How To Retire Early with 0% Investment Returns
Worried that the 4% rule for early retirement might not work in the future? Well, that's no problem, because you can actually still retire early, even if your lifetime investment returns are ZERO percent!
Detailed write-up on our blog: www.tripofalifestyle.com/mone...
The safe withdrawal rate (SWR) is a huge point of debate in the financial independence / retire early (FIRE) community. Some people argue that the four percent rule won't hold up in years to come, and a more conservative "3% rule" should be used instead.
But I wondered what would happen if you were SO skeptical of investing in the stock market that you insisted on assuming 0% returns for life.
As it turns out, investment returns actually aren't all that important for FIRE seekers with ultra-high savings rates.
Video contents:
00:00 - What's More Important than Investing for Early Retirement?
01:10 - The 4% Rule for Early Retirement with Investments
02:38 - How To Retire without Investments
#financialindependence #retirement #investing
---
We're Lauren and Steven, and we followed some simple financial guidelines that allowed us to quit our full-time jobs forever by age 29. We created Trip Of A Lifestyle to share the knowledge that changed our lives for the better. All of our content is free.
Get rich. Work less. Travel whenever.
www.tripofalifestyle.com
Пікірлер: 18
For you 20 and 30 years olds watching this take it from a 40 something this is 1000% worth following and doing you will be so glad you did. Props to trip of a lifestyle for taking the time to educate
@TripOfALifestyle
Жыл бұрын
Trying our best! 🙏
Another great video! Interesting concept, I never considered the 0% returns concept. It’s an interesting “worst case scenario” thought experiment. Frugality really is king!
@TripOfALifestyle
Жыл бұрын
Thanks! And yep. A healthy savings rate trumps just about anything else in the FIRE world.
Another good, well thought through and detailed video. It really seems like the "FIRE movement" is moving more now to the topic of staying in work for much longer than is needed and having more money than you need. This sort of topic seems to be coming up more and more on FIRE podcasts. I guess it is to be expected as those who "frequent" podcasts as hosts or guests are now reaching those stages having passed the saving stage.
@TripOfALifestyle
Жыл бұрын
Yeah, some branches of the FIRE movement have kinda gotten away from their frugal roots. At the end of the day, all of this stuff is supposed to be about increasing lifetime freedom and happiness - not necessarily getting as rich as possible.
@C4sp3r123
Жыл бұрын
@@TripOfALifestyle Agree, it is interesting to see the movement change and develop. One big likely difference that is going to be interesting to see how it develops is that those who are now on their path to FIRE rather than at or past are likely not to see the huge investment returns (at least in the next 5 -10 years) many of the leading FIRE "influencers" saw which accelerated their ability to reach FIRE. I personally don't see/hear this being acknowledged much, if at all. But this video shows that even with poor to no returns it is still achievable 👍
@TripOfALifestyle
Жыл бұрын
@@C4sp3r123 Not sure we agree on that point. Interest rates today are higher than when we were saving for FIRE, which is one indicator that forward returns may actually be stronger from here. But, above all else: We don't have a crystal ball. Investments could easily perform better or worse for today's savers than they did for us. Either way, a high savings rate wins.
@C4sp3r123
Жыл бұрын
@@TripOfALifestyle I hope you are right about returns being stronger
I'm thinking youd have to adjust the amount saved yearly to account for inflation
@TripOfALifestyle
Жыл бұрын
Yes, you do! That's already covered here in two ways: 1) Constant savings rate implies that as your expenses rise with inflation, your salary rises in proportion to compensate. Usually, salaries actually rise faster than inflation with job experience, so this is a conservative assumption. 2) The 0% return quoted is "real" (post-inflation), not nominal. The ways to achieve this are discussed in the footnotes of the much more detailed blog post: www.tripofalifestyle.com/money/retire-early-without-investments/
This sounds similar (at least the post Retire part) to “wasted asset” model. Which is say you have $1M at age 60 and want 30 years our your money. Normal 4% return in a well diverse portfolio (but still a lot of stock) ideally leaves you with $1M at 90, $40k a year. But you’ll be dead at 90 with 1M in the bank and still have a small risk of failure of portfolio (market crash at 61). Wasted asset says invest that 1M super conservative like near zero real return. And just tak $33,333 a year till 90 you have zero (risk here is if you love longer )
@TripOfALifestyle
Жыл бұрын
Yep! The "0% real return" scenario presented here has the notable risk that you might live longer than you expected. But of course, that's easily covered by all the "extras" we neglected (like Social Security payments).
Should you only have index funds before retirement and once retired rebalsnce it to include bonds?
@TripOfALifestyle
Жыл бұрын
That's a matter of personal risk tolerance. Generally speaking, investment-grade bonds carry lower risk and lower expected returns than stocks. By the way, "index fund" doesn't necessarily mean stock market index fund. There are bond market index funds too, such as BND. Here's our personal portfolio: www.tripofalifestyle.com/money/our-investment-portfolio/
❤❤❤
better yet; convert those savings to bitcoin and get rich
@TripOfALifestyle
3 ай бұрын
Here are our thoughts on cryptocurrency if you're curious: www.tripofalifestyle.com/money/cryptocurrency-as-an-investment/