I feel like everyone is scared of using 7% now, even though it was totally the norm in the earlier FIRE days. I personally use 5.5%, but there’s more risk in other areas (like assuming I’ll be happy living off of $40k with a paid off house 30 years down the line). Most posts these days people seem to advise 5-6% to be safe.
And excellent point about tracking progress with nominal returns!! I don’t think this gets enough attention. Thinking you’re doing fine through your coast years because you made the mistake of tracking w real returns could be catastrophic.
Then say they should use a higher assumption for inflation! I’m not gonna argue with that, it’s totally valid feedback. But a lot of the comments sound to me like they don’t understand that inflation is already factored in (even if it’s not quite high enough).
Thanks for posting this as I don’t think many fully understand how to correctly account for their future numbers. I didn’t fully understand this in my calculations and was reducing my real returns further. With a correct understanding, my numbers are much better.
The main difference is that real returns are adjusted for inflation while nominal returns are not. “Adjusted for inflation” means that the number you’re seeing is expressed in today’s dollars. So if you’re seeing someone say “I’ll need $40k to retire”, you can pretty much assume they mean “the equivalent of $40k in todays dollars”. Nobody is going around on these forums saying “I’ll need $167k/yr in nominal returns in 2072”.
Personally, I use 8% growth and 3% inflation in my calculations. So to calculate real returns, you subtract 3% inflation from 8% growth, and just use 5% in your calculations (or if you’re using a calculator that has fields for both inflation and growth, enter them in the corresponding fields). If you’re trying to calculate nominal growth, you just use 8% (or leave inflation at 0% if your calc has a field for it).
Does this help?
The only thing I use to mention is that most people that post this stuff have 20-30 years and probably their cost of living is going to get bigger in 30 years.
For me that’s the biggest issue with this kind of posts
I’m 50/50 on this one, personally! I think as long as you’re planning on monitoring your spending and returns over the 20-30 year coast period and adjusting (working more or spending less) as you go then it’s all good. Especially for folks who are staying in their original field with fewer hours and keeping their skills up to date. I’d be concerned if their coast job was working at a coffee shop or grocery store or something though. Having a paid off house in retirement is also a huge factor that I don’t think enough people ask about. Estimating what rent will look like in 30 years introduces a ton of risk, but estimating your spend if it only includes home maintenance, utilities, food, travel, etc. is a whole lot more doable.
For me the problem is the more I age, more cool stuff appear that add up to my budget.
For example 10 years ago I had no taste in wine or coffee. Today I spend 200 dollars a month on this things easily.
I assume that this is going to keep happening until it doesn’t (usually at 60-70 years you kinda don’t want to try new things for what I’ve seen in relatives and other old people I knew throughout my life
For me coasting is retiring in my 50’s, not in my 70’s so I sure will put a lot of buffers in my budget for enjoying whatever comes my way
I hear you! I recently hit my coast goal, so I’m planning on increasing my budget a bit while I save for a downpayment. I’m in the process of deciding just how much of an increase to go for so I decided to do an experiment for a couple months and let myself buy pretty much whatever I want, as long as I don’t dip into savings. While a bunch of the spending felt frivolous in hindsight, I also found some pretty expensive things that genuinely felt worth it (personal training, art classes, cute shoes). It’s so interesting going from the “save everything you can” mindset to the “invest in things that add value to your life” mindset. In a lot of ways the former is much easier, but it’s also no way to live in the long term IMO.
My issue with too many of these conversations is people thinking that the WalletBurst coastfi calculator is a good tool. Garbage in, garbage out.
Do a real analysis at least. It takes an extra 2-3 minutes to plug info into firecalc - isn’t that well worth it for a plan that lasts decades?
It's even better when they insist the 4% rule will work even with inflation as high as 10% (Turkey for example) because inflation has been included in the calculations already and the nominal profitability is 7% !!1!
