Monochromatic Oeuvre wrote: nealric wrote:
Slightly off-topic, but the 4% safe withdrawal rate for retirement investments is generally used for people retiring at 60-65. A 30-year old withdrawing $80k a year inflation adjusted from a $2M portfolio runs a decent chance of running out of money. The big risk is sequence of returns. If you retire and the market crashes soon after, $80k/yr could drain the portfolio quickly. A good resource for those thinking of early retirement: https://www.firecalc.com/
It runs monte-carlo simulations of retirement draw downs based on historical market performance. Long story short, having $2M is a fantastic financial cushion, but it's probably not really enough to walk away from gainful employment unless you plan on living frugally in a low cost of living locale.
I put in $2M for 60 years and had to top $65k/yr in withdrawal before I wound up with any scenario that left an inheritance under $1.5M. If you can *spend* $65k/year, then even for a family of four, you have *at least* an upper-middle-class lifestyle in any part of the country except a handful of cities/posh suburbs (really anywhere in the world besides about 10 places). '
That is with no one in the house needing to work for the rest of their lives, in the worst-case scenario of market performance
If you're telling me you can't even be CONTENT with that lifestyle (much less ecstatic), then yeah, I guess nothing I can say will ever convince you.
I'm certainly not telling you that you can't be content or even ecstatic with that lifestyle. Keep in mind that the calculator doesn't account for taxes, so this is not the same as spending $65k, though it's a bit better than earning $65k in a job as there are no payroll taxes to worry about. A serious concern not faced by your average family making $65k would be health insurance, as there is no telling what might be available 10 or 20 years down the road, and you have a long time before Medicare eligibility if you were to leave employment. Also, interestingly, one study in 2010 found income in excess of $75k to be the level where additional money won't make you any happier (probably around $80k in 2018 dollars).
One problem with simply discounting "posh suburbs and cities" is that those are precisely the places where one has the most potential to save up that kind of money at an early age (and where Biglaw has offices). While it's certainly possible to simply pack up and move to a place with a lower cost of living, that likely means abandoning friends and family. For many, proximity friends and family are far more important than money.
For me, the point of financial independence isn't really to literally retire, but to have the proverbial "FU money." While people have different definitions of that term, mine if I ever encountered a bad employment situation, I could tell them to "FU" and never worry about the money side of the equation- even if it meant I would never be able to work again. Very few people have that luxury. However, my number is higher than $2M because never working again with that amount saved would involve selling my house and dislocating my family- it's not really "FU" money if you are going to have to seriously upend your life over money.