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Comment by Mtinie | Hacker News Reader

> an era where the retirement age is around 60-65 and most tech workers plan to retire by their 40's.

Those of us in our 40’s—who haven’t yet hit the startup lottery—only wish this was a possibility.

To pull it off, you have to take high-paying jobs (i.e., not startups) in your 20s, be somewhat frugal, and save a large portion of your salary. The compounding is really significant, but early retirement does not give you a lot of working years for compounding to happen. As they say, the best time to invest is 20 years ago.

If you're interested in discussing or learning more about this topic, the subreddit FinancialIndependence focuses on it.

I’ll check it out, as I’m interested in context around the types of people who have been successful doing this. Single, married? Kids, no kids?

Anyone can do it, it really comes down to what percentage of your income you can save, but it'll be easier for people with less expenses.

Here's a calculator that's been posted on HN before to give you some numbers [0].

Also, it's worth noting that 'retiring' doesn't have to mean not working anymore. To me it means the ability to work on whatever I want without having to worry about income. I'd likely still work on side projects, contribute to open source projects, etc.

[0] https://networthify.com/calculator/earlyretirement?income=70...

Most of it is just lucky timing. There are a lot of people who do the exact same things but have very different results based on where exactly they fell on the economic cycle. Unless you’re in the very lucky cohort who would have been rich in any case, being set by your 40s requires things like timing the housing and stock markets pretty carefully to get the necessary returns.

I don't think it's accurate to say "most" of it is lucky market timing. That's certainly a component and if it goes wrong, it can throw off the retirement date by a couple years, but failing to keep your savings to income ratio high enough can throw off your retirement by four decades. For early retirement in particular, the compounding effect is smaller and the main factor (IMO) is savings rate.

Sorting people into two cohorts — "would have been rich in any case" and "other" — fails to recognize that people's individual financials fall somewhere on a continuum, and that their actions (i.e., spending) affects how much wealth they can accumulate by their 40s (or phrased alternatively, affects when they can retire).

> Sorting people into two cohorts — "would have been rich in any case" and "other" — fails to recognize that people's individual financials fall somewhere on a continuum, and that their actions (i.e., spending) affects how much wealth they can accumulate by their 40s (or phrased alternatively, affects when they can retire).

That wasn't a point I intended to make. What I was trying to get at is that most of us should not be comparing our returns to people who start wealthy / connected or the few outliers who were e.g. early employees at a high-return startup. That can be useful as a dream goal but it's better to have more realistic expectations.

For the main point, personal habits definitely make a big factor but your ability to maintain those high savings rates is subject to a number of things which you have little to no control over. As an example, graduating in a recession has historically correlated with lower lifetime earnings because starting salaries influenced subsequent wages and a long period languishing in a mediocre job market really cuts into your interest compounding time if your baseline is not substantially over a reasonable cost of living. Similarly, in many areas the housing market has had huge fluctuations and that's a huge impact on your savings rate since it affects both the cost of rent and your time to acquire a down payment if it's more cost effective long-term to own. You do have the option of living in a smaller/less-desirable place, etc. but that often still means things like a longer commute and the numerous costs that entails.

The other side of the luck equation is that many people have factors which make it hard to optimize for investment returns. If you have health issues, your savings rate is going to be much lower. If you have kids or a relative who needs help that will impact your housing, job, travel, etc. choices and cuts into both your absolute savings rate and especially your ability to make long-term optimizations. If you're married to someone who needs to move for job reasons (e.g. everyone in academia), your ability to time the local housing market is severely hampered. If your particular field is not continuously in strong demand (this can be out of your control: tons of laid-off web developers were competing for the same jobs circa 2001) there's going to be time transitioning, retraining, etc. and likely digging into those savings temporarily.

None of this is to say that living frugally is a bad idea or that you'd regret having done so, only that saying you can retire in 20 years is unrealistic for most people and it makes the pitch sound a bit like a scam/cult.

Yeah, all good points.

> None of this is to say that living frugally is a bad idea or that you'd regret having done so, only that saying you can retire in 20 years is unrealistic for most people and it makes the pitch sound a bit like a scam/cult.

I don't mean to suggest that everyone, or even most people, can retire in 20 years, and I certainly agree that such a claim is not true. Some highly paid tech workers can, and this forum's readership tends to tilt in that direction.

Yeah, I guess I prefer a more positive framing – the person who said that most tech workers plan to retire in their 40s makes it sound like something's wrong if you're not and I prefer a more nuanced message.

I especially like thinking about the meaning of where your money is going – some people spend money on experiences which they like but a lot of it is keep-up-with-the-Jones stuff where e.g. people are paying crazy amounts for housing zoned for the “right” school when paying less and spending more time with their kids will have a much bigger lifetime impact. Someone in that position probably isn't retiring too early in any case but if they have their spending well planned out they're probably going to say that was an acceptable tradeoff for having kids, while the guy living above even considerable means is having a midlife crisis reconsidering hemorrhaging that kind of cash.

