The 0.01% rule

[LivingAlmostLarge]

This is also where I'd be inclined to deviate from the advice about income-generating activities. Are you really Ebaying to generate income, or are you doing it because it fills gaps of time and provides some enthusiasm and satisfaction -with the benefit of a little extra cash trickling in?

While I agree that yes, someone in their 40's or 50's should definitely have meaningful money saved for their goals, it's not wrong to maintain that "every dollar counts" mindset - even if by the .01% rule, or the 1% rule, it doesn't. I'll also provide a counter example to where savings will have an outsized impact compared to growth. In discussing retirement goals, it was calculated my spouse and I will need to save $2 Million over the next 4 years to hit our targets. Our portfolio growth will certainly not come close to outpacing that. Now, excuse me while I forego that $4 latte and brew my own cup of coffee at home! lol - because that's what it feels like needs to be done in order to hit that monumental number in such a short amount of time.

That means that $2m is a substantial increase in your portfolio if your growth isn't hitting that. this year the SP is up 14% YTD. on a $2m porfolio $280k. on $3m it's closer to $420k. The numbers start to get staggering the more you have. a 10% year on a $5m portfolio is $500k. It's why time in market is more important than amount saved in the $1-10M rung. Saving $500k/year for 4 years is part saving, part returns. But to be generating that you've got outsized income. I speak from experience. The massive gains for us looking back on the past 10 years we've 6x our NW in 10 years. The $100k a year made a bigger difference in years 1-5 than years 5-10. Years 1-5 was our biggest saving years. Years 5-10 we've been leaning on the returns of the market since 2021. We just didn't have the income to save like before. But the $100k we put in 2015 has been growing for 10 years at say 8% a year. Adding on $100k for years 2, 3, 4, 5 it's become our biggest generators. We didn't add much in years 6-10.

So hitting the rung 5 of $10m is hard. It's a lot of years saving and compounding. We hit $1m at 30, we'd hit $10m by age 50 according to Nick saving $300k on average a year for 18 years or 58 @ $100k/year. We did save that $300k+ for a few years on the front end. And that's paid the returns now. But it really was time in the market and higher than 5% returns. Aggressive investing, no bonds and averaging closer to 10% helped us with the lift. But I don't think most people can do it or want to do it for 18 years let alone 28 more years.

And that's exactly where we ended up. Not wanting to do it anymore. Enough. I am going to drink my $5 latte now and $10 beer. Nick himself said he won't hit $10m, but it's okay.

[disneysteve]

Aggressive investing, no bonds and averaging closer to 10% helped us with the lift.

If I had gone aggressive with little or no bonds, we'd easily be over $5M now if not $6M. But I probably would have lost a fair amount of sleep along the way.

[srblanco7]

So hitting the rung 5 of $10m is hard. It's a lot of years saving and compounding. We hit $1m at 30, we'd hit $10m by age 50 according to Nick saving $300k on average a year for 18 years or 58 @ $100k/year. We did save that $300k+ for a few years on the front end. And that's paid the returns now. But it really was time in the market and higher than 5% returns. Aggressive investing, no bonds and averaging closer to 10% helped us with the lift. But I don't think most people can do it or want to do it for 18 years let alone 28 more years.

I've been tracking our portfolio in an excel sheet since mid-2005. With a healthy savings rate and investment returns our compound annual growth rate has been somewhere in the neighborhood of 15% over the past 20 years. Coupled with some good fortune we could, in all likelihood, reach to the bottom threshold for rung 5 if we were willing to work a few more years - a goal the younger me might have considered important or worthwhile.

The past few years of grinding it out at work, acceptance of the fact that time is more valuable than money, and the recognition that we have "enough" means getting to rung 5 wouldn't change much for us. Three more months of part-time work and we're done. I'm happy to live well in rung 4.

[disneysteve]

Same here regarding working longer. I was making 250K when I stopped working FT in 2021. If I had kept working FT and worked until 65, we could have gotten up in the $10M range. No thanks.

[LivingAlmostLarge]

srblanco i probably did better than 10% but ugh, i don't want to calculate. I also do not want to work to hit $10m. We'd be done but different circumstances have forced the issue so yes we'll hit rung 5. But DS says you have to retire to something and DH has nothing to retire at this moment.