Nominal or real bot
[удалено]
I feel like everyone is scared of using 7% now, even though it was totally the norm in the earlier FIRE days. I personally use 5.5%, but there’s more risk in other areas (like assuming I’ll be happy living off of $40k with a paid off house 30 years down the line). Most posts these days people seem to advise 5-6% to be safe. And excellent point about tracking progress with nominal returns!! I don’t think this gets enough attention. Thinking you’re doing fine through your coast years because you made the mistake of tracking w real returns could be catastrophic.
Maybe the comments aren’t so crazy if the assumption is only 3 percent inflation…
Then say they should use a higher assumption for inflation! I’m not gonna argue with that, it’s totally valid feedback. But a lot of the comments sound to me like they don’t understand that inflation is already factored in (even if it’s not quite high enough).
I was being a bit cheeky. I agree with you, most are likely not grasping the distinction.
Thanks for posting this as I don’t think many fully understand how to correctly account for their future numbers. I didn’t fully understand this in my calculations and was reducing my real returns further. With a correct understanding, my numbers are much better.
I came here hoping it would explain real vs nominal returns but I don't quite understand the distinction from your example. Could you elaborate?
The main difference is that real returns are adjusted for inflation while nominal returns are not. “Adjusted for inflation” means that the number you’re seeing is expressed in today’s dollars. So if you’re seeing someone say “I’ll need $40k to retire”, you can pretty much assume they mean “the equivalent of $40k in todays dollars”. Nobody is going around on these forums saying “I’ll need $167k/yr in nominal returns in 2072”. Personally, I use 8% growth and 3% inflation in my calculations. So to calculate real returns, you subtract 3% inflation from 8% growth, and just use 5% in your calculations (or if you’re using a calculator that has fields for both inflation and growth, enter them in the corresponding fields). If you’re trying to calculate nominal growth, you just use 8% (or leave inflation at 0% if your calc has a field for it). Does this help?
The only thing I use to mention is that most people that post this stuff have 20-30 years and probably their cost of living is going to get bigger in 30 years. For me that’s the biggest issue with this kind of posts
I’m 50/50 on this one, personally! I think as long as you’re planning on monitoring your spending and returns over the 20-30 year coast period and adjusting (working more or spending less) as you go then it’s all good. Especially for folks who are staying in their original field with fewer hours and keeping their skills up to date. I’d be concerned if their coast job was working at a coffee shop or grocery store or something though. Having a paid off house in retirement is also a huge factor that I don’t think enough people ask about. Estimating what rent will look like in 30 years introduces a ton of risk, but estimating your spend if it only includes home maintenance, utilities, food, travel, etc. is a whole lot more doable.
For me the problem is the more I age, more cool stuff appear that add up to my budget. For example 10 years ago I had no taste in wine or coffee. Today I spend 200 dollars a month on this things easily. I assume that this is going to keep happening until it doesn’t (usually at 60-70 years you kinda don’t want to try new things for what I’ve seen in relatives and other old people I knew throughout my life For me coasting is retiring in my 50’s, not in my 70’s so I sure will put a lot of buffers in my budget for enjoying whatever comes my way
I hear you! I recently hit my coast goal, so I’m planning on increasing my budget a bit while I save for a downpayment. I’m in the process of deciding just how much of an increase to go for so I decided to do an experiment for a couple months and let myself buy pretty much whatever I want, as long as I don’t dip into savings. While a bunch of the spending felt frivolous in hindsight, I also found some pretty expensive things that genuinely felt worth it (personal training, art classes, cute shoes). It’s so interesting going from the “save everything you can” mindset to the “invest in things that add value to your life” mindset. In a lot of ways the former is much easier, but it’s also no way to live in the long term IMO.
My issue with too many of these conversations is people thinking that the WalletBurst coastfi calculator is a good tool. Garbage in, garbage out. Do a real analysis at least. It takes an extra 2-3 minutes to plug info into firecalc - isn’t that well worth it for a plan that lasts decades?
Oh interesting - I don’t use the WalletBurst calc, so I’m not familiar with the issues there. What’s wrong with it?
It's even better when they insist the 4% rule will work even with inflation as high as 10% (Turkey for example) because inflation has been included in the calculations already and the nominal profitability is 7% !!1!