How much MONEY do you really need to RETIRE? (with ChatGPT Code Interpreter)
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- เผยแพร่เมื่อ 19 มิ.ย. 2024
- Ex-Google TechLead asks ChatGPT how much you need to financial independence retire early (FIRE). [UPDATE] I had unlisted this video since the calculations seem high, but the analysis may still be worthwhile. See the pinned comment for alternate calculations that may be more optimistic and addresses comments.
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[UPDATE 8/30/23]: I had unlisted this video since the calculations (while valid) seem a bit high, but I think it's still worth understanding the analysis for your own planning. Based on comments, a more optimistic calculation applies a shorter timeframe of 30 years (because social security/medicare kicks in, although the reserves are forecast to deplete by 2034), a lower effective tax rate of 5% (this can be achieved by capital gains tax harvesting), a lower inflation of 3.5% (the original 5% forecast may be high), and a higher interest return of 6% (compared to 5% as in the video). This results in ~$1.3m needed. Seems reasonable, YMMV. Maybe best to just enjoy life as you go and not wait until retirement.
- Some people mentioned owning a house instead of renting. This does not change the equation, since you'd then lose out on the investment earnings (and there are property taxes and loan interest). A buy/rent calculator would show the're quite similar in costs. Efficient markets.
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Bro, the assumptions are completely exaggerated. Okay, just examples, but still ridiculously high numbers.
Nevertheless, the calculation itself is quite interesting. Thanks
I think one massive mistake you made was telling GPT that returns are only 5%. The S&P 500 averages 9.8% per year. The 5% withdrawal rate is a rule of thumb of how much you can withdraw without ever running out of money, even under bad market conditions.
For example a 75k / yr income would be a 1.5 million dollar portfolio. If you backtest withdrawing this amount (also increasing the amount withdrawn by inflation) on a site like portfoliovisualizer since 1993, you would end up with more money than what you started with by 2023. 10 million dollars to be precise.
So the amount you need to retire with the goal of running out of money by the time you die, is a lot less than 3 million. Maybe even less than 1 million.
Have you checked with BTC investment and deflationary stock2flow model?
With chatgpt. Bro really hacked the algorithm. XD
I prefer to minimize cost of living and dependance on inflation by owning a property rather than rent, powered 100% by solar. Have less money but also have minimal daily costs/bills. This way whatever money is made and saved, should last longer. But a lot depends on expected lifestyle.
We all know that prices of almost everything aren’t coming down. Simply put, they're rising less. Costs are rising due to rising inflation. As we are evidently at the verge of hyperinflation, with the less haves bearing the brunt of the burden. I'm more concerned that the rising inflation may lead my entire $990k retirement funds to lose value. Where else could we put our cash?
I wholeheartedly concur, which is why I appreciate giving an investment coach the power of decision-making. Given their specialized expertise and education, as well as the fact that each and every one of their skills is centered on harnessing risk for its asymmetrical potential and controlling it as a buffer against certain unfavorable developments, it is practically impossible for them to underperform. I have made over 1.5 million dollars working with an investment coach for more than two years.
I need a guide so i can salvage my port-folio due to the massive dips and come up with better strategies. How can one reach this advisor???
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
We experienced the pinnacle of our era, but it is now gone. Like what happened to Rome, the corrupt administration will bring this nation to an end. My condolences go out to anyone who is close to retiring and may be worried about whether their pension will be enough to pay the rising cost of living. Insane fiscal policy, poor regulatory policy, poor energy policy, and poor foreign policy
Vote Biden
The same content again?! It's not even that good
This doesn't account for wives. Wives are very expensive.
Amen 🙏
Not all wives just the ones that choose not to contribute to shared goals.
How many Wives we talk'n ?
indeed they sure are! very expensive
Even kids. More or equally expensive than wife.
wow, you took my advice and re-listed this video! Nice
I am already retired and live in Bangkok. It's very hard to spend more than $1600 a month here and I have an apartment, car, motorbike, girlfriend and I go out to a restaurant every week. I donate $1000 to poor people here every month.
amazing video mr techlead,
helping out so many of us
we thank you
Thank you for putting this up.
Not always agree with your thoughts on topics but this one is definitely a reality check. Hard check...
You shouldn't be paying 25% tax rate during retirement. You can make the effective tax rate negative if you live really cheap.
4:37 Look at the first row of the federal capital gains brackets. 0% tax on gains up to $45k/$89k/$60k. You only pay the 15-20% on gains beyond that (assuming your only income is from capital gains). Move to a state without state capital gains like Texas or Florida and you avoid another 5-10% compared to a state like California. Rent out your property and live cheaply in another country. If you keep your expenses under 0% capital gains bracket, you can sell and immediately rebuy shares to roll-over excess capital gains at 0% (capital gains harvesting) for a negative effective tax rate.