[srblanco7]

srblanco i probably did better than 10% but ugh, i don't want to calculate. I also do not want to work to hit $10m. We'd be done but different circumstances have forced the issue so yes we'll hit rung 5. But DS says you have to retire to something and DH has nothing to retire at this moment.

Congrats on hitting rung 5. That's quite an accomplishment. I understand the retire to something concept, though at this moment if I were asked what I was going to do with all that free time in retirement, I think my response would be along the lines of "whatever the f*ck I want" . I have a vision of what I'll do with much of my time - but also want to be open to trying new things and/or allowing for down time. Stated differently, after being overscheduled for the past couple decades, I think I'll value the freedom most of all.

[disneysteve]

Congrats on hitting rung 5. That's quite an accomplishment. I understand the retire to something concept, though at this moment if I were asked what I was going to do with all that free time in retirement, I think my response would be along the lines of "whatever the f*ck I want" . I have a vision of what I'll do with much of my time - but also want to be open to trying new things and/or allowing for down time. Stated differently, after being overscheduled for the past couple decades, I think I'll value the freedom most of all.

When you first retire, it's amazing to have nothing you need to do and nowhere you need to be. That lasts for about a week, and then you start asking yourself what you're going to do with the rest of your life because lying on the sofa watching Netflix all day isn't a good long term plan.

I really haven't had any trouble adjusting to retired life but I also had the benefit of phasing into it going from FT to PT to per diem gradually decreasing my works hours. I suspect it's a little harder if you go from 40 hrs/wk to nothing overnight.

I've always been an active person who kept busy no matter what, so finding things to do in retirement was no trouble at all. If you're the type who lived to work and that was about it, you're going to find the transition more difficult. But over time, you will cultivate new interests, reawaken old ones, and figure it out.

[srblanco7]

When you first retire, it's amazing to have nothing you need to do and nowhere you need to be. That lasts for about a week, and then you start asking yourself what you're going to do with the rest of your life because lying on the sofa watching Netflix all day isn't a good long term plan.

I really haven't had any trouble adjusting to retired life but I also had the benefit of phasing into it going from FT to PT to per diem gradually decreasing my works hours. I suspect it's a little harder if you go from 40 hrs/wk to nothing overnight.

I've always been an active person who kept busy no matter what, so finding things to do in retirement was no trouble at all. If you're the type who lived to work and that was about it, you're going to find the transition more difficult. But over time, you will cultivate new interests, reawaken old ones, and figure it out.

I’ve been at 24 hrs/week for since May of 2024 and over the past few months have been transitioning my remaining “roles” to my chosen successors. And, since going part time, I have no doubt that my mindset has shifted significantly away from my former “live to work” approach.

Fairly confident I’ll figure it out as both DW and I have invested time over the past couple years creating and expanding social circles.

[Petunia 100]

Steve, you should definitely order an iced tea anytime you want one!

[disneysteve]

Steve, you should definitely order an iced tea anytime you want one!

LOL. Thanks, Petunia.

[LivingAlmostLarge]

I’ve been at 24 hrs/week for since May of 2024 and over the past few months have been transitioning my remaining “roles” to my chosen successors. And, since going part time, I have no doubt that my mindset has shifted significantly away from my former “live to work” approach.

Fairly confident I’ll figure it out as both DW and I have invested time over the past couple years creating and expanding social circles.

i hope my DH will be okay. I suspect not but i also suspect he has a plan to work while retired. It's hard to let off the gas when we are all constantly living a fast pace life. And part of it is the age of the kids. 13 and 15 and busy with school, friends, everything. It's high octane my mom says when she visits. There is always something and she likes it. But she says she's also exhausted too after visiting us. But it's the age. I know in a few more years i'll look up and wonder what did i do with all my time before? And the answer is my kids.

So DH works I suspect also because he doesn't know what to do with himself. He gets socialization. He gets to do something instead of waiting on our kids. It's fun and interesting. But maybe after they go he will also slow down. He says he might teach. Me? I am also slowing down not taking on clients and truthfully i want to be done in a way.