Suze on FIRE . .

Suze on FIRE . .
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#24

Sunday afternoons weren’t complete without him. I still fondly remember hearing him talk about the “gift horse” of a stock market that we were being given in 92. He was sure right about that.


#25

Bob used to broadcast Saturday mornings at six o’clock AM. He was on radio station WMCA in New York City at that time, and living in New Jersey. His WMCA show was local only for the NYC metro region.

Later (1986) he moved his act to a weekend show named Money Talk which was broadcast nationally on Saturday afternoon and on Sunday afternoon. Bob moved out of high tax NJ to Florida.

Still later, much more recently, Bob ditched the Saturday afternoon gig. Money Talk is still heard across the USA, but only on Sunday afternoons. And Bob is now living in Nevada.

Bob Brinker, over the years, has been among America’s top five (stock) market timers. He gave pretty amazing trading advice right up to the 2008 crash, which he missed. As a FIRE participant I never felt comfortable in the stock market, so I did not follow Bob’s (mostly) wise counsel in that arena. I made my money, instead, in bonds. But I listened to Bob’s show, regardless, over the years because I think he is a very smart money guy generally and because I needed all the help I could get . . . for free.:grinning:


#26

Replying to a few posts…

I really like TMND. I’ve read it a few times. That said, it is important to note that a lot of folks think the book is flawed in that it does not handle survivor-ship bias well.

As for Suze, I find her quite irritating to listen to / watch. Why others like to hear her insult them, talk disrespectfully to them, I’ll never know.

I agree with most of the FWF crowd that she (and Dave) provide a certain service to a certain crowd. I’d never be where I’m at today without leverage, but many people can’t handle leverage / credit. Fair enough. Each to their own.

I try to keep in mind that there are very few folks like Jack Bogle. I think Jack is in it for others. Sure, he made a lot of money for himself, but I think he is genuinely sincere in wanting to help others.

Suze, on the other hand, I see as much more of an “In it for herself” sort of person. Not TOTALLY in it for herself, but there is a much larger component there than there is in Jack.

Jack (if it was his thing) might have recommended prepaid debit cards to a certain group of folks. Suze could have done that too. There are already great ones out there. Why reinvent the wheel unless you want to make money from a slightly oval version of the wheel and call it totally round? I’m not insulting Suze for her prepaid debit card. I’m just hypothesizing that she capitalized on her fame and turned decent advice into a profit center for herself.

As for FIRE, I think it is an AWESOME goal to be able to retire early. A lot of recent research has indicated that retiring early is a great way to die early. So unless you have some sort of passion for actively doing something in retirement, working longer may lead to a longer life. This is probably wasted advice on the FWF crowd, since most of us here are highly internally motivated to do stuff. It’s the LazyBoy / TV crowd that retires and slowly dies of Barnaby Jones reruns.


#27

This is at the very center of the retire early decision IMO. Because all the other costs (housing, utilities, food, etc.) are relatively predictable. You also can structure your assets to have relatively reliable income. So outside healthcare spending, it’s not too difficult to make the financial analysis of whether you’re ready to retire early or not.

Except for healthcare. Costs and insurance premiums have consistently outpaced inflation. So much so that per-capita spending in inflation-adjusted dollars has increased 5x over the last 40 years. In fact, overall the increases have been so steady that you could (should?) plan for such increases to continue as part of your FIRE analysis and decision.

The other part like Shinobi illustrated very well is personal priorities. My own situation (currently a few $M networth) is I have a relatively stress-free job that pays 6 figures and I still have our last kid finishing elementary school. So while I could retire early (I’m 45) with a reduced lifestyle, I’d still be tied up anyway until the last kid graduates. So might as well keep padding savings until then. The main thing about becoming FI (not necessarily retiring) is that it really lifts a lot of weight from the stress of your job. Maybe that’s why I can see myself doing it until I have other priorities in life. If job becomes stressful, I’ll just pick another one that is less stressful and that I like doing, regardless of whether I need to take a 50% paycut or not (although I’d rather not all things being equal).


#28

Prepaid debit cards that charge fees per purchase can never honestly be recommended to people in poverty trying to get their finances straight.


#29

RIIIIIIIght…

That’s what I’m sort of trying to say about Suze and Dave.