Also, assuming your balance is in investment assets, you wouldn't be paying taxes on your living expenses in full, you'd only pay capital gains tax on the difference between the sale price of assets to cover expenses minus what you paid for those assets. By picking and choosing which lots of assets to sell, you can adjust the effective capital gains (even making it negative in some cases as with tax-loss harvesting), and thus how much tax you're liable for in a given year.
Correct, he assumed $60k income, so that would be zero capital gains taxes for a married couple.
Good point about being in a lower tax bracket! I added an alternate calculation in the pinned comment.
@@Waingro808 If you assume a married couple, then you should also account for the cost of possible divorce.
I think some numbers are wrong. Long term inflation is like 3.3%. Similarly, you'd want to use a longer term rate of return on investments. 35% tax bracket for 300K salary is not your effective tax rate.
Depends how you count inflation. Real inflation definitely is higher than just 3.3% and that was the case before money printing went wild during corona crisis. Official numbers are misleading.
The california tax rate is ~37% on 300k, you can check it here smartasset.com/taxes/california-tax-calculator#hhMZgXQlm5. Inflation is supposed to be "transitory," although the US is also printing its way out of unprecedent debt and rent prices seem to go up ~5% every year.
bro if you think we're going through a 3.3% inflation rate from here on out... you're definitely ngmi. they will print forever beyond your 3.3% guess
@TechLead 5% a year? Not in my area. I own a few houses and the 5 year tenant just moved out paying $2000 and I re-rented it for $3000.
All of his number were wrong or missing.
In 2002 I was told in a seminar I attended that within the UK I should be saving around £500 a month to retire. I was in my 20’s then. The way everything has gone like the country going fully degen it seems we are going to be in a big mess for sure even if you are saving a little. Because let’s face it who is saving for retirement when they can’t even afford the rents and shopping bills these days?!?!??
There are 2 classes of people... those who are saving for FIRE, and those who aren't. The ones who aren't are the ones shopping for Gucci & Audi.
@@TechLead thank you so much for your reply! Been watching a lot of your videos.
If everyone saved for FIRE, then the whole world would be run by young people?
Absolutely bollocks, most of people can't save 500 bucks every month and they are not spending their money on anything luxurious, just the necessities at discounted prices, people aren't reck leads, please connect to reality, society is screwed everywhere and only the 10% will have a decent retirement including the teach lead, as a millionaire
@@Gjallarhorn84 With your bad attitude, you certainly won’t save for FIRE / retirement. Losers always have bad attitudes, winners have positive constructive problem-solving attitudes. ¯\_(ツ)_/¯
You do not need to rent for 4k per month when you retired. Because you live in you own home or live outside of downtown. You want to live in something like village in old years. You do not need a car a lot. You do not travel for 1k per month, because it is physical work, you need rest. And better travel by foot or bicycle, good for health. I would say you need like 2k per month at minimal. And you can make some work sometimes if you have skills. Life is not so bad in old years, it depends a lot on opportunities that the society provides. And yes, you still have opportunities when you retired
helllo tech lead. I am your fan since 2019, I noticed your videos have been getting less and less views. But I hope you keep creating these insightful concents for the likes of me. I like the transitioning of this channel from your former tech and career topics to money and health ,
have a Great Day!
I too used to watch when Sunny was in the backseat.
Patrick's views on race in America, as a privileged recent immigrant, seemed to have little regard for the struggle of non white people who toiled to build this place so it would be so welcoming economically to people whose ancestry is outside Europe. I just didn't feel the respect was there, much less a sense of gratitude. He's still a certified rockstar, but I personally chose to give him some space in hopes time might change his perspectives.
Thank you !
Raelly really reallly enjoyed this video. Especially the part where you had to troubleshoot your prompts/approach in making those calculations. You showed us not only how to ask very important questions about our personal finance, but also how to approach analyzing the situation using code and chatGPT. My only complaint is that there wasnt enough sarcasm and memes so 0/10.
Most FIRE calculations seem to ignore taxes, inflation, and expense, which I hoped to highlight in this vid. ChatGPT actually calculated these properly.
@@TechLeadChatGPT is like my good friend I borrowed test anwsers from, in class.
Always there to give a helping hand and explain my short comings and mistakes in logic.
can chatGPT add sarcasm 😂
The most commonly used FIRE calculation is the 4% rule, which suggests that you can withdraw 4% of your capital without depleting your funds for 30 years, even in the most unfavorable scenarios. However, this approach assumes that all assets are held in non-taxable account, which is often far from reality.
On the other hand, the calculation does account for inflation by adjusting the annual withdrawal of 4% based on the inflation rate. For example, let's say you begin with $1,000,000. In the first year, you withdraw 4%, which amounts to $40,000. If the inflation rate for that year is 5%, in the second year, you can withdraw $40,000 * 1.05 = $42,000.