Totally agree.

http://awealthofcommonsense.com/2014/02/worlds-worst-market-...

Even with bad market timing, you still have pretty good odds if you are genuinely dedicated to the task. Keep in mind, to succeed in ~20 years in almost all market conditions you would need to save 50-60% of your before-tax income.

MMM has done a blog post covering the issue of how long it takes to save for early [or not] retirement at a spread of savings rates.

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si...

Under his assumptions, to retire in 20 years takes a savings rate of around 44%.

His math is a little optimistic when we are talking about "almost all market conditions" and once you start factoring in things that might go wrong, like a couple years of unemployment stretched over a 20 year career.

MMM ignores a ton of statistically common problems (like 4 bouts of unemployment over 20 years).

All models are wrong, but some models are useful.

If it is obvious predictable stuff, like being unemployed that almost everyone experiences eventually it isn't useful.

"[A] couple years of unemployment stretched over a 20 year career" seems to be an extreme outlier for the tech field.

I worked through the 2000 and 2008 crashes and I can't think of anyone I worked with in tech who was involuntarily unemployed for more than a few weeks at a time and certainly not for 10% of the total time. (Voluntarily for personal reasons like they decided to stay home with a kid, sure.)

Yes, years or 10%+ of unemployment would derail retirement savings. A few weeks here and there doesn't.

So now we are going from the general case to the Bay area tech crowd?

I think you live in a bubble, honestly. Get out of it and realize how most people live.

I see it differently. I think we’re in a sub thread on a tech discussion site about tech workers trying to retire in their 40s and what savings rate is required to do that.

You’re the one trying to steer the discussion into a general case.

The luck isn't in the timing--as others point out, even bad timing leads to impressive gains over long time periods if there's a steady stream of periodic investments. The "luck" comes from winning a genetic lottery that allows you to live to 96 with no major bankrupting health crises or other situational losses, and to be well off enough early in that timeframe to have excess to invest.

These posts almost make me feel like I'm doing the wrong thing by living on a beach making very little money in my late 20s.

Though after some reflection I'm reminded that I'm doing exactly what I want to be doing.

I wonder how rough reintegration into society will be.

Yeah, and don’t even think about having kids. At 46, I could retire now if single and childless, but with a 10 & 12 YO with looming college expenses, no way.

I wouldn’t know what to do with myself anyway. Will work till I keel over.

Lifehack: Look up The Case Against Education by Bryan Caplan and then make your kids go straight to work.

(If they're smart and have hustle, it'll be better for them.)

This is untrue in modern tech for most people. Let's attempt to break it down for a person who's single who wants to retire early:

If you're pulling 100k or more, you should be more than capable, if you are living frugally, even after taxes, to save about 30-40% of that (if not way more. Remember that the median single person income is about $35,000, and the median family income, in total, is $75,062 [1]).

The current wisdom is that if you are withdrawing no more than about 3-4% of your savings, you can expect, due to return on investment, your money to last about 30 years with 90% certainty [2].

This means that if you are willing to live on, say, $18,000 (fairly doable in many parts of the country where rentals are 600-900 a month), you only need a nest egg of 600k to begin a 30 year retirement in which you never make another dollar from working.

To make this concrete: let's say after taxes and expenses, 30% of $100,000 is all you can reasonably save, due to the Bay Area being pricey and general life expenses. I personally don't think it's a major sacrifice to stash this much away, but let's run with it as an example. That's $30,000 you can sock away a year.

This means to reach that 600k retirement figure, it should only take someone who starts saving for retirement immediately, 20 years to get there.

And I would argue this is a VERY pessimistic assumption set as well, because the 3% number is meant to be a guarantee to survive HARD economic downturns, and the above analysis assumed you never received a bonus, never got a raise, never were awarded stock, never saved more, and never developed any income streams besides your job, despite being a programmer for over 20 years. Some analyses of doable salary increases programmers regularly get show you could pull this off in 8 years with my 30% estimate [3]. If you can, for example, increase your savings rate in my setup to 50%, you can have the above 600k based retirement within 12 years, in your mid 30s.

Families obviously make this analysis more complicated, because of housing and the possibility of new income streams and drains, but assuming a two income family, I still would assert the fundamentals of the above situation haven't changed.

So, in short, it very much is possible to retire in your 40s. You just have to live your lifestyle in a way that actually allows for that.

[1] https://www.bloomberg.com/news/articles/2017-09-12/u-s-house...

[2] http://time.com/money/4689984/safe-withdrawal-rate-retiremen...

[3] https://danluu.com/startup-tradeoffs/

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