Let's talk about the FIRE (Financial Independence, Retire Early) lifestyle

In My Humble Opinion
101

I was once on Medicaid, and it was great while I was on it, but they kept kicking me off with without notice - or if I did get notice, I was too busy being a psychologically debilitated 18-year-old to realize. The result was constant interruptions in my medical care including the birth control I use to control my endometriosis and PMDD. I also had access to a lot of grants and scholarships because I was poor. Being poor sucks, but my point is that there’s an income level just above poor that’s not quite standard middle class, where if you fall in that range, you can get in trouble, because you make too much money for help but not enough money to afford things. I had a college roommate in that position, and I was effectively better off than she was, despite having lower income. It is my impression that there are more people who fall into that range now than there were 20 years ago when I was in college.

Also, you are one person, so for a family of three wouldn’t it be like trying to make it on $96k a year? Because that we could do. Or - are doing, more or less. Right now my husband has a reduced income because he’s trying to get caught up on work, and we can’t afford our expenses including these high medical bills without dipping into savings. I don’t love being here. But it’s temporary. I started saving this year for next year’s OOP max, so hopefully it won’t hit us as hard next year.

Why I chose this year of all years to open a 401K at work to set aside additional retirement I can’t say, but I did and I think we need it. But it’s not helping the monthly budget any. We save a large proportion of our income - probably more than most people - but aren’t even close to FIRE.

102

Yep, more or less.

When my husband was still alive and we were living on just my income (which at that point was about $8k a year less) we were officially poor and has access to various programs that enabled us to live decently, if very frugally.

The day he died was also the day I lost my then medical insurance (Medicaid). Thank goodness I was employed full time and, due to the “life event”, was able to get on board at work almost immediately.

103

The insurance thing varies wildly from person to person. My husband is self-employed so we pay a high premium but it’s at least before tax. I work for a nonprofit that has maybe a marginally better health plan but my mental health professionals are out of network. As for shopping around, we just spent an entire year getting evaluations for my son and insurance approved for his intensive therapy, so no way we can go through that all over again for some other insurance company. It’s just exhausting.

104

In my experience, people saying this in a wealthy country like the US are just refusing to change their priorities to build wealth. Bloomberg published an article last year where 25% of people making $170k classified themselves as poor, and there’s plenty of other evidence that indicates that many people claiming to be too poor to save define the word to mean “less money than I’d like” rather than the various types of insecurity (food, shelter, medical care) that applies to the rest of the world.

105

If you’re earning $168,000 a year (from whatever source(s)) then you are wealthier than 90% of the US. I’d call that “rich” (and that’s totally OK - nothing inherently wrong with having wealth). Yet I have met multiple people earning that (or even more) who are convinced they are merely middle class, or even just getting by. Not sure if that’s “keeping up with the Jones’” run amok or some other societal quirk that convinces rich people they aren’t rich.

If you’re the sort of person who MUST have [fill the blank with expensive whatever(s)] then you might be earning a half million a year yet still in debt up to your ears and teetering on financial ruin. That’s not because of your income, that’s because of your choices. But while we’ll condemn the genuine poor for buying hamburger instead of beans and rice, or buying water instead of drinking lead-contiminated water out of the tap (hello, Flint, Michigan), there is no societal criticism for rich people making stupid decisions that lead to someone making a half million a year going bankrupt.

When I did my retirement planning with a “financial professional” I said that my current lifestyle was a floor I didn’t want to fall below. That’s a pretty frugal lifestyle, but it’s one in which I (maybe not someone else, but I) can be content, even genuinely happy. Despite my modest means I am on track to have that through my 90’s. Would I like more? Oh, absolutely - I am making some investments that might have that pay off but if they don’t I’ll still have a roof over my head and something to eat.

I have a friend who MUST have X, Y, and Z - but you know what? He made his financial plans and some good choices that worked out and he has that (he’s one of those guys who are as busy in retirement as when he was working, but he is able to choose that, he’s not forced into it). Good for him.

I don’t critique the retirement plans of someone who is working the program. I don’t question if someone wants to go off and live in the woods in a truly minimal lifestyle, nor do I care if after a few years they decide nope, that’s not what they want after all. If someone wants to work like crazy in their 20’s to achieve financial independence by 30, or 35, or whatever more power to them (although women should understand that deferring kids to their mid-30’s has significant ods of being a problem). If someone wants to raise their kids in their 20’s and then launch a career in their 40’s great - although I wish society would make it easier for such people because there is a LOT of bias against people “waiting” to “work” (raising kids is a crap-load of work!)

There’s no one-size-fits-all for retirement because we’re all different people with different wants, needs, and obligations. If someone can reach their goals early good for them. Some of us made other choices than just working constantly for a decade to accumulate money and that should be OK, too. I’ll be retiring at 70 (probably, unless something really pays off for me). I’m OK with that, I planned on that decades ago because my goals included more than just amassing piles of money. I could have gone a different route, but chose not to. If someone else makes different choices than me I’m fine with that, I just wish more people were OK with other folks making different choices.