According to historical backtesting, there hasn't been a 30-year period in the past century where following the 4% rule would have resulted in running out of money. In the majority of cases, the remaining amount would have been higher than the initial capital. But of course this is based solely on backtesting and historical data...@@TechLead
@@Matmat123_5 What % rule should be used for 70 years (very early) retirement, hypothetically?
Liked for the expressions and showing chatgpt features:)
Dude you're a genius. I like how your FIRE acronym is the same as the FIRE sector acronym in economics: Finance, Insurance, Real Estate......
He didn't come up with it, it's a famous acronym among the bay area coders
This would be a lot cheaper in the UK if you built up a portfolio on the investment ISA, you wouldn't pay any taxes apart from the standard 15% one for foreign investment.
Since healthcare is part of the actual tax, you wouldn't have to pay that either, so the $500 to healthcare wouldn't apply to you.
Car payment wouldn't apply either since the public transport here is actually viable in the UK (unless you wanted to live somewhere remote).
The food seems a bit high also, I generally spend $400 on food per month in the UK, and that's after taxes.
With that in mind, you'd probably be able to retire with half a million $$$ in the UK, you could even get a 40 year+ mortgage deal just before retiring and that should make you only pay like $1000 per month of mortgage for about a property that costed $365,000 (decent price), this way you'd get more freedom on doing what you wanted with your house/property if you wanted to e.g. become a farmer or beekeeper or something.
Very insightful, thanks. It’s astonishing that no one does the Math(s).
If you invest in blue chips stocks that raise dividends annually, you will beat inflation most of the time. And your investments are going to far outpace the increase in cost of living. Taxation are also quite advantageous for qualified dividend. Here in Canada, it is around 16% for 100k income. But it can be reduced further with registered account.
Agree 💯 people need to stop buying into high risk investments like crypto with a one in a million chance of making it big. Slow and steady wins the race
@@jenshark4 Bitcoin is not 1 in a million chance 😂, but some random crypto is a bad bet however. Bitcoin already got a $500 billion market cap.
Good point using ChatGPT for this topic - very interesting. I don't recall you mentioning social security income after 65/67/70, probably about $3K a month; a Roth retirement fund could be a better way to avoid taxes after age 60. Overall, I agree that $3-5m in a diversified portfolio would be an estimated saving for a comfortable retirement.
Actually it is a terrible point using chatGPT.
ChatGPT is a large language model that effort to give you an answer you want to hear, not the correct answer.
Use any of the dozen plus free FIRE calculators; or any investing calculator, retirement calculator, interest calculator; or even write a program in matlab or spreadsheet.
This was embarrassingly bad.
And $3MM-$5MM may be what you need for a rich retirement in Silicon Valley; those of use pursuing are not looking to Retire Early to the most expensive place in the country.
Think more Tampa Florida.
Such a beast at analytics
For Malaysia citizen investing in US stocks, we don't need to pay capital gain tax just only dividend withholding tax 30% and that will make a huge difference. For basic expenses u just need abt USD $1000-$2000 depends of which cities u stay. Majority of the Malaysian live as little as USD $500. Landed house here cost abt USD $100k-$200k. Grab your few million USD and move to any south east Asia country will make you live like a king.
I'd be scared of all those abhorrent insects and snakes living in these countries
In city u hardly find those insects or snakes in resident area.@@dramic6869
@dramic6869 ahhhhh have u been asia bro, except if your living in the jungle or close to it I don't think your going to have those problems. He'll even retiring in Florida depending ware, you will get all that + add an alligator or two 😂 in lakes
One also can take pause from job for 5 (maybe 10) years instead of 40 and in this 5 free-from-hated-job years one could learn and work (maybe for free) in area the one really likes for becoming a real professional in the area. That's not a job if you love it, and human's goal in life is not to do nothing but to do things one really loves.
I think this is an underrated idea. Take short breaks in between. I quit my job and stopped for working for 6 months last year and I returned to the market feeling SO REFRESHED. Even learned some new skills.
You can mostly ignore inflation for these types of calculations.
Most people who pursue FIRE focus heavily on stocks. Stocks go up in value with inflation. This means that they are largely immune to inflation (not necessarily in the short run, but almost always in the long run).
Stocks can fluctuate wildly in value, so you do want part of your portfolio to be invested in safer assets like bonds. This will let you weather sharp stock market declines (like the Global Financial Crisis). Bonds don't do as well in an inflationary environment, so that's where inflation calculations *are* important. But bonds should be a minority of your portfolio, mostly as a stabilizing element.
Also, in your "how long to make $3M" section, you forgot that your investments will also appreciate during your working years. Earlier, you assumed an annual 5% real rate of return, which sounds about right. This means that you'll actually reach your objective faster than expected.
what plugins are you using for the plotting in gpt4?
This is way out of whack hahaha
I pay $400 in rent in Sweden and I split it 50/50 with wife, so only pay $200 in rent
And we live in a nice renovated 3 room apartment
Health and all of that is covered by tax already.
