"I wish I could do that."
Frequently Raised Objections
Looking at the thread/wiki page, I think there are two classes of objections. One is the emotional sort, "how could you do this," "you'll end up alone," "but what if you want a big TV," etc. I think these are easy to put up some defense against, simply by being rational. Whether it will convince the other person is hard to say.
The other class of objections is describing some real difficulties. Facing 200k of student debt, with a serious disease/disability, etc. Here the only defense is describing some workaround, or portraying the problem as less severe than it is. Particularly for diseases or caring for elderly family, you may be able to mitigate some of the expenses, but in the end I do think there's a possibility that early retirement is simply not feasible, and not acknowledging that comes off as zealotry.
What these come down to, is two factors, constraining someone's time to reduce expenses, or starting them deeply in the red. For instance, $200k debt is probably manageable. But what if your elderly parents cost you $500k in expenses? What if you decided to become a lawyer before encountering ERE, and you're starting $600k in the hole? There's some point where, regardless of how much you save, you'll be spending years getting to 0. If we assume someone clears $50k and saves $40k, it will take 10 years to erase $400k of expenses, and then the 5 years to build up $200k to retire. And clearing $50k is above the average American income. If they clear $30k and save $25k, it will take them 16 years to erase the debt, and 8 years to save for retirement.
I'm just saying, there's some point at which someone is not going to be able to retire early. Still, their actions should be the same, regardless of whether their goal is feasible or not.
The other class of objections is describing some real difficulties. Facing 200k of student debt, with a serious disease/disability, etc. Here the only defense is describing some workaround, or portraying the problem as less severe than it is. Particularly for diseases or caring for elderly family, you may be able to mitigate some of the expenses, but in the end I do think there's a possibility that early retirement is simply not feasible, and not acknowledging that comes off as zealotry.
What these come down to, is two factors, constraining someone's time to reduce expenses, or starting them deeply in the red. For instance, $200k debt is probably manageable. But what if your elderly parents cost you $500k in expenses? What if you decided to become a lawyer before encountering ERE, and you're starting $600k in the hole? There's some point where, regardless of how much you save, you'll be spending years getting to 0. If we assume someone clears $50k and saves $40k, it will take 10 years to erase $400k of expenses, and then the 5 years to build up $200k to retire. And clearing $50k is above the average American income. If they clear $30k and save $25k, it will take them 16 years to erase the debt, and 8 years to save for retirement.
I'm just saying, there's some point at which someone is not going to be able to retire early. Still, their actions should be the same, regardless of whether their goal is feasible or not.
SWR= Safe Withdrawal Rate.
But that would entail knowing what the "real" rate of inflation is. How do you calculate that? Or should there be an "average" inflation rate of say 5% to 10%?
And then, would you take that 5% to 10%? inflation rate and multiply it by your SWR and then add it back into your SWR and come up with a total.
On 300k with a 3% SWR would be $9000. Plus an extra $900 for inflation makes $9900. Or would that be 10% of the 300K i.e. 30K? That would require an additional 300k in investment capital at 10% return if you could get that...so what's the scoop?
But that would entail knowing what the "real" rate of inflation is. How do you calculate that? Or should there be an "average" inflation rate of say 5% to 10%?
And then, would you take that 5% to 10%? inflation rate and multiply it by your SWR and then add it back into your SWR and come up with a total.
On 300k with a 3% SWR would be $9000. Plus an extra $900 for inflation makes $9900. Or would that be 10% of the 300K i.e. 30K? That would require an additional 300k in investment capital at 10% return if you could get that...so what's the scoop?
-
secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
-
jacob
- Site Admin
- Posts: 15980
- Joined: Fri Jun 28, 2013 8:38 pm
- Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
- Contact:
SWR is essentially the projected/future _real_ return rate corrected for volatility "over the long run". Historically, meaning over the past couple of thousands of years, it's been 3%. The only exception has been the period known as the Dark Ages, where trade and finance broke down completely.
Keep in mind that this requires a certain level of flexibility. You have to be able to go where those 3% are available. For example, if your country erupts in civil war, you can leave and get 3% elsewhere. Conversely, 2% or 1% is not going to save you if you're the persecuted minority.
Keep in mind that this requires a certain level of flexibility. You have to be able to go where those 3% are available. For example, if your country erupts in civil war, you can leave and get 3% elsewhere. Conversely, 2% or 1% is not going to save you if you're the persecuted minority.
Hi,
Here's an objection I did not see on
http://earlyretirementextreme.com/wiki/ ... Objections
: "You have to be really smart at investing to do that"
ie, Can 'normal' people ERE, or must you be an investing whiz?
Even assuming someone bought into the first part - lower expenses, and save your money - then what do normal people do with their saved money to grow it to that magic 3% SWR?
Here's an objection I did not see on
http://earlyretirementextreme.com/wiki/ ... Objections
: "You have to be really smart at investing to do that"
ie, Can 'normal' people ERE, or must you be an investing whiz?
Even assuming someone bought into the first part - lower expenses, and save your money - then what do normal people do with their saved money to grow it to that magic 3% SWR?