Bogleheads are mind-boggling sometimes.

[Beaudacious]

http://www.bogleheads.org/forum/viewtop ... st=1771064

Just wanted to share this head-scratcher of a post from those Boglers. $1.7 mil accrued at age 36 (SO 37) looking to pull the plug on their careers in the near future.

I guess others are worried about Social Security? Healthcare? A 4% withdrawal rate not being enough?

$60k a year is what they estimated for breathing in perpetuity. I somehow think they'll manage...

It has got me thinking though about my own path. A lot of worry goes into the expect-the-unexpected hypothetical situations. Do many people not have the faith/belief in themselves that they can adapt and overcome these barriers? I can understand this thought process from people who haven't achieved success in prior endeavors, but I assume that, if you are competent enough to be able to save a fantastic percentage of your salary, you're competent enough to work around the potential costs that could come down the road in your retirement. These problems seem so easily solvable, especially when you have the means to do so! Maybe I'm overconfident in my abilities, but I have a feeling that it's more of a matter of perspective. Or maybe I've become really jaded from my line of work.

[secretwealth]

Bogleheads, like libertarians or socialists, have a secular religion that has become gospel to them. The result of dogmatic thinking is to get stuck into grooves created by your own thought patterns, which results in bizarre and absurd conclusions like what you see in this thread.

[Spartan_Warrior]

I know we're supposed to rail over such conversations and accuse them of being "religious" or dogmatic (ignoring that that in itself is a dogmatic response), and maybe this is just me, but I honestly don't see what the big deal is about that thread. Granted, I skimmed, but the majority opinion seemed to be that the OP shouldn't retire, not because $1.7mil is simply "not enough", but because the 4% withdrawal rate is unsafe. We have plenty of people here on this site who also feel 4% is too risky and aim for 3%, 2.5%, etc withdrawal rate before pulling the plug. The math seems sound to me, or at least not unsound.

The real problem is the inputs: the guy wants to live on $60k a year. Many of the people in that thread even suggest that he lower his living expenses for a greater chance of success.

[Ego]

It has got me thinking though about my own path. A lot of worry goes into the expect-the-unexpected hypothetical situations. Do many people not have the faith/belief in themselves that they can adapt and overcome these barriers? I can understand this thought process from people who haven't achieved success in prior endeavors, but I assume that, if you are competent enough to be able to save a fantastic percentage of your salary, you're competent enough to work around the potential costs that could come down the road in your retirement. These problems seem so easily solvable, especially when you have the means to do so! Maybe I'm overconfident in my abilities, but I have a feeling that it's more of a matter of perspective. Or maybe I've become really jaded from my line of work.

This is an exceptionally important point. It is good to be confident based on your current ability to earn. It is better to be confident based on your ERE abilities while continuing to exercise your constantly improving adaptability.

I had a tenant who worked for Wang as an international troubleshooter. He had a map on his wall of all of the places they flew him to solve problems. I now have that map on the wall of my shed as a reminder of his lesson. He saved and retired early but continued to spend more than he should have. When Wang began to fade he made a conscious decision to eschew computers. He would continue to dress as a business executive but spent his days doing crossword puzzles and enjoying long conversations at a cafe with friends. The closing of the cafe back in the 1990s was a major blow to his lifestyle. He lost that link to people which he never regained but he continued with crosswords and took up Sudoku when it became popular. When his money was getting low he began applying for jobs but by then he had had so many years of non-productivity he just couldn't get hired. I had a long conversation with him after he was turned down for a position as a ticket taker at the movie theater a few blocks away. Soon after he applied to live in government subsidized housing in a sketchy neighborhood and moved out. Social Security is his only income.

When I read that people want to use ER to read and play video games I cringe.

[Chad]

Taleb's Anti-Fragile, which I happen to be knee deep in right now, focuses on this type of question. I don't think it's new for us, but he does do good job of defining it and creating vocabulary.