My total expenses including car, rent, food, insurances - $750 per month
Sure some months cost a bit more, around $1000 when I have to repair the car or similar.
Can't imagine paying $3k for rent thats insane
Sweden has government subsidized housing..
That’s the life and I bet it’s safe
Spot on... we could be such good friends.
this is why in the real world, mere mortals actually retire at (increasingly) old age - if they are able to survive that long.
And those doing well spend more time with kids and continue to work but with less hours so that you can provide for your family and keep racking up money so that you don't have to touch money in retirement until you are 65 to ensure you have enough.
In either case, retirement doesn't seem smart... Waiting until you're old to enjoy life doesn't work. Do it as you go.
@@TechLead it's naive to assume that your misery will end with retirement. the only thing it accomplishes is adding comfort to the miserable existence.
@@jirikrajnak9047 True, but, on a side note, there is no limit to how miserable someone's misery can become if he has too little money
This is why in the real world you use a retirement calculator not ChatGPT where he completely forgot to add in market returns.
While your last example factors in inflation and increasing income, it seems you haven't adjusted for investment gains. Considering the original 5% assumption for investment growth, along with rising income and accounting for 5% inflation and taxes, the timeframe should be closer to around 20 years, rather than the suggested 200+.
Also if he assumes investing returns and inflation are the same, that's embarrassingly stupid.
Actually historical inflation is about 3%.
Actually historical returns are over 10%
Most simple retirement calculators use 7% market return after inflation.
@@martincoates96yeah this video is a joke
@@martincoates96 His video was only 2% short then of 7% return after inflation, since chatgpt forgot to take into account 5% inflation reducing value of savings by 5% each year… it assumed 0% inflation with the 5% (minus tax) return. So the real story would be 2% higher net return, which would reduce timeframe accordingly.
Is social security mandatory in USA (around age 65) ?
...or do you get social security only if your retirement savings are very low ?
You get social security based on years of wage work
35 year formula
And then cannot collect till are old
Retiring at 25 seems boring
I am 65 and still working although can afford to retire
you can get around with 1M in Argentina, if you invest it very precisely. i assume there are many places in the world which this applies too.
Sos argentino che?
@@jeremyschonberger554 si señor. Buscá circulo vicioso en yt
I've been in so many places.. I wouldn't want to live in Argentina, spent months there and many other places!
Compelling information but seems to be missing social security payments (which may not exist much longer) and what about for most of us who expect maybe 20 years from retirement, rather than 40?
Your social security should pay your taxes and insurance. And you could work a part time job. Something you might enjoy doing.
Hi tech lead
Thanks for your interesting content.
When you talk about 5 % return is this nominal or real (inflation adjusted) return? If real, it means a 10 % nominal return which I think is over optimistic. If nominal it means actually a zero real return as you deduct 5 % inflation from 5 % nominal. In this case of course with a 0 % return your money goes to zero. Could you by a bit more specific please. Thanks
No, he screwed up.
He set 5% return with 5% inflation so the two canceled each other out.
Also he counted 5% inflation on reduced spending power and 5% increase in annual spending.
That is why the curve looked so insane.
One lesson that these numbers teaches: if you want to retire early, be an entrepreneur or your odds of succeeding are very low (even considering one of the most well-paying jobs)
You need to work 20-30 years in one of the most well-paid jobs to earn 3 million while selling a small to medium business can net you more than that in less time.
Not even account for the tax advantages
Shhhhh, thats a secret the elites dont want people to know. The average person believes millionaire next door that they can FIRE or at least be a millionaire someday on an average salary but what people dont know is the slow millionaire next door path needs like 5x average salary to succeed by later in life and to be millionaire by 40 you need massive salary job, lucky investments or own business
"your income rises with inflation as well"... Well, that would be nice, but not happening at my job
Since when?
Since the recent extreme inflation spike, probably not.
But where inflation was at normal levels, I got annual "Cost of Living" raises usually about at inflation or slightly above. That is not including real raises and promotions.
@@martincoates96I've been at the same corp for the past 4 years, averaging 2% - 3% increase per year, no promotions, so I am close to entering job hunting mode again
Missed you Tech lead!
I calculated this for myself and my wife in Germany years ago ... and forgot about the health insurance completely, because it is paid from salary automatically here :( - I calculated around 3 million Euro to be living the normal life with inflation. But not taking into account that we could also spent some of the capital every year.
Good health insurance seems tied with employment, once you're out of the workforce you're thrown to the side. Perhaps consider creative options like medical tourism.
@@TechLead Yeah, that's true. Atleast you can keep the health insurance of the government in Germany, which you have as a normal employee also, if you don't work at all and then pay the minimum amount a self-employed person would have to pay, which is luckily, since some years, cut back to only ~200 € per month.
Did you also calculated children expesnses, education, etc?
