Deciding When to Retire

[Jaxbuck]

It’s in the investor’s favor. That’s the point. The massive asset inflation across all asset classes is unprecedented. You either prepare for it, or you don’t. That’s why @Zurp is so loaded!

Totally agree, you have to own assets and then you win on asset inflation.

You have to have earn enough to buy assets though, and the board has tilted hard against most people as child rearing, education and healthcare have outpaced wage growth and eaten into the purchasing power of those earnings.

 

[heisman]

Totally agree, you have to own assets and then you win on asset inflation.

You have to have earn enough to buy assets though, and the board has tilted hard against most people as child rearing, education and healthcare have outpaced wage growth and eaten into the purchasing power of those earnings.

I think we are talking around one another. A person who made minimum wage in 1980 could not afford any of those things at $2 an hour either. Nothing has changed that much. 1980 had interest rates around 15% as well.

Minimum wage in IL isn’t $2 an hour anymore, it’s $17 an hour. Work a little OT and you’re looking at $40k per year. That’s why there is inflation. Apples to apples, even with inflation, you can afford a hell of a lot more on $17 per hour today than you could $2 an hour 45 years ago.

Anyway, the beauty of 401k math is that if you deduct $2k (5%), and your employer matches the $2k (most do, including mine), that’s $4k per year in your 401k. Since it’s pre-tax, that takes that $40 per week deduction, and reduces it to around $30 per week, or $1500 per year. So, you are choosing to forego $30 per week in instant gratification, for $4000 per year in capital growth. Put that $4000 per year in a compound interest calculator at a rate of 12% (S&P’s since 1980), and you end up with $4.4 million dollars. $30 per week or $4 million? This is the exact presentation I have management give our new employees.

 

[osugrad21]

Going through this process now. Just turned 50 and next year is my year to qualify for state retirement. I can lock it in and come back to work..."double dip". However, I become at at will employee and can be dismissed at any time.

Definitely not ready to stop working but trying to figure out the best financial route.

 

[shetuck]

I think we are talking around one another. A person who made minimum wage in 1980 could not afford any of those things at $2 an hour either. Nothing has changed that much. 1980 had interest rates around 15% as well.

Minimum wage in IL isn’t $2 an hour anymore, it’s $17 an hour. Work a little OT and you’re looking at $40k per year. That’s why there is inflation. Apples to apples, even with inflation, you can afford a hell of a lot more on $17 per hour today than you could $2 an hour 45 years ago.

Anyway, the beauty of 401k math is that if you deduct $2k (5%), and your employer matches the $2k (most do, including mine), that’s $4k per year in your 401k. Since it’s pre-tax, that takes that $40 per week deduction, and reduces it to around $30 per week, or $1500 per year. So, you are choosing to forego $30 per week in instant gratification, for $4000 per year in capital growth. Put that $4000 per year in a compound interest calculator at a rate of 12% (S&P’s since 1980), and you end up with $4.4 million dollars. $30 per week or $4 million? This is the exact presentation I have management give our new employees.

skip that dunkin / mcd's / starbucks stop every morning and get your coffee / eggs / bagel at home... $4.4 million dollars.

 

[Jaxbuck]

I think we are talking around one another. A person who made minimum wage in 1980 could not afford any of those things at $2 an hour either. Nothing has changed that much. 1980 had interest rates around 15% as well.

Minimum wage in IL isn’t $2 an hour anymore, it’s $17 an hour. Work a little OT and you’re looking at $40k per year. That’s why there is inflation. Apples to apples, even with inflation, you can afford a hell of a lot more on $17 per hour today than you could $2 an hour 45 years ago.

Anyway, the beauty of 401k math is that if you deduct $2k (5%), and your employer matches the $2k (most do, including mine), that’s $4k per year in your 401k. Since it’s pre-tax, that takes that $40 per week deduction, and reduces it to around $30 per week, or $1500 per year. So, you are choosing to forego $30 per week in instant gratification, for $4000 per year in capital growth. Put that $4000 per year in a compound interest calculator at a rate of 12% (S&P’s since 1980), and you end up with $4.4 million dollars. $30 per week or $4 million? This is the exact presentation I have management give our new employees.

Probably a side conversation but you cannot buy the same with $17 an hour (or any amount). your purchasing power is 25-45% less.

To say that you can is factually incorrect

 

[shetuck]

The more interesting question isn't "when" but "where"...

Florida real estate getting more affordable.
Some countries in Europe are ending Golden Visas, but others are still giving incentives.
Asia (vietnam, thailand), South America (Honduras, Costa Rica)...