He would suggest that the Boglehead wanting a larger amount of savings is building robustness, but not anti-fragility. The difference between these two words seems to be where the discussion is centered for us, but the Boglehead Board seems to ignore the anti-fragility (Renaissance Man/Woman) part and only focuses on making them robust.

I plan on building in two levels of safety.

I will overshoot on the amount I need with whatever job earns me the most, as I want that safety margin. I want an amount large enough to fund my retirement and, at least, slowly grow the principle. The fastest way to that safety is generally going to be the job most of us hate, our current one (hopefully, I can change this as I work on my "ERE abilities").

I will also make sure my "ERE abilities" are ready and able to facilitate the retirement. When I say "ERE abilities" I don't just mean gardening, handyman, etc. I'm using it to suggest that I don't plan on just reading and playing video games (though, for sure, I will do some of both). I don't want to withdraw from society or decide to not keep up, as your renter did.

At this point, I plan on coaching and writing in ERE retirement. Both should earn me some money and keep skills active, while being enjoyable. Of course, other skills would be acquired interests/needs changed.

[Spartan_Warrior]

If the guy's lifestyle requires $60k/yr and he has $1.7mil, I don't see how that's much different from a situation where a prospective EREr wants to retire with expenses of $15k/year and $400k in the bank--as I said, depending on risk tolerance, at least some of us would have no qualms telling this person that this strategy is a little risky because it's pushing the boundaries as far as historically safe withdrawal rates, and leaves little safety margin. We might tell the person they could reduce this risk by either lowering living expenses, saving more money, or looking at other income streams/semi-ERE... which, as far as I can tell, is exactly what most of them are saying on that thread.

Maybe I'm missing the point.

[secretwealth]

Ego: What is Wang? That was a great story, but I had trouble following because of this detail.

[George the original one]

Oh, secretwealth, here is where the old-timers come in...

Wang was a computer company known for its multi-user word processing system and network. Feds bought Wang gear in the late '70s and most of the '80s. But Wang was ousted as PCs and local area networks and DEC became dominant.

Their furnishings were well-made. Desks with 8" floppy drives built into drawers. Daisywheel printers in acoustic cabinets that barely whispered.

[jennypenny]

Those bogleheads have come a long way. That said, 1.7 mil would be a runaway kitty in my book.

The problem, like everyone said, is if the money is their only resource. Or if they're locked into the $60K spending level with no wiggle room for the bad times.

The other problem over at bogleheads is that they like to retire and go on autopilot. I do think that's a luxury you give up if you retire early. They will have to actively manage their money if they expect it to last 50 years.

[secretwealth]

@George Built-in floppy drives? Such decadence!

@jp: That's a very good point and I think the biggest disconnect I have with Bogleheads: their fixation on passive investing significantly hinders the rate of return they can get--but they're fanatically dedicated to the efficient market hypothesis to the point where they cannot entertain the mere idea of active management. It's folly, but folly is good: it creates market inefficiencies that others can capitalize on.

[Ego]

Ego: What is Wang? That was a great story, but I had trouble following because of this detail.

He would have had near apoplexy had someone asked him this questions. As George said, they were massive computers. Here is the map he left me. He carefully underlined all the countries where Wang sent him.



To Beaudacious's point, I believe it is good to have confidence in my abilities. It may not be a good idea to be overconfident in my ability to switch them back on after they've been dormant for too long. Doing things like pretending to care when I really don't give a shit or faking enthusiasm when I don't feel enthusiastic.... those are skills. They are skills that get rusty and eventually seize altogether if they are not used. If you're in the middle of a sixty hour workweek full of forced shit-eating grins you may dream of a time when you can let those skills get rusty and seize. Be mindful that doing so comes at a cost.

Also, I believe a focus on SWR is unhealthy.

[George the original one]

Most people know when it is time to move on in their careers. Few know when it is time to move on in their life.

