3 yrs to FI: ertyu's journal

[jacob]

That seems quite generous! Over here 100,000 euros gets a 50 year old male 312 a month, or 3.7%, and there are no options that correct for inflation. If inflation halves the value of money in 20 years, at his 70th birthday the 50 year old male will have the purchasing power of 156 a month.

Been a while since I looked into actual numbers, so just ballpark it. In the US, it's possible to buy an inflation-adjusted annuity. In some countries annuities might not even be available. Regardless, an inflation-adjusted annuity will mostly(*) give you the same deal as people living on social security (public pension). Of course inflation-adjustment takes on another fee. This is why the DIY approach is so popular. I'm mostly recommending this not because DIY is hard but because punting a problem that one is particularly unconfident in unto others might be the saner solution.

(*) In the US, SS is indexed to the average earned income, not CPI.

[okumurahata]

Simply sharing my thoughts, without singling out any particular post.

I have previously discussed this, but I believe it's crucial to consider retirement years in relation to age. For instance, let's examine the following scenarios (assuming a 5% return):

Scenario 1: Saving €10,000 per year for 5 years with no work thereafter.

Code: Select all

| Year | Amount Saved | Interest Earned | Total Balance |
|------|--------------|-----------------|---------------|
| 1    | €10,000      | €500            | €10,500       |
| 2    | €10,000      | €1,025          | €21,025       |
| 3    | €10,000      | €1,551          | €32,576       |
| 4    | €10,000      | €2,029          | €44,605       |
| 5    | €10,000      | €2,230          | €57,835       |
| 6    | -            | €2,892          | €60,727       |
| 7    | -            | €3,036          | €63,763       |
| 8    | -            | €3,188          | €66,951       |
| 9    | -            | €3,349          | €70,300       |
| 10   | -            | €3,520          | €73,820       |

Scenario 2: Working alternate years, saving €10,000 per working year.

Code: Select all

| Year | Amount Saved | Interest Earned | Total Balance |
|------|--------------|-----------------|---------------|
| 1    | €10,000      | €500            | €10,500       |
| 2    | -            | €525            | €11,025       |
| 3    | €10,000      | €551            | €21,576       |
| 4    | -            | €1,079          | €22,655       |
| 5    | €10,000      | €1,133          | €33,788       |
| 6    | -            | €1,689          | €35,477       |
| 7    | €10,000      | €1,774          | €47,251       |
| 8    | -            | €2,363          | €49,615       |
| 9    | €10,000      | €2,481          | €62,095       |
| 10   | -            | €3,105          | €65,200       |

Second subject ‘pays’ a premium of 8,000 EUR, but has enjoyed leisure years at a relatively younger age.

The downside is that aging theoretically makes it more challenging to secure employment.

In an extreme case, you could achieve ERE in 5 years using a High-Intensity Interval Training (HIIT) approach. For instance, saving 80% of your income for 1 or 2 years, then not saving (i.e. collecting unemployment) for the next one. Rinse and repeat.

Put simply, if you're able to save 80% of your income for 5 years between the ages of 18 and 65, and not deplete the capital, theoretically, you're set.

[guitarplayer]

The downside is that aging theoretically makes it more challenging to secure employment.

Yeah I've been thinking about this the other day. I think due to demographic shifts in the developed world, it might be very easy to make money for people of any age in, say, 2050 if they are willing to work.

[urgud]

I love the idea of the Trash Place. Sad, romantic, quirky. As someone pointed out, maybe it's good to have someone live there, even for free. Could also result in worthwhile non-financial capital (i.e. doing good by another human)

Reading the last few pages, I am dumbstruck by the insane privileges afforded to me, simply by virtue of being from a wealthier country. In particular, you not having any form of old age safety net whatsoever is tough to read. You mention having basically lived abroad your entire adult life - how are you fixed in terms of family (siblings, cousins, etc.)?

[zbigi]

Reading the last few pages, I am dumbstruck by the insane privileges afforded to me, simply by virtue of being from a wealthier country. In particular, you not having any form of old age safety net whatsoever is tough to read.

Won't that be the case for many ERE people? If someone really retired extremely early (say, after 8 years of working), their contributions to the social security system in their state surely won't grant them much in old age? (unless the state is extremely generous for people who chose not to work for most of their life). I for one, based on my current countributions, will receive state pension at around $100-$150 level (400-600 Polish złotys) when I get to official retirement age, which, for reference, is just 13%-20% of current official post-tax minimum wage (IOW, it's peanuts).

[urgud]

Denmark's public pension system isn't dependent on having worked, just having resided for at least 40 years between 15 and retirement age. Private pensions managed through employers are a relatively recent scheme dating back only to approximately 1990, so right now there's tons of people subsisting on the public pensions alone. My grandmother is one of them. I'm guessing she probably gets around 27000 EUR/year, perhaps a bit more. Then of course, there's still taxes.

[zbigi]

That sounds amazing - basically an UBI scheme for old people. I'm guessing most countries aren't as generous as Denmark though.

[jacob]

That sounds amazing - basically an UBI scheme for old people. I'm guessing most countries aren't as generous as Denmark though.

It depends #TANSTAAFL

If you're single w/o any savings, you should be able to haul in $2000/month AFTER tax. Average cost of living in Denmark is roughly the same as the average in the US. So a typical WL1 (spending under but a modicum of self-control) retiree should be able to be comfortably live in medium+-sized apartment at that income.

However, if you're currently 50, you wont be able to collect until you're 70. If you're 40, you'll have to wait until you're 72. And if you're 30, you'll be waiting until you're 73. The financial equation was resolved politically by increasing the retirement age so that your UBI won't really be useful for much more than a handful of years given average longevity. Even more interesting, if you happened to save up some money, you'll get paid less.

As such, it's actually not worth that much compared to saving your own money. It mainly serves to prevent people from falling through the cracks or going toothless during the last handful of years before they die.

[guitarplayer]

I am rooting for the UK system to be going strong into the future at least at half the current rate (which I think is safe but plan otherwise anyway), it being a relatively ‘cheap’ compared to elsewhere in Europe. Half the current rate will fund 70-100% of an ere lifestyle.

But @ertyu, I will stop short of recommending finding your way to the UK and instead recommend moving to an EU country in Western Europe, most of which have various social security schemes with different eligibility criteria. I think this would maybe address some of the insecurities about safety net, and i might me wrong but think there are no issues with you moving to a Western European eu country. Heck, sounds an adventure!

[zbigi]

Worth noting that many European societies are getting seriously old. I'd definitely avoid moving to countries with really bad demographics, as, in a couple decades, they're much more likely to heavily tax your FI stash to help fund the remains of their welfare state, than to help you with some UBI-style pension.

[delay]

The Dutch public pension is much like @urgud describes the Danish system. You get 2% of the amount for every year you were in The Netherlands during 50 years before the retirement age. The monthly amounts are 1460 euro after tax if you're living alone and 991 euro if you're living together. The years up to retirement age can be harsh and many people look forward to their first public pension.

[RoamingFrancis]

Pleasantly surprised to see Daniel Ingram and pragmatic dharma mentioned on this forum