@@sipsae nope, good point, at least public education is free, but there's plenty of stuff to buy for school
@@finanzheadKostentechnisch ist ein Studium hier in Deutschland geschenkt, wenn man es mit den Staaten vergleicht.
Social Security has to be accounted for somehow as income ?
i wanna retire at 20, im 19 rn and I'm done with all this rat race I wanna retire asap
I think this is close to accurate!! We’re all going to need a boat load of excess money!
Man what happened to million token?
It went to a billion
Unless you are a regenerative farmer with a homestead. Then you'll get to live like the Amish. FREE. They don't know what cost of living even is.
It's funny that all the animals on the planet basically live for free ... And we, the most intelligent, struggle to pull our weights.
My family are regenerative farmers, Paying for food is an option. I've never bought food. It's strange to see the exploit system control people. Process one cow and pig and eat for a year and a half. One dairy cow makes 120 plus gallons of milk a month. You can make more products with milk than yo can imagine. @@wayando
What if you break a hip?
Communal living saves a lot. Getting 10+ people to live on a big plot of land is probably really affordable. The problem is people would have to learn to get along with each other.
@@PleaseXplane ... Even though this channel is for entertainment .... I think this perspective is a serious one worth considering.
Especially since I do own afew Hectares of land already, which are near a fresh water lake.
If you own a paid off home when you retire you won’t run out of money so fast. Figure out how to pay $0 for the roof over your head and you’ll be the richest person you know.
I figured it out and you can too.
Just because you put syrup on it doesn't make it pancakes.
You forgot about Social Security. If you make the max for social security income. It would cover your rent in most places.
5 million Euro, rent in Monaco an apartment for 10k, per month, and shop in Nice France and to live in Monaco, you need 1 million in the bank, for a right to visa of Monaco, about 2 million for expansion the multiple income, the rest you need for joining Monaco Tech startup, I would suggest creating a SAAS business
I think 5% inflation estimate was the thing that increased price quite a bit
inflation is currently 10%+
I think he's making a mistake, since on the 40th year when the inflation adjusted expenses (or could be chat gpt making mistake since it did adjust for inflation when he asked it not to and instead just assumed he asked for growing the expenses each year) is around 0.4 or 400k, that means your spending quite luxuriously every year near the end of your life.
Or let's assume the 400k in the 40th year is the amount not adjusted for inflation as he intended, then you could say 5% growth in investment returns is some what low than normal returns (in like sp500, it's more like 9% or so) if it weren't adjusted for inflation, so it's not as bad as he made it seem even with 5% inflation - I think 5% on average is fair to be much more safe rather than saying 2% or 3% of the actual average
@@-eurosplitsofficalclanchan6057 Where? Certainly not in the US. It has gone way down in the past few months.
@@-eurosplitsofficalclanchan6057 Actually 3.7%
@@-eurosplitsofficalclanchan6057yeah, a two year sample size will surely be representative of the entire future.
In Iran inflation is around 50 percent . What we learn is that you should not save your money in bank . Buy land . You don't need to live in it . Just buy land so over time you don't lose what you work for . . Also those who work in a service base business get hits from inflation the most. Because companies don't add that much too their salary... the safest way is to sell a product in your business . That way of all the products get more expensive your products will get more expensive as well... make your own business and buy gold and land instead of cars and clothes you will be ok ...
You can access youtube in Iran or are you using some kind of VPN?
Save and Invest NOW young people . Don't wait 1 more day . your strength is Time and Compound Interest
Whoa - what about social security income which can be towards 3000 a month out a few years.
good point. If you've been working towards that, perhaps it will pay something out. Although, social security funds are set to be depleted by 2034 too...
@@TechLead I always worried that SS would not pay out when I was 30 but it does and likely will forever. They will inflate the debt awaaaay. That's already a plan in Treasury. Inflate so 32Trillion becomes 32Bill. 🙂 retired already. Making $2600 a month from ss. My friend gets $2800 - my mom gets 2800 - We have been getting pay increases from SS.
This is pretty insane. House is paid, house taxes 250$ per year, no new car or debt. Retirement, SS and investments will be 4-6k per/mo. 2nd home paid in the Philippines….Happy camper.
Thank you for this Techlead.
There's a Sucker Born Every Minute.~P. T. Barnum
It is very simple Patrick, just buy a tri-plex at the right price, right location, make your tenants pay off your mortgage, and then they become your pension plan when you get old...glta
12:08 chat GPT breaks because you can''t ever make more than 3KK$ (inflation adjusted). When you have 3KK$ and lose 5% to inflation that's -150K$. And you are only making 147k$ post tax/spending. So you are losing money at this point if adjusted for inflation.
