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These numbers show Suze Orman is right about needing $5 million to retire

By zzyzzx following x   2018 Nov 14, 10:39am 2,170 views   21 comments   watch   nsfw   quote     share    


https://www.marketwatch.com/story/these-numbers-show-suze-orman-is-right-about-needing-5-million-to-retire-2018-10-15/

Suze Orman broke the internet earlier this month when she told the “Afford Anything” podcast that those buying into the FIRE movement (financial independence, retire early) better save at least $5 million to achieve that goal.

The overwhelming response: Are you nuts, rich lady?

Emails poured in, tweetstorms raged, Reddit’s FIRE board lit up and bloggers everywhere, including Mr. Money Moustache, laid out perfectly sound reasons why Orman’s out of touch with millennials and the needs of the common man.

But one popular personal finance blogger swam upstream right next to Orman, and he used his own experience to back his point.

“Her views ruffled a lot of feathers, but after crunching the numbers, I have to agree — $5 million sounds about right if you want to retire before the age of 60,” the Financial Samurai blog’s Sam Dogen said. “Bad things happen in life all the time that costs money!”

He pointed out that only 18% of Americans actually retire before the age of 61, so it makes sense that the masses took issue with Orman’s scenario — $5 million to $10 million isn’t an option for most.

Dogen says 40 is the absolute earliest he’d recommend anybody retire, although even then, that’s asking a lot out of your investments. Building a $1 million after-tax nest egg by that age sounds great, but that $40,000 a year, assuming a 4% safe withdrawal rate, won’t fly in many parts of the country for another 40 years of life, with all its twists and turns.

Retiring at 50 with $3 million in after-tax investments is closer. “Not bad!” he says. “But you’ve got to live in a cheaper part of the country and stay frugal if you have kids and parents to care for. At this age, you might as well keep on working until you’re 60 to eliminate the risk of financial shortfalls.”

He uses this chart to illustrate various scenarios:


His takeaway is that $5 million in after-tax income generates $200,000 a year in passive income, and that’s about right if you have a family and want to live an urban existence, such as San Francisco, New York, Seattle, Boston, etc.

In Dogen’s case, he “retired” at age 34 — well before the age he recommends for others — with about $2 million in after-tax investments producing about $80,000 in passive income. He said it was “scary to leave so young,” but he planned on working toward a goal of creating $200,000 in passive income to support his potential family.

Thanks to his blog and a “raging bull market” he’s been able to hit his target. He fears, however, that the bull market and the lure of easy internet money is giving the generations after him a false sense of what it takes to live the FIRE life.

“So many young bucks think they’re Warren Buffet now because they can’t lose in the stock market or real estate market,” Dogen said. “I don’t blame them for believing they’re impervious to a downturn if all they’ve seen is gains their entire working career.”

He explained that the younger generations might not be as familiar with the crushing blows of the financial crisis and the dot-com bubble.

“There needs to be another downturn to vigorously stress test the FIRE movement,” he said. “My guess is we’ll see a lot of FIRE folks end up going back to work after a decimation of their finances.”
1   HEYYOU   ignore (31)   2018 Nov 14, 11:43am   ↑ like (0)   ↓ dislike (0)   quote   flag        

OMG! It would be terrible if any American had to cut back on their lifestyle.
$5,000,000 ! No problem! We have MAGA!
2   zzyzzx   ignore (1)   2018 Nov 14, 11:48am   ↑ like (1)   ↓ dislike (0)   quote   flag        

HEYYOU says
$5,000,000 ! No problem!


I was assuming that was the number to retire in Caligulan Splendor.
3   APOCALYPSEFUCKisShostikovitch   ignore (41)   2018 Nov 14, 11:52am   ↑ like (1)   ↓ dislike (0)   quote   flag        

OPEN FIRE! NOW! IF YOU WANT TO SURVIVE!

EAT WHAT FALLS AND KEEP SHOOTING!

LONG: Yams! and (BELT!-FED!) AMMO!
4   HeadSet   ignore (1)   2018 Nov 14, 11:56am   ↑ like (3)   ↓ dislike (0)   quote   flag        

Keep in mind, that retired or working, the median household in come in California is about $68k. Somehow half the households (not just people) living in the "number 5 economy in the world" can manage to live on that paltry amount.
5   HeadSet   ignore (1)   2018 Nov 14, 11:58am   ↑ like (2)   ↓ dislike (0)   quote   flag        

“My guess is we’ll see a lot of FIRE folks end up going back to work after a decimation of their finances.”