Urban to rural vs rural to urban - eg rustbelt to NYC or ATL or ABQ vs getting outta the big noisy city out to big sky country.

Others? Digital nomads? Buy a room on a cruise ship? Buy a farm or a fruit orchard?

 

[Jaxbuck]

The more interesting question isn't "when" but "where"...

Florida real estate getting more affordable.
Some countries in Europe are ending Golden Visas, but others are still giving incentives.
Asia (vietnam, thailand), South America (Honduras, Costa Rica)...

Urban to rural vs rural to urban - eg rustbelt to NYC or ATL or ABQ vs getting outta the big noisy city out to big sky country.

Others? Digital nomads? Buy a room on a cruise ship? Buy a farm or a fruit orchard?

Not Florida dude.

Whatever the hell you do, don’t do Florida.

 

[heisman]

Probably a side conversation but you cannot buy the same with $17 an hour (or any amount). your purchasing power is 25-45% less.

To say that you can is factually incorrect

$100 in 1980 purchasing power is the equivalent of about $400 today. So, a $3 hourly wage in 1980, would need to be $12 hourly today to have the same purchasing power. $17 > $12.

 

[DubCoffman62]

$100 in 1980 purchasing power is the equivalent of about $400 today. So, a $3 hourly wage in 1980, would need to be $12 hourly today to have the same purchasing power. $17 > $12.

I think the big difference between now and 1980 is it's so much easier to blow your money now in comparison to back then. Back then you pretty much had to leave home and walk into a store or restaurant or wherever it was to blow your money. Now you can do it from home sitting on your ass using a cash app.

 

[heisman]

I think the big difference between now and 1980 is it's so much easier to blow your money now in comparison to back then. Back then you pretty much had to leave home and walk into a store or restaurant or wherever it was to blow your money. Now you can do it from home sitting on your ass using a cash app.

100%. Values surrounding consumerism and debt have gone completely in the toilet.

 

[DubCoffman62]

100%. Values surrounding consumerism and debt have gone completely in the toilet.

It's funny, at work all of the old timers pack their lunch. All of the snot nose entry level kids order Ubereats for lunch. The get their nails did and their eyebrows plucked at the Vietnamese salon next door for a cool 80 bucks. Kids today have no chance because they can't manage their money. The thing is they're all living with their parents and aren't taking advantage of the opportunity to save. When I graduated high school I had nothing. I joined the service, lived in the barracks, ate at the mess hall and when I got out I worked remote Alaska for four years, free room and board. My only expense was my calling card. To be honest all though I've never been a super earner or a savvy investor as an adult I've never had money problems.

 

[shetuck]

It's funny, at work all of the old timers pack their lunch. All of the snot nose entry level kids order Ubereats for lunch. The get their nails did and their eyebrows plucked at the Vietnamese salon next door for a cool 80 bucks. Kids today have no chance because they can't manage their money. The thing is they're all living with their parents and aren't taking advantage of the opportunity to save. When I graduated high school I had nothing. I joined the service, lived in the barracks, ate at the mess hall and when I got out I worked remote Alaska for four years, free room and board. My only expense was my calling card. To be honest all though I've never been a super earner or a savvy investor as an adult I've never had money problems.

Not upgrading your dinnerware for 50 years also helps...

 

[DubCoffman62]

Not upgrading your dinnerware for 50 years also helps...

 

[DubCoffman62]

I'll also confess that since I bought my first car at 17 I'ved own 4 cars. I also have the same alarm clock that I bought in an Anchorage thrift store in 1989.

 

[Jaxbuck]

$100 in 1980 purchasing power is the equivalent of about $400 today. So, a $3 hourly wage in 1980, would need to be $12 hourly today to have the same purchasing power. $17 > $12.

That might work if it wasn't for the pesky basket of goods you are trying to purchase increasing significantly faster.

$100 of medical care in 1980 = ~$800 today
$100 of tuition in 1980 = ~$1,280 today
~$64K house in 1980 = ~$400K today

Like I said in the post that started this, the math is working against people. If pay goes up 4x and the stuff you need to buy goes up 8-12x...you have a lot less room for error.

EDIT

This is just since 200 for a good quick visual. The mistake is to believe the fucking government about "core CPI" and think wages have done anything remotely close to keeping up.

So the real financial mistake people can make is not tattoos or pot. The mistake is getting sick, having kids, getting an education or trying to buy a house.

Electronics are depreciating though. So we've got that going for us. Which is nice.