This is the only reason I own property. Eventually I want to get that housing cost to $0/yr + tax/maintenance. It's the only way I can see myself being able to splurge some in my later years
You never own the house...? There are always property taxes at minimum. On a $2m house in California at 1% propery tax, that's 20k/year in fees, or ~$1700 monthly rent equivalent. Add in maintenance and loan costs, and it's going to be higher. You also tie up cash in the house so you lose the opportunity cost of earning interest.
Property tax, maintain, insurance, interest and the opp cost to invest in the market.
You may not do your math carefully.
I believe one of the biggest mistakes of Americans is buying a (big) house instead putting money in the market. Most housing market return is poor, barely keeping up to the inflation.
The house you live in is not really considered investment since you may never want to sell it.
@@TechLead Oh a buy/rent calculator is exactly what I've been looking for. I did my own math, but I knew it didn't account for everything. I got a 3% interest rate on a condo in a mid-COL area that's kept my housing costs low, but it looks when I sell and lose this rate, renting will be the money saving option. Thanks, this is why you are the tech lead!
@@ec188 I don't know where you live, but housing is expensive and always going up where I live (in Australia). I've always shared the belief that it is important to get on the housing ladder as soon as possible and that the share-market is akin to gambling, which is fine for small funds but I wouldn't want to risk it all. Once you've raised a family in that house and it is paid off and you have a few investment properties, then you can retire. When the house seems too big for your empty nest, then downsize. You'll probably have more than you need and can enjoy giving some to your kids to help them at that point, as they're probably going to need it as the property ladder keeps getting pulled up from them. Yes, property management and various taxes is a bummer, but it's a good problem to have, and you won't be crying for anyone that has them.
You guys pay crazy property taxes. I pay $500 per year in Mexico for a $500K building with 6 office spaces. So essentially .1% and it doesn't increase with inflation so each year I'm essentially paying a lower percentage.
short answe didnt watch video but ive know this my whole life, 5 millinon, and depending on your age some of that in money and some in assets.
Property, property, property.
One to live in, one to rent out and one to sell.
Property doesn't change the equation really, since you'd then lose out on the investment earnings (and there are property taxes and loan interest). A buy/rent calculator would show the're quite similar in costs. Ownership is actually quite expensive nowadays with high interest rates on loans and high opportunity cost in locking up funds.
Bingo!!! A paid off property changes the equation entirely!!!!
I don't think so - rent earnings per dollar invested just isn't as good a return as your average business. Maintaining rentals isn't nothing either - it's not retiring, it's changing your job to housing management
@@mrmrmrkevin And it will get worse, as when socialists are in power they will raise property rates and increase maintenance regulations, leaving loopholes for the ultra-rich, of course, who will own everything. The goal of the elite, is that you will own nothing and you will be happy. It's all part of their plan to own all the property by making it not worth your while.
Rent earnings on a paid for property is pure income and the property itself is at the very least going to hold value, or more likely increase in value over time. I own two modest properties both mortgage free, I have absolutely no concerns about the future from a financial perspective. I will always have a roof over my head no matter what, besides maintenance costs future investment requirements are minimal.
The rent I make on the second property more than covers my living expenses and generates enough to cover any unexpected maintenance work that comes up, I'm also able to grow vegetables, I have fruit trees, I hope to get some chickens and maybe a couple of goats over the next year or two.
As for the third property, I don't like thinking about it but the reality is I expect to inherit my parents house when the time comes, along with my brother. We will almost certainly sell it as neither of us would want to move back to Scotland, and it's too far from either of us to be practical to manage as a rental.
I will never be a rich man, I came to terms with that fact years ago, but I can and do have financial independence and security. I could stop working tomorrow and comfortably survive without needing any kind of financial assistance, assuming the rule of law remains true nothing can change that. It took many years of hard work and sacrifice in order to attain this, but now I'm there life holds no concerns for me.
Only property can provide that, or the wealth to suddenly acquire it.
If I had 50 million, I’d retire. But that amount is no realistically attainable, so I’m just gonna live the best life I cam. Working isn’t as bad as everyone makes it out to be. For example there are chefs who work themselves to the bone in much worse conditions than most of us will ever have. But they like it, they keep coming back for more. We don’t stand to gain anything by feeling sorry for ourselves. The more lazy you are, the harder you will have to work later.
The Trinity Study says you can take 4% out from your asset if it is invested in S&P500, and with high confidence it will last for 30 years. Also, did you know that, if you take out Social Security in the US at age 62, it could be $1800, but then, if you wait until age 67, it would be $2900, and until age 70, then $3200. And these numbers will go up with inflation according to CPI. So, you just have to sustain yourself to age 70, and then all of a sudden, you have extra $3200 to spend each month. (of course, taxes... again). Well, right now you can move to some areas where the rent is $1300 for a two bedroom apartment... or there are still places in the US where a 3 bedroom house is like US$400k. Also, rent in Japan, I saw a video, was like US$700 for a two bedroom apartment, and in Taiwan, a 3 bedroom condo has the rent of U$650 in some cities. And 6 plates of sushi (2 per each plate) is only US$6. You don't have to live in an ultra expensive city if you retire
Moving to a cheaper location sounds like a good answer. S&P500 may not perform well in a recession where interest rates are high. Social Security is supposed to go bankrupt or we will print more perhaps...