"decimation of their finances." Also known as 'Divorce."
6   Ceffer   ignore (2)   2018 Nov 14, 12:02pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

I know a coupla guys in Bay Area who 'retired' in their late 30's. One is an elderly vet who went in at 18 and left with pension at 38, and has only worked part time-ish ever since. He got several degrees (courtesy of the gov), did a lot of sailing, and has wound up in a beautiful manufactured home. He was married twice to women who had some dough, and spent two years sailing around the world with one of them. Has a porsche, but I scratch my head at how he has managed to do all this when he was a dirt poor kid. A lot of it has been on the largesse of his military career from the day. I doubt that he ever had an equivalent of a 5 mill nest egg, maybe hundreds of thous short of a mill.

One of his friends also 'retired' in his 30's. This guy worked in the film industry, and had a small trust fund from family (like really small). He's pushing early 70's, has a small trailer and a boat moored on the peninsula. He is a docent in SF and goes up there and back. He is just a dharma bum and refuses to work at anything that doesn't tickle his fancy.

It's amazing what some people can do living hand to mouth almost indefinitely, without ever becoming homeless, and even thriving in their own way. Neither one have any alcohol or drug issues.

One has to remember, the Ormans of the world make their living on paranoia, and nobody wants you to spend your own money as long as they are making a commission on it.

I guess everybody has to make the decision about when their time and sanity is worth more than the salt mine.
7   RC2006   ignore (1)   2018 Nov 14, 12:07pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

Ceffer says
I know a coupla guys in Bay Area who 'retired' in their late 30's. One is an elderly vet who went in at 18 and left with pension at 38, and has only worked part time-ish ever since. He got several degrees (courtesy of the gov), did a lot of sailing, and has wound up in a beautiful manufactured home. He was married twice to women who had some dough, and spent two years sailing around the world with one of them. Has a porsche, but I scratch my head at how he has managed to do all this when he was a dirt poor kid. A lot of it has been on the largesse of his military career from the day. I doubt that he ever had an equivalent of a 5 mill nest egg, maybe a couple of hundred thou.


I've seen a few guys like this but most the time they are getting side money from VA for bogus disability.
8   zzyzzx   ignore (1)   2018 Nov 14, 12:18pm   ↑ like (4)   ↓ dislike (0)   quote   flag        

HeadSet says
the median household in come in California is about $68k. Somehow half the households (not just people) living in the "number 5 economy in the world" can manage to live on that paltry amount.


12 illegals in a household is skewing the averages in CA.
9   HeadSet   ignore (1)   2018 Nov 14, 12:37pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

12 illegals in a household is skewing the averages in CA.

I see, but would not these 12 individuals combined income hit that $68k or more? If more, it would skew the other way.
10   Ceffer   ignore (2)   2018 Nov 14, 1:27pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

RC2006 says
I've seen a few guys like this but most the time they are getting side money from VA for bogus disability.


By his own admission, he has 'worked' the system to the max. He even thanked me for being a worker bee taxpayer. Considering the life of adventure he has led, I guess I'm the chump.
11   clambo   ignore (4)   2018 Nov 16, 8:47am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Social security is worth a chunk of change. If you calculate $2000/month=$24000/year=$480,000 from an annuity paying out at 5% for life. (24,000 /0.05)

$1000 per month invested, add $500/month for 33 years=$1 million+ (assume 8.5% return).

Now you are at about $1.5 million net worth if you consider social security like a fixed annuity or bond fund.

The $1 million will provide a pre tax income of about $50,000. So, now you have a pre tax income with social security of about $75,000 per year.

Is this rich? Not really but you can get by if you save 9.3% state income tax by leaving California for example.

What will cause you to have no money to invest that $500/month for 33 years? Kids going to college, cars, vacations, mortgages, etc. all may make saving that $500 each month very difficult. A wife or female partner will say you are being a cheapskate (boy have I heard this before).

I believe that a $1.5 million net worth independent of Social Security will be sufficient for most people to have a pretty nice time.

After I drop Obamacare in 2019 I will be actively seeking more income since I won't have to pay the premium back, there won't be a premium.
12   HeadSet   ignore (1)   2018 Nov 16, 8:54am   ↑ like (3)   ↓ dislike (0)   quote   flag        

I believe that a $1.5 million net worth independent of Social Security will be sufficient for most people to have a pretty nice time.

Absolutely. Not sure if you are including a paid for home as part of the $1.5 million.

