIRE, where you don’t have to completely stop working but are financially independent so you can choose where/how hard to work.

    Good luck,

  • karpintero@lemmy.worldtoAsk Lemmy@lemmy.world•Anyone else about ready to give up on tech?
    9·
    2 months ago

    I started buying physical media again (in addition to data hoarding) because I don’t like the idea of just “renting” everything and having some company decide to remove media from their catalog at any point.

    Been buying books, manga, Blu-rays, DVDs, CDs, and records so I can enjoy things without the internet.

    Hate the that AI is being shoved into everything as well without any ability to opt out. I’d rather just avoid using your product completely if that’s the case.