Since you can move to a much lower cost of living location when you retire, it is best to retire and get SS at age 62. I bought a nice penthouse in a gated and heavily armed community in Africa for under $100k. I spend less than a $1000 per month on expenses and I am not even being that careful with money. I also don't need a car since I am rich enough to get an Uber anytime I want to go somewhere.
if you only need $1000 as expense per month, I think it doesn't matter if you claim SS at age 62. For some people, if they can lock in $1800 per month at 62, but what if their other investment goes lower over the years? I think $2900 or $3200 is such that, it is locked in for life, so even if a person live to 95 or 105, they don't have to worry about living too long. $3200 with inflation adjusted is at least ok for decent living in the US or in Asia @@JaimeWarlock
This is correct, as far as I know. People assume that you can take out 4% while your money is sitting in a bank account earning next to nothing. Not correct. The assumption is that you invest in the S&P and it earns on average 8% a year, and meanwhile you take out only 4%. This basic fact, often missed.
I think it is just common sense you need the growth, otherwise it is like taking an egg from a basket and sooner or later it will be empty@@jonb3189
You didn’t include chipotle reward points. Otherwise, great video.
spend $100 get $1 back
Number is much lower for a few reasons.
1. Inflation has historically averaged closer to 3%
2. Returns have averaged closer to 9% if you include stocks, which most portfolios should have a bulk of
3. Calculations don’t include social security
4. For homeowners, inflation will be lower due to fixed mortgages, and then the mortgage will disappear at some point
5. Portfolio withdrawals will be mainly from retirement accounts or taxed at long term capital gains, meaning close to 0% tax if planned well.
So actual answer is that you need closer to 25x what you want to spend. So for 40k a year you need 1 mil
Interesting question to ask ChatGPT.
Is it?
Don't trust ChatGPT's math ability - just double check every time...
@@SF-fb6lv it's code interpreter, it's reliable
Hi saw u replied on my comment of Prasad you tube channel.
The 5% inflation number seems excessively high unless everything is changing now. Also many people are happy to live in a quieter area with a nice home around 400k, with spending yearly around 60k it becomes very realistic to retire with 2-3 million without even hurting the best egg at 3.25% withdrawal. You can also adjust withdrawal by year to not eat at the assets
Enlightening but the reality is most people never reach 1m (the amount I was told to aspire to growing up and now that isn't even enough) and this includes the people NOT buying Gucci or whatever other name brand of shoes, bags, cars and whatnot out there.
Between inflation, wars, pandemics, GCFs, tech implosions and so on, the feasible options for most are t leave this country to prolong life a bit longer with whatever money is left OR stay in the US and continue chasing another stream of income while using your 'wealth' to pay for your health (assuming you still have it)...meh
It seems society has been conditioned to believe "whoever lives longest, with the most money "wins" instead of individuals living their lives to the fullest today and counting that as a win but to each their own...That said, i'll be sticking with the Ruger Retirement Plan (once I got past the morbidity of it all)😉
One thing though: when individuals living their lives to the fullest today reach age of 60, they don't suddenly stop wanting to live.
Lol, pinned comment. The biggest issue with this is assumed 5% inflation and assuming low investment returns pre-retirement. Of course during retirement you would hold more conservative assets so your yield would be lower
i mean,
what if during the first year of retire inflation went up to 9% then come back down to 5% as as surprise
For Americans you need to add social security. Also people’s living expenses go down as they age.
Why would expenses go down, if anything in the US, the medical expenses shoot through the roof. All countries have a retirement plan, social security is set to be fully depleted by 2034 - so I would not count on that.
@@CrispinCourtenay People in their 80's travel much less than people in their 40's or 50's.
@@CrispinCourtenay America will probably import the entire population of India if it can tax them and pay social security.
I am an engineer in the Fab (not software). My paid is decent but much lower than Big Tech software companies. There is no way I could “save” 3M in my lifetime by Salary.
However, most likely, I could make Mils when I retire because I invest “aggressively” assuming the US market will always recover after it crashes within few years. I am OK.
Ya, he completely forgot about market returns.
He use the current T-bill yield rate, then rounded down so that it was the same as inflation.
He also double counted inflation as money losing value and spending increasing.
@@martincoates96 Inflation is supposed to be double counted. Your expenses rise per inflation rate. And your savings’ value falls per inflation rate. Market return of savings (minus taxes) is the only thing that increases the savings. If return post-tax isn’t greater than inflation, then savings actually only falls in value each year.
What about social security benefits?
I think that u can still work, what is wrong with working?