106

That’s because most people live in Bumblefuck, America where you probably can buy a house and live a decent middle class life on $65k a year.

If you work out of someplace like Manhattan or San Francisco metro where housing costs are astronomical, $168k isn’t buying you a “wealthy” lifestyle. “Rich” people don’t shlep themselves over an hour each way to some office to write those TPS reports for some middle-manager boss, no matter what they get paid.

In actual banking circles, for marketing purposes those people are not considered “rich”, they are “mass affluent”.

First of all, yes, odds of complications do increase as a woman gets older. But plenty of women have children up to their 30s and even 40s. That said, you can’t do much about biology so the only variable you can control is related to work.

The “bias” of people waiting to work is that people who work tend to not want to pay for able-bodied people who don’t. The economics and biology are such that the man tends to have the luxury to focus on their career and get financially established before deciding to have children. Women are forced to choose between career and family early on. So the incentives are for women to get married to a successful man as soon as possible. That creates all sorts of societal problems for both men and women. Moreso for women as it tends to put them in a more financially dependent position.

107

Except that’s not the only bias there is. Let’s take a couple that decides that one will leave the workplace until their kids are in school. So one is out of the workplace for maybe 5-10 years. No one other than the partner is paying for it. And then when they want to return, it’s difficult to pick up where they left off. I don’t mean that the person won’t be treated as if they had the additional 5-10 years experience that they don’t have - that’s understandable. I mean they will have some difficulty finding a suitable job at all, as if the education and experience they have somehow became worthless.

108

The devil is in the details here. As well as where you live (as other’s have pointed out). Is this before or after tax? Is this for an individual or for household (and are we talking a couple or a family?)

Post-tax, for a single individual without kids, in Bumblefuck, WI. Absolutely that counts as rich, its plausible to be able to put enough away to retire early.

Pre-tax for a family of 5 in Manhattan. You are poor not middle class. You are barely making ends meet and saving anything at all. You are absolutely not retiring early if you cut out the odd luxury here and there.

109

Not if you spend as much as you make.

110

Washington Post recently had an article on how people define “middle class”. Very eye opening.

168,000 is certainly not an income to complain about - but whether that counts as “we’re doing pretty well!” or “Just squeaking by” depends a LOT on circumstances - location being the top concern.

Without dumping too much boring detail, that income would not get you far (in terms of home ownership at least) where we live (you’d be lucky to afford a very basic townhouse or condo), while it would let you have pretty much any home you wanted where my daughter lives (assuming you could even get that income where she lives).

I would definitely say that to be considered “rich”, you ought to be able to afford a detached house in a safe-enough neighborhood - which in my county, 168K a year is pretty iffy.

Even here, though, that’s higher than the median household salary.

Can’t speak to how those numbers work out in a place like LA, San Francisco or Manhattan - even tougher, I expect.

111

I think some of the problem in defining “rich” and “middle class” and so on is that different places have different styles of living so that it’s difficult to compare.It’s easy enough to figure out the median income , but I don’t think that’s what people are talking about when they talk about “middle-class” For example, that Wapo article doesn’t even mention a car - I guess because it’s assumed that any household that might be middle class has at least one vehicle. I’m surprised that only 60% said owning a home was necessary to be considered middle class - I would have thought it would be more. But something like 2/3 of NYC households rent and over 50% of households don’t have cars . I remember reading years ago that when All in the Family was new people around the US were confused - they couldn’t understand how someone would be able to afford to own a single-family house but not a car.

The people who end up renting this will most likely not own a vehicle but it would be absurd to decide that they aren’t middle class because they choose to pay over $12K a month in rent rather than living in a neighborhood of single family houses. Don’t get me wrong, I’m not saying you or anyone else would say that, just that trying to define a "middle class life " is difficult - there are places where even wealthy people rent and places where most middle class households have household help.

112

Even in Bumblefuck, its hard to live a middle class life on $65k a year. Cars are the same price whether you live in New York or Fargo, ND. And you will NEED a reliable car in Fargo. Groceries are often more expensive in rural America. Health care can be more expensive and difficult to access - my sister needed to drive an hour for chemo infusions. Housing is a lot cheaper than in high COL cities like NYC or San Francisco, but that is really the big thing. But its still difficult to afford a house on $65k in Bumblefuck.

Other than that, its a lot of choices - live in NYC and its easy to spend a lot on restaurants or entertainment that really isn’t available in Bumblefuck - where you can spend $10 to see the high school do “The Music Man” and then go to the only Chinese restaurant (and BAR!) in town. On the coast you might spend to get your kids enrichment activities - or send them to a private school. In Bumblefuck, maybe there is a Catholic school, but most people send their kids to the local public high school, not because its good, but because its the only option - and maybe to the local old lady who teaches piano. In NYC if you want to go on vacation, a dozen airlines fly out of NYC airports, and there are always discounts and specials. Living in Bumblefuck, you’ll drive an hour to a local small airport, where you’ll take a hopper to a big airport like Omaha, and then you’ll get to go on vacation.