Suze created and marketed a prepaid card that was not as good as what others already had created and she benefited by it financially. She could also legitimately say that her card could help people (as compared to an overused credit card, as an example). FWFers might see this as all bad. Her followers might see it as good. I’m sure it actually did help some folks.

Similarly, Dave recommends high fee mutual funds. They could help people (as compared to not saving / investing at all), but I’d guess he has some financial gain that he gets out of it. Again, FWFers might see this as bad. Dave’s followers might see this as good.

I’m trying to contrast the two of them to someone like Jack Bogle, who, for the most part (let’s not get too picky here…) think has done a lot of good for a lot of folks and done it without a lot of excess fees. In other words, Jack had more of our OUR interest in mind and less of his own.


#30

Noodling through this thread a bit I notice I dropped the term “critical mass” several times without explaining what it means. I apologize. Of course followers here of Bob Brinker already understand critical mass, but many of you do not know of Bob’s work.

Broadly speaking, critical mass is the amount of money you need, at whatever age you might be, to be able to live in a manner you find acceptable for the remainder of your life without working. Instead you would be living on the income generated by your critical mass nestegg. That this number is different for everyone is patently obvious. Persons accustomed to fine dining, travel, copious gifts for the grandkids, an upper crust home, etc., will have a higher critical mass number than a person of the same age having more modest aspirations and goals. FIRE seekers ask the question: do I have enough money to retire? Whatever that amount of money is for you is your critical mass.

FIRE clearly embraces two distinct elements. The “FI” portion can happen at any age without any implication whatsoever for retirement. Many folks prefer NOT to retire. They enjoy their work, which is an essential part of their life.

The “RE” portion comes in many flavors. As the chart (see OP) shows, people retire at all different ages. There is real danger retiring too early with insufficient funds. To wit:

It could be many years before the funding shortfall manifests itself. At that point you have been unemployed for a long time with an atrophied skill set and correspondingly eroded job prospects. In addition likelihood of health challenges increases with age. You have to be ready for anything, especially during the five to ten years immediately prior to qualifying for Medicare.

So you see wise and prudent determination of (one’s own) critical mass is a big deal for would-be early retirees. And I’ll risk tossing out an additional consideration for very early retirees:

You had better have a decent crystal ball regarding national and world affairs and circumstance. What kind of a country, what kind of a world, will it be thirty or forty years hence? Well, don’t ask me. I have no clue. But if you’re thirty or forty years of age, wanting to retire, and at critical mass, you had better address that question. I hope your crystal ball is a whole lot less opaque than mine!:grinning:


#31

Pretty sure Suze Ormans card did not have per purchase fees. It had fees but not per purchase ones. Most fees were for optional stuff like statements or customer service but there was a $3 / month fee. Course none of the fees were really necessary.


#32

In OP reference, Suze points out why it is necessary. She needed another $5M.


#33

Aren’t these illegal? Or is that state specific?


#34

Its state specific. Most states don’t have laws against them. Though several states including CA & NY do have such laws.


#35

I think the problem for Suze and others like her is that her audience cannot handle the careful analysis and planning required to retire early. While doing tax prep for some folks who needed free help with theirs, I kinda got a sample of the disconnect between some people and financial efficiency.

So when Suze tries to give advice on FIRE, I think she pads the numbers greatly based on the assumption that her audience will typically not be very disciplined or will mess up somewhere. So take the national median HHI, calculate what efficient structured asset early retirement nest egg you need for retiring at 55, then multiply by 2-3 for her audience to account for execution ability. She’ll never get stick from people who retired early with $5+M nest egg that they didn’t need that much to live comfortably. But she’d definitely get thrown to the wolves if she encouraged people to retire too early to find themselves with nothing 15 years later.

The good in that particular advice is that it should prevent at least some from deciding to retire too early on overly optimistic planning assumptions, you know like safe 15% annualized stock market returns forever. Because like Shinobi said, if you mess up, and on top of that are not an hawk in terms of following how your plan is going, you’ll run out of money way too early and with little chance to get back to meaningful income generation.

But sure, for the FWF crowd, there is very little of interest in her shows. (disclaimer: I’ve haven’t watched her show in years - only briefly saw her advice to callers on whether they could afford stupid purchases)


#36

jcohen, would love to learn what you mean about structure things correctly. How to gain healthcare and other benefits, college, etc.? Thanks in advance.