This is why you have to take a much more active investment approach now. The typical 5-8% return is a roach motel for retail investors to be fleeced by Wall St.
You have been warned.
Yeah and what percentage of the population could beat the S&P500 investing actively? Maybe 1% and those people already have done things to be rich anyway. For the average person passive index funds is the best
@@GK-gc9cv OK - 8% expected return with 2% or more inflation is good for the average person? That is why they will be average their entire lives and fail. Like I said - ROACH MOTEL.
The rules have changed dramatically in the past few years.
En México consigues $10,000,000 MXN, los metes a cetes y ya te retiras
I came up with 3.4 MM instantaneously off the dome 🎉
I currently have 0 but own a 🐐 is that good?
Hell, my goal is just to find a job with free weekends and work until 55.
Shouldn't we take into consideration social security?
Instead of making 5million to never work again for 40 years.
How about reduce living costs and work as few hours as possible per week online?
Kinda like the "4 hour work week" vibe.
FIRE community is only for people making the big bucks or if they are very smart with money.
I have no problem working 4 to 20 hours per week.
20 hours being part time basically.
And living a more simple Life.
It all depends where you live. I would retire if i had 500.000 € on my account, and im 46. But i dont live in USA. I live in Portugal.
chat GPT should havr told you that it had accumilated enough already. Asking GPT in FIAT was your first mistake. How you enjoyed your slumber . Glad you could surface
That finish line is always moving.
not in USA. Only in remote area.
I was hoping he was going to give us the secret sauce to get the 5 mill. LoL
Wot? 3 million?
I want to be a homeless bum living on the street. How much will that cost me?
everything
3 million
@@turinreza man i need to find cheaper streets to live on.
The assumption that returns are equal inflation is problematic. One could argue that returns should be on average higher than inflation, on average, over a long timescale. This would change the calculation significantly.
Actually, in the second half he completely forgot to do returns and only did inflation. That's why the result was infinity.
@@martincoates96 Even the first half skipped inflation effect on savings 😂, he told chatgpt to do it but chatgpt did not do it.
WoW That's a heart break. I better start saving or investing soon...
You should make a video where you look at programming memes and try to explain them to non programmers. It would be funny and would get a lot of views as well. I know it’s not an original idea.
the other option is to hope for the end of the world (because of AI) in a couple of years and then there is no need to retire at all
10k to 12k for Washington State and its going up.
You need $5000 per month? You really are a millionare Mr.TechLead God!
Exactly, Silicon Valley life.
In Florida, my FIRE plan is for $2k a month basic expenses (paid for home) and another $2k discretionary expenses; for a FIRE number of $1.2 million.
There are far nicer places to live than Silicon Valley and Las Vegas. Especially if you're retired. In fact, right now, there are better places to five than North America as a retiree. But if you want to impress, then sure live in those expensive, polluted and mismanaged places. BTW, you may want to adjust your numbers slightly because you put car repairs in two categories.
Let's retitle this video, retirement in The matrix
How do people even retire?
Taxes or the working population and issuing government Debt
No Wives , No Kids, and living in a country that is not super expensive will save you a fortune !!
comedy gold is back
Remember hearing early on in my adulthood that $1 million was an approximate number you'd need to shoot for to have a good retirement where the money didn't run out. And being that it was the dark days before the advent of ChatGPT I was only able to use the tool of mental estimation to figure that with rising costs I would need about $2 million. I didn't figure inflation would rise as much as it has in the last few yrs for example, so talking $5M for a 'bare bones' retirement seems about right.
You know there are literally dozens of free retirement calculators out there that are far better than this mess.
He literally forgot to put the market returns in the calculation, that why the answer was infinity.
That 1 million is a present value number needed today. The future value of that amount when you retire is probably going to be around 3 million because 3 million in retirement will have around the same buying power as 1 million today.
@@martincoates96yeah this was a bunch of hog wash honestly
@@maxrubin9540 He didn’t even notice chatgpt didn’t even account for reducing his savings’ value by 5% inflation rate each year… if it did, then the curve wouldn’t have gone up in first half of retirement, based on his other variables like market return and taxes. Curve would have been in a downtrend immediately.
he doesn't take into account dividends either.. @@martincoates96
5:28 So $3M in 2023 dollars. If you TAKE 10 more years to SAVE that $3M, $3M won't be enough anymore, right TL?
4% safe withdrawal rate is a sanity check rate that considers inflation, market volatility, etc. With 3mil savings, 4% withdrawal can last ~60 years at 110k/yr expenses. Here 4% is used as a real rate approximation - so that there is no need to bump up both market return and expenses by inflation. This is not as pessimistic as the projection in the video, but the general conclusion is not wrong though, you do need 3-4mil saved to have a decent retired life, and that's extremely difficult to achieve in today's market.
4% safe withdrawal rate is based on 30 years retirement… not 60 years. And it was already revised to 3.3% in 2021.