CronoDAS comments on Who are your favorite "hidden rationalists"? - Less Wrong

18 Post author: aarongertler 11 January 2015 06:26AM

You are viewing a comment permalink. View the original post to see all comments and the full post content.

Comments (40)

You are viewing a single comment's thread. Show more comments above.

Comment author: gjm 12 January 2015 11:12:59AM *  17 points [-]

It's possible and achievable without major sacrifices with high probability, if you're reasonably well paid.

The basic tricks are (1) put a really substantial fraction of your income, at least about half, into savings -- index funds or similar -- and (2) learn to live a less gratuitously-spendy life than is normal in the affluent West, especially in the US. I strongly endorse both of these; but living on half your nominal income is much much much easier, and requires much much much less sacrifice, if that income is $100k/year than if it's $30k/year.

And if your investments misbehave badly enough, you're screwed. Firstly, if you hit a bad market crash before you were hoping to retire, your retirement date gets pushed out. Secondly, if the longish-term performance of the market turns out to be anomalously bad, you run out of money after being retired for years. You're supposed to save enough that the risk of the second failure mode is really low, so the question here is how comfortable you are with inferences like this: "Over the last 100 years or so, there's been no 40-year period in which you'd have run out of money if you held a broad stock-market-index-like portfolio and took out 3% of the initial capital, inflation-adjusted, every year; so you're safe adopting such a strategy now."

(I do not know whether the specific statement in quotation marks there is correct. There are studies whose conclusions have something like that form. Look them up before making retirement decisions.)

[EDITED to add: Just to be clear: I really do think the mustachian approach is a good one, and I follow it myself, and I do think anyone reasonably well paid who follows it has a very good chance of a comfortable early retirement. But I prefer not to see these things overstated, and I prefer to avoid formulations that -- wrongly but seductively -- encourage wealthy people to look down their noses at poorer people for whom living that way is very much harder.]

Comment author: CronoDAS 13 January 2015 09:08:05AM *  2 points [-]

"Over the last 100 years or so, there's been no 40-year period in which you'd have run out of money if you held a broad stock-market-index-like portfolio and took out 3% of the initial capital, inflation-adjusted, every year; so you're safe adopting such a strategy now."

Assuming that you invested in the United States stock market. Argentina would have looked like a good bet back in the 1920s, but it hit some really bad times...

Comment author: BrassLion 15 January 2015 03:49:51AM *  1 point [-]

Mr. Money Mustache is very US centric. YMMV with the investing advice if you are in a country with different tax codes or a smaller stock market with less international exposure. The advice on how to save money is good no matter where you are.

Comment author: gjm 13 January 2015 09:36:25AM 0 points [-]

As I said:

I do not know whether the specific statement in quotation marks there is correct.

Indeed, some stock markets are better investments than others. (How far one can predict which ones is an interesting question.)