This is my take on a few things that I've heard about and read about lately from that well known Finance Guru, Suze Orman. Ms. Orman has certainly stirred things up a bit of late. First, I read an article in the recent AARP Bulletin where she says that 70 is the new 65.
This particular piece of advice that she dispenses is something that I take issue with. It may be easier for a mega wealthy woman who lives with her partner on a private island and who has already made many millions of dollars by dispensing financial advice to say this than it is for somebody with real-world middle class problems here in late 2018.
It isn't that I am a subscriber to the FIRE way of thinking that has become so popular among personal finance bloggers, particularly those who could be considered millennials. I have already moved beyond the age that many of those who subscribe to the fire movement would consider an age that they would want to retire. Turning 48 next month, I prefer to think of myself as part of the FD/ROT movement; financially dependent and want to retire on time.
It would be very difficult for me to consider working at a job like the one I have now until I reach the age of 70. Truthfully, it would be hard for me to even assume that I will reach the age of 70. My dear late father passed away technically at the age of sixty-six, but spent a little more then the final year of his life in excruciating pain dying of a particularly horrendous form of cancer. Not that he ever actually retired, or would have wanted to, but Ms. Orman's advice certainly would not have applied in his case.
A guy like me, and I suspect a guy or gal like you, could do something like writing or speaking or teaching up until that age. I have a strong desire to launch my own e-commerce business, just as many millions of others undoubtedly do. But I am not so greedy or dreaming of making millions off of it like many people do. I just want to be able to make a few thousand dollars from my online endeavors, whatever they may be. It may be learning how to monetize my blog, selling hundreds or perhaps thousands of ebooks, reading books by others into audio applications such as Audible, steadily selling goods on the vastly expanding online marketplace via an e-commerce site that I have been pondering for the better part of this year and intend on launching next year.
But this is about Ms. Orman, not me. My point being that, while I am not firmly ensconced in the FIRE movement like so many of the bloggers that I follow are, I do not intend to work to the ripe old age of 70. By the time I hit 60, I want to be able to work or even not work if that suits me, while making a decent buck by doing things that I want to do.
I don't think that's too much to ask, do you?
I should add here as I approach the age of 48 that should I be able to continue at my current place of employment or in a job similar to the one I have now working for another municipality in Illinois, I should be in line for a monthly pension payment in the range of $6,500 per month, or $78,000 per year to start in the year 2026.
As an Illinois Municipal Employee, I contribute to a fund called IMRF, and this is important because it is not the same as the broke, bankrupt pension system that Illinois state workers pay into. IMRF is fiscally prudent and 93% funded and US Municipal Employees count on it to get us through air golden years.
Per a recent Forbes article:
The Prairie State remains the poster child for pension problems, due largely to the massive $130 billion unfunded liability from its five state-based plans and $10 billion in unfunded local police and fire obligations.
But a local municipal employee plan offers a rare bright spot. The Illinois Municipal Retirement Fund (IMRF), which represents nearly 3,000 local governments (with the exception of the City of Chicago and Cook County), enjoys a healthy 93% funded level.
That level is rare not only in Illinois, but across the nation, according to the National Association of State Retirement Administrators (NASRA).
The IMRF, which manages $40 billion of assets, represents local municipal workers, not police and fire, who have their own (badly funded) local systems. As a local fund, the IMRF is also different from Illinois' state funds, which represent state employees, university employees, and teachers, among others.
The IMRF is healthy enough that for the first time since the Great Recession, participating governments’ contribution rate this year will be lowered to single digits, to 9% of payroll, down from 11% of payroll last year.IMRF pensions are automatically increased by 3% per year, so by the time I turn 60 I should be collecting in the mid-80s per year. probably not enough to sustain me and my wife in the lifestyle that we would like to live in those years, but it's at least a good two-thirds to three-quarters of that amount, the rest of which I intend to earn by some way, shape or form.
What I don't want to be doing in my sixties is dressing business casual, being required to maintain office hours set by other people, sitting in endless meetings, meeting and speaking with people who I would rather not meet and speak with, and trying to cat kiss the asses of elected and appointed officials who will never know as much about Economic Development is I knew 15 years ago after doing the job for 3 years.
Now For What Pissed Everybody Else Off
Ms. Orman recently ticked off every adherent to the FIRE movement with her recent comments about hate hate hating it, and noting that one should not consider retiring early without a minimum of five mil saved.