Also important is to stay in shape as you near retirement years. To really enjoy those years, you need time, money, and health.
13   FortWayneIndiana   ignore (4)   2018 Nov 16, 9:10am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Healthcare costs are very high at old age. Healthcare inflation is 10% a year, so most people can't keep up with that.

Government bureaucrats and unions will give themselves very wealthy benefits courtesy of our taxes, so they don't worry about future, but us private sector people have to make it work on our own. 5M seems right for CA.
14   clambo   ignore (4)   2018 Nov 16, 10:37am   ↑ like (1)   ↓ dislike (0)   quote   flag        

@heatset, that $1.5 figure refers to financial net worth.

Your house can also become a part of your financial net worth if you reverse mortgage it and turn it into an income stream.

My father had supplemental health insurance from Transamerica which was about $230/month. This covered anything not covered by medicare.

Being in shape is the best way to be able to keep your options open.

My present problem is my father lived until 96 so I feel like I must be a cheapskate, yet I want to have fun while I am healthy and have energy. I see myself being less frugal in a couple of years.

Females around me heard I had money and then received an inheritance; they are annoying because they think like communists that I should "help" them achieve their goals. I disagree. I was a big mouth with one and she told her friends at work, and so on and so on...
15   Ceffer   ignore (2)   2018 Nov 16, 10:54am   ↑ like (2)   ↓ dislike (0)   quote   flag        

clambo says
Females around me heard I had money and then received an inheritance; they are annoying because they think like communists that I should "help" them achieve their goals. I disagree. I was a big mouth with one and she told her friends at work, and so on and so on...


I wouldn't even talk with women in your sphere any more than necessary and would never be alone around them. Otherwise you will be getting a 'sex harassment' or 'rape' accusation, and will be sacrificing your dough to grinning, leering lawyers. If they can't get your money one way, they will get it another. I have known dumb stick guys who have fallen into this honey trap. Secondary Gain and False Testimony are the new 'divorce without marriage' bonus for some of women nowadays, and they should mostly be regarded as free range sexual extortionists and sociopaths unless proven otherwise through extreme vetting.
16   HeadSet   ignore (1)   2018 Nov 16, 11:34am   ↑ like (2)   ↓ dislike (0)   quote   flag        

they are annoying because they think like communists that I should "help" them achieve their goals

That sounds more like they are thinking like adolescents. Old enough to have adult activities, but still want a parent to pay the bills.
17   rocketjoe79   ignore (0)   2018 Nov 16, 12:00pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

HeadSet says
they are annoying because they think like communists that I should "help" them achieve their goals

That sounds more like they are thinking like adolescents. Old enough to have adult activities, but still want a parent to pay the bills.


The only way to proceed is pay on a transactional basis, or find a partner who doesn't need the money.
18   clambo   ignore (4)   2018 Nov 18, 7:19am   ↑ like (0)   ↓ dislike (0)   quote   flag        

I agree with rocketjoe79, other comments above sound too cautious; I don't make promises I can't keep so I don't expect any lawsuits from normal dating misunderstandings.

BUT, it's simply amazing in my part of Florida how many Colombians, Venezuelans, etc. seek a 1. husband (green card) 2. sugar daddy or generous "boyfriend" 3. want to live in a luxurious place 6 min from the beach where Tiger Wood's ex wife lives. This includes local talent from the wrong side of the tracks so to speak.

One who wants to make some $ is a friend of a girl I am dating; it's like the "roommate switch" which is supposed to be impossible.

I could not believe my ears when she said to me "You can fuck both of us!" She just wants a little money.

I vastly prefer them to my insanely jealous Mexican female visitor; she told me often that I "owe her" money because she has had sexual relations with me over several years during her visits. When she got drunk she said that because she was kind to my father during a couple of visits she should be entitled to some of the stock which I inherited. "Lets go to the bank and sign over some things to me." I said "the bank doesn't have that stuff. It's at an investment company which I won't mention to you."
19   Ceffer   ignore (2)   2018 Nov 18, 12:04pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

They'll slather you with pussy juice while stealing your wallet.
20   willywonka   ignore (3)   2018 Nov 18, 12:39pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

That bitch in black impales hopeless student loan indebted millennials with her 24 carat gold strap-on.
21   HeadSet   ignore (1)   2018 Nov 18, 6:23pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

"The fireman's pole to bankruptcy is greased with pussy juice."

I think I will submit that one to Reader's Digest Quotable Quotes.

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