Comment by neogodless | Hacker News Reader

Comment by neogodless | Hacker News Reader

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> Extreme frugality

Were you reading FIRE blogs or extreme frugality blogs? Or maybe I can just ask "how do you define extreme frugality?" (I think of myself as kind of frugal, and planning to have the choice to avoid compulsory paid work before I'm 50, but I also live in one of the most expensive areas of the United States outside of big cities / California, with somewhat regular trips to Disney World and other countries.) But a blog like earlyretirementextreme.com isn't focused on high earners cutting down on consumption and retiring early (that's MrMoneyMustache.com) - it's a version of extreme frugality and self-reliance (and adaptability regardless of changing life circumstances.)

> bare minimum savings

I assume by this you mean "leanFIRE" as in "just enough of a nest egg to retire with 25x your annual expenses and everything goes perfectly?!" Of course, that sounds like a recipe for disaster, and I think in some cases it's a bit of a "oh I can quit my stupid job at the exact moment I hit this magic number" mentality, but a misunderstanding of putting a real plan in place for a future that is filled with variables. Depending on the blogs you frequented, they could be "copycat" blogs that just took the juicy headlines from more in-depth blogs and throwing up quick articles so they can get some ad revenue.

Any idea, handled poorly, is going to either come off unappealing or be riddled with shortcomings. That doesn't mean the original idea can't work (and it does for some - some by luck, others by proper strategy.)

Well someone spending 30k in Massachusetts living in a rental is got to be living extremely frugally. Then the woman had enough of the pennypinching. I see this so often in my circle - all the missed eating out and having fun is ultimately spent on marriage counseling and divorce lawyers.

Divorce is better than an unhappy marriage with someone who doesn't share values.

Even better is don't marry that person to begin with. Let them go off and enjoy their life with someone they're better suited to share life with.

My understanding was that they had separate finances, and 30k/year was just his spending. My spouse and I spend less than $60k/year in a comparable cost-of-living area (COLA), including flights/hotels/entertainment and other nice things to have (home, some land, modern cars, monthly massage, etc.). It's really not "extreme frugality" in my point of view, but I suppose some might see it that way.

There's a big difference between spending $60K/year on average, and having a firm upper limit of $60K/year that can never be exceeded for the entire rest of your life (inflation adjusted), lest your entire financial plan collapses.

If you had an unlucky year and had to spend an extra $10K on various things (car breaks down, medical expenses, moving for a job) it's probably not a big deal for you. If a leanFIRE person had an unexpected extra $10K expense, they'd have to cut $10K out of the rest of their budget for the entire year.

If you're already squeezing by on $30K/year like this author, somewhere between 1/2 and 2/3 of that might go to basic living expenses (rent, utilities, food). If the other 1/3 of your budget gets wiped out by an unexpected $10K expense, it's going to be a very lean year.

This is the problem with most leanFIRE plans: They only work if nothing ever goes wrong, no unexpected expenses occur (for 4 or more decades straight), and a person's lifestyle never expands at all.

This isn't really accurate, though. In most cases there is a large margin of error built into the 4% "safe withdrawal rate" - and that is that the investments "on average" do much better than 4% (easily 5-7% after inflation, in many cases much higher) and that you end up with much more than what you need to withdraw 4%.

The notable exception is called a "sequence of returns risk" (SORR) where either something bad happens in the first few years draining a really large portion of your original savings (more than $10k) and/or the market undergoes a recession during the first few years, and if you withdrew the full 4% from your investments while their value was markedly depressed, you would never recover (without additional income). In my opinion, a proper retirement strategy should account for SORR; some padding (i.e. the wants portion of your budget you can reduce during a lean year), reverse-glide strategy where you can draw from cash/bonds instead of equities in case of depressed value equities, etc. In many cases, this scenario happens so early in retirement that anyone retiring at a younger age has relatively good prospects of rejoining the work force to get to the other side, and then will likely be very well prepared for a second retirement with a decreased likelihood of yet another bad sequence of returns occurring before their nest egg has grown well beyond 25 times annual expenses.

And all retirement plans should be flexible - some years where you might spend a bit less than the target, but have room to change that, particularly if your invested assets grow beyond the original necessary funds.

> In most cases there is a large margin of error built into the 4% "safe withdrawal rate"

I don't think that's the case if you're retiring early. The 4% withdrawal rate was based on a 30 year retirement. You need to go a bit lower if you want to have minimal risk of running out of money for a much longer horizon.

https://engaging-data.com/will-money-last-retire-early/

You're more likely to die than run out of money!

Certainly, but with their example of retiring at 40, you have an 8.5% chance of going broke before you die and a 3.4% chance of going broke before you even reach a normal retirement age.

That's a much higher level of risk than I would accept.

I think this was covered in the article. His assets have grown 20% (inflation adjusted) since retiring and that's with a number of years having higher than average expenditures due to unplanned medical issues. His financial plan didn't really collapse per se.

The median household income in Massachusetts is $80k so between them they weren’t far off. Especially when you consider your costs tend to be lower when you aren’t working. I wouldn’t call that extreme frugality.

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