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Dangers of Relying on the 4% Rule in Early Retirement Scenarios

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  • #31


    it was virtually transparent that if you are admitted and cannot afford to attend, those that could would be essentially paying your way. I guess that it is like this in many other areas of society: healthcare, public education, food, housing, etc., but in a discretionary spending setting, this left a bit of a bad taste in my mouth AND made me feel badly about feeling badly about it!
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    I hate this too. It looks like colleges are happy to just about anyone they think deserves it and then find out how much they need and who can pay and sock them with the fees.

    If we took similar action in our offices where we see all, even some interesting cases who cannot afford the costs, and then charge the people who can afford what we think we need to cover our expenses, even if they came in for a simple URI - Imagine the outcry.

    I refuse to be blackmailed into overpriced education costs just because I work hard and save and keep my expenses in check.

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    • #32
      I never quite understood why MMM is as popular as it is made out to be. One look at the website and you see a garish site with a 1990 website look when Netscape was the ruling browser. It is difficult to navigate the site.

      I vaguely remember one article where he had a trailer hitched to his bicycle ( or was it a Prius) and used in in sub zero temps in snowy conditions to do grocery shopping. Brrrr..... That put me off. No way will I scrimp and save to retire at 40 and then lead this lifestyle.

      I see the same trend in those travel bloggers who retire early and live like vagabonds traversing the world, claiming how good they have it made.

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      • #33







        The other issue with the MMM lifestyle is the MMM lifestyle.  We live a reasonable lifestyle, yet still enjoy many of the world’s pleasures (great vacations, good wines and scotch, enjoyable activities around town) without breaking the bank.  Spending 8,000-10,000 a month is plenty for all the things we enjoy doing, and saving a lot on our physician salary.  I agree with having backup plans, but do not really desire the MMM lifestyle to begin with.

        I believe we have reached financial independence, yet are still aiming for financial freedom (http://www.physicianonfire.com/financial-independence-versus-financial-freedom/).
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        I completely agree, though it is an anathema (I love using that word) in early retirement discussions. I like good beer/wine, I need one or two great trips per year, and I like comfortable socks (not the cheap ones you get at Target). If I have to do a little part time work to afford those things in retirement (working at REI or Trader Joe’s), so be it, dammit!
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        I  love the MMM philosophy, but I think that people forget that it is indeed a philosophy and not some rigid set of rules you have to follow to live a good life. Sometimes his critics take him too literally, in my opinion. His life is optimized for him, and indeed he seems to be one of the happiest guys I've ever met. I truly believe him when he says he needs nothing else in life to be absolutely happy. I'm not sure there is a blog I've read that has changed the way I think about money, time, work and happiness like his has. That said, I think that most of us within 2 standard deviations of the mean will not be immune to a little lifestyle inflation. It takes a unique person to make 400k/yr and spend 25k. The thing is we can all take his principles and live an amazing life spending 'only' 80 or 100k/yr (while our colleagues spend 250). Everyone will have their own set point.

        And I completely agree on the socks thing. Life is way to short to wear cheap, uncomfortable socks!

         

        retire--->part time work at REI--->employee discount on excellent socks--->happiness!

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        • #34










          The other issue with the MMM lifestyle is the MMM lifestyle....
          Click to expand…


          I completely agree, though it is an anathema (I love using that word) in early retirement discussions. I like good beer/wine, I need one or two great trips per year, and I like comfortable socks (not the cheap ones you get at Target). If I have to do a little part time work to afford those things in retirement (working at REI or Trader Joe’s), so be it, dammit!
          Click to expand…


          I  love the MMM philosophy, but ...blah, blah, blah...

          And I completely agree on the socks thing. Life is way to short to wear cheap, uncomfortable socks!

          retire—>part time work at REI—>employee discount on excellent socks—>happiness!
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          Amen, brother!

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          • #35
            I don't quite get MMM. The frugality message seems to clash somewhat with the lifestyle reality. We live about thirty minutes away and $25K / year doesn't seem like it would come even close to supporting their lifestyle. That's just above the federal poverty level for a family of four in Boulder/Weld County. A paid off house without insurance goes a long way, but it doesn't change living in an expensive area. Everything costs more across the board.

            Not having dogs would greatly reduce our entire family's personal happiness level. I definitely don't mind the extra expense.

            We're also willing to pay top-shelf prices for excellent bread. ;-)

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            • #36


              $25K / year doesn’t seem like it would come even close to supporting their lifestyle.
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              I checked and we paid $15K for our health care premium with 2.5K deductible. Our cheap paid up house has property tax of $1.5K and insurance of 1K. The old cars have an insurance and taxes of $2K. So 25K does not even cover the basic non negotiable items. Yes, we need the cars to perform our jobs.

              If he had preached living within $75K on a $400K income I would have listened. But he takes being a cheapskate and scrooge to a whole different level. What is he going to do with all the extra money when he croaks. Leave it to Uncle Sam. :roll:

              No thank you, I have one life to live and can live within my means and yet have a fun life.

