Motley Fool - Suze Orman Says You Need $5 Million to Retire Early. Is S
From a425couple@21:1/5 to All on Sun Nov 4 19:18:18 2018
Retire early? You need 'at least $5 million,' according to Suze Orman ... https://www.marketwatch.com › Retirement
5 days ago - Suze Orman just threw water all over the FIRE movement
that's been spreading across the internet.
Suze Orman Is Right: You Need $5 Million Or More To Retire Early https://www.financialsamurai.com/suze-orman-is-right-you-need-5-million-or-more-t...
Rating: 4 - Review by Financial Samurai
Oct 8, 2018 - Suze Orman hates the FIRE movement and believes retiring
early is the biggest mistake ... She believes you need $5 million to
reitre early. ... between 40 – 50 if you so choose with a safe
withdrawal rate of between 3% – 5%.
Suze Orman says you need at least $5 million to retire early - Business ... https://www.businessinsider.com/suze-orman-says-you-need-at-least-5-million-to-retir...
Oct 8, 2018 - Personal finance guru Suze Orman says you need at least $5 million to retire early. In a recent podcast, personal finance guru,
Suze Orman said she thinks early retirement is the biggest financial
mistake "you will ever, ever make in your lifetime."
Suze Orman Says You Need $5 Million to Retire Early. Is She Right ... https://www.fool.com/.../10/.../suze-orman-says-you-need-5-million-to-retire-early.asp...
Oct 14, 2018 - Author, show host, and financial "guru" Suze Orman has
once again made waves in the financial world. Appearing on the Afford
Anything podcast, Orman claimed you'd need at least $5 million if you
wanted to "FIRE" -- an acronym for the ability to be financially
independent and/or to retire early.
Suze Orman Says You Need $5 Million to Retire Early. Is She Right?
While limiting your downside is important, here's why Orman's claim is
so out of touch.
Brian Stoffel (TMFCheesehead)
Oct 14, 2018 at 7:02AM
Author, show host, and financial "guru" Suze Orman has once again made
waves in the financial world. Appearing on the Afford Anything podcast,
Orman claimed you'd need at least $5 million if you wanted to "FIRE" --
an acronym for the ability to be financially independent and/or to
This isn't the first time Orman has used anecdotal evidence to make
straw-man arguments that are easily refuted by...well...demonstrable
facts. This claim takes that tendency to an entirely new level.
But rather than throw the baby out with the bathwater, we should
investigate the spirit of Orman's warning. Valuable nuggets lie there.
So does a bunch of nonsense. I'm here to separate one from the other.
Scared and anxious young people (two men and a woman) who are hiding
peek from under the table. Icons above their heads indicate that they
have questions and ideas to solve a problem.
"You never know..."
The overarching premise of Orman's argument is solid: You never know
what's going to happen. During the podcast, Orman said, "The worker that retires at the age of 30 -- if something goes wrong from 30 until 70 --
now they're in trouble."
She gives several examples of things that can go wrong: You get hit by a
bus, you get cancer, AI takes over all of our jobs, tax brackets
increase markedly, Social Security and Medicare disappear.
While these concerns might seem neurotic, there's a crucial principal at
play: limiting your worst-case scenario.
Earlier this year, best-selling author and trader Nassim Taleb made a
very similar point when I interviewed him:
As an investor you need to think about it in these terms: No investor
knows what's going to happen to him or her in the future.
The market may deliver whatever people claim it will deliver. But if you
have a drop in the market that may force you to liquidate --
particularly a drop in the market that may correlate with your loss of
business elsewhere -- then, automatically, your returns will be the
returns from today until that drop in the market. It de-correlates from
Taleb might be the most important risk expert in the world today. The
point he makes is in the same vein as Orman's. It's worth heeding: If
you retire early, you must protect your downside.
Terrible math, self-aggrandizement, and general nonsense
Unfortunately, while the basis of Orman's warning is solid, the
conclusions she draws from that warning strain credulity.
Let's consider how she arrived at her $5 million figure in the first place:
I took care of my mother [in old age]. Remember, it was $30,000 a
month... So you're talking about maybe $300,000 to $400,000 a year. All
right, say I'm wrong: you're talking about $250,000 per year there.
Now you have other expenses -- food and everything -- and let's just say
you need another $100,000 a year to live. So now you need $350,000 a
year after taxes. You need at least $5 million, $6 million.
There are so many issues with this that I'm not sure where to start.
More than anything, Orman's true detachment from reality -- compared to
how the average American experiences daily life -- is on display. This shouldn't be too surprising; she mentions multiple times in the podcast
how she lives on her own private island and flies on her own private plane.
Here's how her numbers hold up:
Actually, if you need $350,000 per year, using the 4% rule -- which she
cites -- you'd need $8.75 million to retire early.
While I'm sure Orman -- like any of us -- got the best nursing-home care
for her mother that her money could buy, it's not typical. According to SeniorLiving.org, the nationwide average for a semiprivate nursing home
room is $82,128 -- almost 70% below Orman's "low-ball" figure. In some
states, the average is below $55,000.
The typical American household in retirement (65 or older) spends just
under $50,000 in 2017. And this is the mean! The median -- which is less affected by the wealthiest 1% -- is likely far lower. Either way, that's
less than half Orman's example.
For most of us, Orman's $350,000 figure is outlandishly high. If you're
the average American, $50,000 per year seems reasonable. Using the 4%
rule -- and not including any Social Security, Medicare, or pensions --
this requires a nest egg of $1.25 million -- or 75% less than Orman's
It might be tempting to say, "But the average retired American is poor
and miserable." But when we measure these things, we see the exact
opposite: Retired Americans are the happiest, least stressed age cohort
in America. And they do it -- on average -- with annual expenditures of
less than $50,000.
But Orman's suspect math doesn't stop there. Long-term care insurance --
which can run between $3,000 and $5,000 annually for a couple --
usually covers the first $150 per day in a nursing home for three to
four years. Using the figures above, that means paying about $27,000 per
year for nursing home care, plus the $5,000 per year in premiums --
which comes to $32,000 per year -- or what Orman claims you should be
prepared to pay in a month!
That's why I call this a straw-man argument. The fact that early
retirees need to protect their downside is obvious. Health, long-term
care, life, homeowners' insurance -- all of these things are vital to
support proper early retirement. But pretending there are no affordable
and sensible options to mitigate these risks is just plain nonsense.
The big picture is what's really missing
Here's the bigger problem with Orman's take on "FIRE-ing": Her
assumptions make it seem as if she read a single blog post about the
movement and drew wild -- and highly inaccurate -- conclusions about
what it means.
Alternately throughout the conversation, she says that retiring early is
a bad idea because (1) you stop earning money during your compounding
years and (2) you'll get endlessly bored by sitting around all day.
I've been reading about -- and practicing -- this lifestyle for almost a decade. There's a reason for the FI (financial independence) to be
included in the acronym: It's not about sitting around all day.
Instead, it's about meeting your basic needs and then freeing up the
time. With that time, you can focus on the only three things that really
matter in creating a fulfilling life:
Connections to family and friends.
Having purpose and meaning.
Progress toward what you're working on.
That is the North Star of the FIRE movement. It is not a hope to become
a multimillionaire, own a private island, or ride on a private jet.
Sometimes you might get paid for following this North Star, sometimes
you won't. The point is that you'll be OK either way.
We'd all be wise to heed Orman's advice about protecting our downside.
But we'd be equally wise to ask ourselves where our level of "enough"
really is and recognize that anything above it will have significantly diminished returns.
Your life might require $5 million to retire early, but 99% of earth's inhabitants would be just fine with far less.
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