As a middle aged guy who has experienced some of the setbacks that she alluded to, as well as wanting to pay at least a hundred grand for each of my two children's education, I agree with a portion of her statement on the matter, but only with half of the other part.
The part that I agree with is her comments that “You get hit by a car. You fall down on the ice, You get sick. You get cancer,” she said. “If a catastrophe happens, if something goes wrong, what are you going to do? You are going to burn alive.”
I tend to agree with the above, although it is most certainly more negative than FIRE followers would want to allow. She does not even address such commonplace things as paying for a child's wedding, paying for them to go to college or helping support aging parents.
One of your children might move to LA and the other to NYC and you may want to be able to travel to visit with both of them frequently. You may even want to stay at a hotel, taking in some entertainment and take them and maybe even your grandchildren out to dinner.
If you are single or married without children and will never have them, by all means go ahead and retire as early as you want. You may be able to live off of one million the rest of your life, so long as you do not do anything but the basics and you are far more frugal that me or my family could ever be.
I do not need to spend a lot of time or words dispelling this notion of hers. The two best ones that I came across are from two bloggers that I follow, although not closely, Mr. Money Moustache and another by the Early Retirement Dude.
Another well-respected blogger who I follow, the Financial Samurai, agrees with Ms. Orman's $5 million theory.
At the age of thirty or thirty-five with two kids whose futures I could only guess and if one lives in a high-cost area, like I do, I would not recommend retiring with "only" a million or 1.5 in the bank.
I do know a guy, a friend of my best friend and a guy who I lived with for a year in college, who retired early to travel the world at the age of about forty-two with about three mil in the bank. He is constantly traveling abroad, probably seventy percent of the time, and living a life of ease at beaches, parties, concerts, resorts and the like while I work forty-plus hour weeks and answer to a millennial fifteen years my junior.
Am I a bit jealous? You know it.
Unlike me, he does not have any dependents relying on him. He will have many fun memories of travel and parties in his golden years, but no children and grandchildren to spend time with. I would not trade his millions for what I have, not in a million years. But he did retire early and appears to be doing fine. Plus, he was a very successful self-employed options trader and I guess that, push come to shove, he could probably make a few more million in a few years if need be.
Two things from the Financial Samurai:
One: Only until you reach about 45 with a $5,250,000 net worth will it feel OK to hang up your boots and retire early. So again, Suze Orman’s statement that you need $5,000,000 to retire early isn’t too far fetched.
It’s always good to do the math when planning for retirement. Don’t let people just tell you about their experiences and feelings without sharing some numbers.
Two: Very Few Retire Early
Only 18% of Americans retire before the age of 61. Therefore, it’s normal to feel bothered by Suze Orman’s statement and my realistic after-tax calculations.
Even if you don’t achieve my figures, at least with focus, and proper financial planning, you will come closer than those who don’t even bother.
Reading this, I realize that I may be part of the FIRE movement without really knowing it. After all, I often contemplate retiring at the age of fifty-five, seven years from now, with my initial $78,000 pension which will increase by three percent every year, and supplementing that with a few thousand bucks on doing things that I like and am good at. Like writing shit like this 😁
Anyhoo...
The bottom line in my mind is that everyone's scenario is different, and people have different wants, needs, ideas and dreams about how they want their retirement to be. While a super-frugal single person or couple without children may be content to retire in their thirties with a million in the bank and live in a tiny house in a low-cost rural area and grow their own food, purchase low-cost items and repair everything themselves, another person with a financially dependent spouse, three children and possibly other relatives to help support may need five times that amount, or the $5 million that Ms. Orman suggests.
Like with most other things, I see it in shades of gray, or gradients if you prefer. I think that somewhere between one and five million dollars is the right number. Like she says, there will be many unexpected costs and possibly misfortunes that one may encounter over the decades.
Beyond the negatives, you might want to have a lot more money for some positives. As an economic developer, I can vouch that I have worked with many business owners and property owners whose parents helped get them in business or a head-start if you will. Even the President of the country was put into business by his own father.
Even if I had a couple of mil sitting pretty in a safe, well-diversified portfolio that constantly threw off dividends, capital gains and the like, I would still want to have enough set aside that I could help out my loved ones in a rainy day or perhaps launch their own business.
Who knows?
To help you figure out the right amount to fund your retirement, there are numerous retirement calculators out there.
Most importantly, don't put retirement on the back burner, even if it seems too far away to consider.
Doing so may push your end date even further back and get you thinking about retiring on time, like I am, rather than early.
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