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              • #37


                If he had preached living within $75K on a $400K income I would have listened.
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                Then I think you'd be willing to listen to me.    Similar income, spent $73,000 in twelve months.

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                • #38




                  Then I think you’d be willing to listen to me. ? Similar income, spent $73,000 in twelve months.
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                  $75K is reasonable. I don't spend a lot on unnecessary consumer items like boats, luxury cars or expensive dining ( though every trip to Costco costs us >$100, usually it is closer to $300). What kills our budget is vacation costs. We usually take far way vacations and the airfare ( expensive since it has to be taken during school holidays) plus the tour company adds up to a good sum. Our 17 day tour of Amsterdam and Tanzania & Kenya this August was $2K airfare + $5K Africa + $0.5K for Amsterdam /PP and hence it was $22.5K total. The recent India trip was $15K. MMM could have used that to survive the whole year or even a couple of years. My photography hobby costs $8K per year on the average.

                  But I rationalize it this way  1. Take the trips while I still can walk without arthritic pain and have no cardiac issues limiting me. In ten years it might be too late and I will have that pile of money and no way to spend it. 2. Why leave it to some one, especially as taxes to IRS. After making sure my daughter is set for life with a trust I would like to spend it down as much as I can.

                  I still can't get myself to pay business class fares but who knows if that might change in the future.

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                  • #39




                    $75K is reasonable. I don’t spend a lot on unnecessary consumer items like boats, luxury cars or expensive dining ( though every trip to Costco costs us >$100, usually it is closer to $300). What kills our budget is vacation costs. We usually take far way vacations and the airfare ( expensive since it has to be taken during school holidays) plus the tour company adds up to a good sum. Our 17 day tour of Amsterdam and Tanzania & Kenya this August was $2K airfare + $5K Africa + $0.5K for Amsterdam /PP and hence it was $22.5K total. The recent India trip was $15K. MMM could have used that to survive the whole year or even a couple of years. My photography hobby costs $8K per year on the average.

                    But I rationalize it this way  1. Take the trips while I still can walk without arthritic pain and have no cardiac issues limiting me. In ten years it might be too late and I will have that pile of money and no way to spend it. 2. Why leave it to some one, especially as taxes to IRS. After making sure my daughter is set for life with a trust I would like to spend it down as much as I can.

                    I still can’t get myself to pay business class fares but who knows if that might change in the future.
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                    Depending on how many people in your family you travel with, sometimes you can find "cheapish" business class fares, which one could potentially justify. You just might not get those fares during school breaks, however.

                    I agree with you about our health--sometimes you can't predict how long any of us will be around no matter how healthy we perceive ourselves to be. Then again, I might just be trying to rationalize why I own a $12k built-in fridge. ;-)

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                    • #40
                      I think the value of MMM is getting you to think about what is and is not important in your life.  I will never be bicycling around my town.  I love my big dogs and I have a built in fridge too.  I rarely eat at an expensive restaurant but I don't worry about it.  I think reading MMM made me realize that brand name items were generally not important i.e. shoes, purses, etc.  I now view people wearing lots of designer stuff as wasteful and probably not financially secure.

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                      • #41


                        ( though every trip to Costco costs us >$100, usually it is closer to $300)
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                        The only way I've found to spend less at Costco is going by myself without a shopping cart to purchase one item.

                        Which basically translates to emergency trips for dog food.

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                        • #42
                          Getting what works for you and your specifics from different ideas is great. I also somewhere along the way looked at whats purchased and what made sense to me as valuable, etc...Clothes and labels certainly did not make the cut in general, and overall its a pretty powerful way to view everything you purchase, just being mindful of real utility. Some things are definitely worth paying more for, rarely the most expensive thing, but there is a def middle ground for lots of real items. Same ideas keep me from caring about buying most anything until there is a real need.

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                          • #43





                            ( though every trip to Costco costs us >$100, usually it is closer to $300) 
                            Click to expand…


                            The only way I’ve found to spend less at Costco is going by myself without a shopping cart to purchase one item.

                            Which basically translates to emergency trips for dog food.
                            Click to expand...


                            There's always space in my hands for an extra bottle of whisky or wine.   

                            I go for the cheap gas and $1.50 hotdog & pepsi, spend $70.00 on booze and food I didn't know I needed.

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                            • #44








                              ( though every trip to Costco costs us >$100, usually it is closer to $300) 
                              Click to expand…


                              The only way I’ve found to spend less at Costco is going by myself without a shopping cart to purchase one item.

                              Which basically translates to emergency trips for dog food.
                              Click to expand…


                              There’s always space in my hands for an extra bottle of whisky or wine.   ?

                              I go for the cheap gas and $1.50 hotdog & pepsi, spend $70.00 on booze and food I didn’t know I needed.
                              Click to expand...


                              Costco alone has destroyed any possibility of the 4% rule working for me

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