#37

Pretty straightforward. Control your income so that you qualify for Obamacare subsidies, or if you are really ambitious, Medicaid.

For your children, you want to review what goes into the FAFSA and how investments outside of a retirement account act as a “tax” for calculation of EFC (Expected Family Contribution) - therefore get as much of your assets in retirement accounts as possible. For example Cal Grants have a relatively high income limit ($98,900 for a family of four, which is nothing in the Bay Area or Los Angeles but a solid middle class lifestyle in the Central Valley or Inland Empire) but a hard asset test of $76,500. Have one dollar over that and you lose $12,630 towards a UC education ($17,000 tuition, although if you go above that on assets you may qualify for Middle Class Scholarship which is 40% off, but again with a $171,000 asset limit). It certainly discourages me from opening up a 527 and commits me to fully funding my retirement accounts, as well a reminder to roll up to a more expensive house when my (future) kids are ready for high school (likely desirable anyway due to trying to be in a good school district) since home equity is not considered an asset.


#39

I mentioned Bob Brinker up thread.

One of the more thoughtful lessons Bob taught me back in the very early 1980’s addressed the question: “Why is it bad to lose money?”

Of course that question appears superficially almost nonsensical. Everyone recognizes it is a bad thing to lose money. For “RE” people, for example, a severe gouging of the nestegg can presage a (gasp, choke) return to work!!

But I always took Bob’s explanation to heart regardless:

Bob taught that loss of money can force an individual to place his or her remaining wealth at greater risk in order to recoup the loss.

I have long believed it is not rate of return on an investment that matters. It is, instead, your risk adjusted rate of return that counts. This is true in particular for retirees. Should monetary loss lead to assumption of added risk, the loss becomes a DOUBLE negative. Not good.:grimacing:


#40

Maybe I am misreading his post, but pretty sure jcohen is just being facetious, and is implying that he doesn’t hold these things in his own name any longer, and has somehow structured his assets to not be “his”, in order to take advantage of low income or low asset programs.

If you picked up on that from him and YOUR reply was similarly facetious then “whoosh”, sorry! :stuck_out_tongue:


#41

Appreciate your post, arch8ngel. I have modified my earlier post, taking into account your thinking. I’ve always paid my own way. Am not really in touch with doing things differently. I think most folks pay their own way. The notion of acting as you suggest might be the case would never even occur to me. It is an unappealing option for any number of reasons.


#44

You can bet your sweet ass it is different. Of course, at my age, I’m on SS and Medicare. And BTW if you think Medicare is free let me introduce you to IRMAA.

Thing is, PRIOR to reaching retirement age, when nearly every American is on SS and Medicare, I never engaged in any shenanigans related to phony impoverishment in order to “qualify” for benefits for which I was never intended to qualify.

If you believe US law related to senior citizen benefits is wrong or unfair, work to change the law. Until you succeed I will unabashedly collect every dime to which I am legally entitled, same as do millions of other seniors.

But when we all were younger and paying in, the overwhelming majority of us did NOT seek to cheat the system. We had, and still have, too much pride for that sort of thing.

And let me comment as well on another aspect of this which is tangentially related. I have NEVER sought, during retirement and working with lawyers who specialize in such ripoffs, to create a circumstance which protects my heirs by any means or method. Expenses I incur going forward, including those which are related to (for example) long term care, will be borne by me, not by you or by the general public. That is another aspect of paying your own way. I view as reprehensible (albeit legal) actions taken by seniors to shield and preserve their wealth for their heirs while using the public’s dime to pay their extraordinary expenses related to aging. And I have a VERY low opinion of lawyers who facilitate such irresponsible behavior.

The public, and that means people like you jcohen73, will pay for my care only after every cent I have is depleted . . . and not before.


#46

What about to preserve their wealth for their own decent retirement? Where do you draw the line? Healthcare in this country is ridiculous and nobody should have to pay $100K for a hip or knee replacement using their retirement funds. I believe the ridiculous and unpredictable healthcare cost is so unfair that I have no problem with people hiding their assets to get free/cheaper healthcare.


#47

Shinobi – jcohen’s valid point regarding SS and medicare is that very few recipients paid enough in to cover their present benefits.

It isn’t through any fault of their own, as it is how the system was made, but leads to a fair amount of cognitive dissonance when discussing “government benefits” of all types.