[jacob]

1) First they ignore you.
2) Then they laugh at you.
3) Then they fight you.
4) Then you win.

Wow, it looks like the bogleheads have progressed to stage 3.5 or so. I still remember stage 1, 2, and 3.

[Spartan_Warrior]

So the issue is that they're disinterested in actively managing a portfolio? Do you have the same issue with all the ERErs who run the Permanent Portfolio or other passive strategies?

The other issue seems to be (the assumption) that this guy is only interested in the financial side--sustaining his lifestyle on the proceeds of his investments--without embracing the other ERE strategies like simple/frugal living or producing rather than consuming. Again, this view has been espoused by plenty of ERErs (I'm looking right at you, secretwealth). So what's the problem?

Sorry, I'm still not getting what the fuss is about. This whole thread seems kinda elitist and silly. Is there some kind of longstanding "Bogleheads vs. ERE" internet feud of which I'm unaware?

(EDIT: Never mind, Jacob's post pretty much answered that.)

[secretwealth]

@jacob--I don't think we're fighting the Bogleheads at all. I never ignored the Bogleheads--back in 2011 when I was looking for investment strategies, I read a lot about PP. I came to the conclusion that, despite its long-term track record, now is a pretty bad for it, and I've focused on other investment strategies instead. I've never tried to argue that the Bogleheads are wrong--I see no point in that debate.

If anything, I've gone to stage 2 and maybe seeing the venom spikes in this thread, I think I'll go back to stage 1.

[jennypenny]

@Spartan--My impression of the PP/ERErs here is that they don't plan to live solely on the ROI. They (you) seem to be the people who hedge the most with part-time gigs and a focus on skill acquisition. That would make them very different from bogleheads. Maybe I have the wrong impression?

EDIT. @SW--Go do a search over at bogleheads for ERE or Jacob. It wasn't that long ago they were calling him and DW trailer trash. Many of them annoy me, but I've also made some of my best trading contacts through them.

[Spartan_Warrior]

@Jenny: That is true (at least for me). I guess my problem is I don't see what's inherently wrong with the plan "to live solely on the ROI". To my mind, financial independence/early retirement simply is the mathematical equation "(passive) income >= living expenses", nothing more. The frugal living/part-time gigs/skill acquisition stuff is optional--it's not a prerequisite, it just makes it easier to lower the "living expenses" or raise the "income" sides of the equation.

If this guy's plan really is to live solely on ROI, with no intention of lowering his expenses through skill acquisition or supplementing his income with part-time work, then IMO they are giving him the right advice: don't retire! (Or, "retire with the understanding that you run a reasonable risk of running out of money before you die".)

I think what bothers me is the implicit idea that there's only one "right" way to retire early. This forum alone shows wide variety in strategy. Not even everyone here is following the true "ERE" plan in the sense of the "Emergent Renaissance Economy" method of extremely low expenses due to high skill acquisition.

If there is a personal feud going on (and it sounds like it got pretty rough), that's another story and renders this reaction more understandable... but still a little unreasonable, IMHO.

[jennypenny]

@spartan--I guess it's the static nature of the typical bogleheads plan that I don't like. They lock into a specific 3 or 4 fund investment plan, decide on a SWR, and then lock into a lifestyle that matches the ROI. That might work over a 20 year retirement, but over a 40-50 year one I think it's too risky. ERErs (I assume) would tend their investments and watch for macro trends so they can adjust accordingly along the way.

I do think things are slowly changing over there.

[workathome]

Have to say, Bogleheads are miles and miles ahead of the typical consumer - though I disagree with the overly-optimistic assumptions.

[Spartan_Warrior]

@Jenny: Okay, well, fair enough. I'm not all that familiar with the Bogleheads investing strategy. If it actually is staggeringly bad then maybe mocking it is within reason. I just didn't get that impression from this one thread; the responses seemed mostly reasonable within the context of someone seeking to retire on only a 4% SWR of $1.7mil while living on $60k.