113

NYC, at least Manhattan, is really an outlier in terms of car ownership and home ownership. I don’t know if there are any other places in the US where cars are as uniformly optional (maybe parts of Boston / Chicago / Washington DC) - having lived in Manhattan for a bit, a car is far more of a hassle than anything. And of course, someone elderly might well be middle class or better but not own a car due to, well, aging. Possibly a better definition would be “access to transportation when you need it”. I’m surprised at “only” “over 50%” have cars - would have thought car ownership was a LOT lower than “nearly 50” but if that counts outer boroughs, that makes sense.

And of course owning any housing in Manhattan is pretty insane, and detached housing is literally impossible (it can happen in the other boroughs).

Anyway, I’ll amend my “rich” / “detached house” to mean “whatever housing you want”.

And part of my definition of “middle class” would be along the lines of “able to live within your means without utterly harsh restrictions”. Which begs the question: If someone has a good income, but chooses to live a very restricted lifestyle in order to save more, do they qualify as middle class?

114

Almost literally impossible - there are a handful of single-family detached homes in Inwood, on Manhattan’s northern tip. (Or you could be elected mayor!)

115

A lot of upper-income people seem to define “rich” as “has a Learjet and a no-kidding yacht, not just a boat”. If you don’t have that, you’re not rich. If your credit card has no limits and pays itself every month you’re rich. If not, you’re not.

Or so the low six figures crowd tends to think. Because from where they sit, they can see those seriously wealthy people around. When they go out on a splurge meal, the true fatcats are seen at other tables. When they go to the fancy whatever, the fatcats are there. They drop their leased Lexus at the valet and see 3 Rolls and 2 Lamborghinis sitting there. Those people are rich; I’m not.

Meanwhile, from where they sit, they have nil interaction with the truly poor. The “working poor” folks might be working in the restaurant kitchens, or cleaning their house, or driving the trash truck, or delivering their daily flood of Amazons, but those people are invisible.

Given that annual individual income in the modern USA spans 9 orders of magnitude, and individual net worth spans 12 orders of magnitude, we probably need more words than just “poor”, “working poor”, “middle class”, “upper middle class”, and “rich” to describe the various layers.

And that’s before we get into the huge regional cost of living differences and regional opportunity for spending differences as @Dangerosa said so well a couple posts ago.

116

There’s also a huge difference between “1 person” and “2-person couple” and “family=2 adults + (n) * kids”.

That’s why government programs have different categories for all of the above.

And yes, NYC and LA are outliers - but while a lot of Americans live in those cities most of them live outside those high-cost cities.

117

Not only does location matter, as has been mentioned several times, but your own life situation matters a great deal also.

Take myself, as an example. I live in the San Francisco Bay Area, a notoriously expensive area, especially well-known for its high housing costs. But I happen to own my home outright: I was lucky enough to be able to pay off my mortgage about a decade ago. So my housing costs are minimal. Aside from that, costs around here are somewhat high, but very manageable.

So my financial situation is very different from that of my neighbor who recently bought an identical house.

118

And if you wanted to FIRE - you could sell your expensive real estate, and move to West Bumblefuck - where you could buy a house for half of what you sell yours for, and then - if you could live as frugally as Broomstick, quite possibly retire based off your savings and the proceeds of the house. But you’d give up what San Francisco has to offer and instead be watching the high school production of “The Music Man.”

(ETA: Covid changed the rural housing market - houses aren’t nearly as cheap outside LA/SF/NYC as people from those areas think they are. Covid saw a lot of coastal refugees - people who discovered they could work remote in a lower cost of living area - and they weren’t getting the big city benefits of restaurants and entertainment during Covid anyway. That increased prices in places people would want to live in. Yeah, West Bumblefuck might still be affordable, but housing in Minneapolis/St. Paul isn’t THAT much cheaper than that in New York. Even my sister’s “hour from chemo” community saw a huge jump in housing prices.)

119

I’ve mentioned before, that when we were selling our Florida condo last year (55+ community, bought for the parents to live in), I realized that if we wanted to stay there, we could have retired right then. No mortgage; only expenses aside from repairs would be about 500 a month in HOA fees and a few hundred a month in taxes.

It was smaller than ideal, but even if we bought something bigger (could easily do so with cash if we sold our house)… it was in Florida.

Which has seen a housing boom; we bought it in 2014, and sold it in 2023 for 2.5 times the original purchase price.

But in any case, it would have demonstrated several principles discussed here: move to some place cheaper, downsize / lower your demands. And it met some other retiree / elderly needs in that there is transportation available if you can’t drive. With just our Social Security (assuming we held off on taking that for a year or so), we could have been living decently if not luxuriously; add in our savings, and we’d have been better off than the majority of local residents.

But… Florida. :::shudder:::

120

There’s a huge swathe of the country that’s neither NYC/LA/SD nor Bumblefuck, for what it’s worth, where the cost of living is exceptionally reasonable, and where we have lots of lots of options when it comes to seeing actual touring theatre companies, finer dining, etc.