michaelsullivan
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Of course, but in relative terms he's still right, it's just easier to see when you are thinking from the point of the hungry hobo (or peasant in the developing world).
Standing from the point of view of a middle class person in a rich country looking at hypothetical bets where the potential loss is usually tiny relative to our large net worth+human capital value of >4-500k, then of course we don't feel like we can mostly dismiss utility over a few hundred thousand k, because we're already there.
Consider a bet with the following characteristics: You are a programmer making 60k ish a year a couple years out of school.... (read 366 more words →)
I think you're downplaying the chances that a singularity does happen in my lifetime. 90% of experts seem to think it will.
I don't. (Edit: I meant this as "I don't think I am downplaying the chances", not "I don't think the singularity will happen")
It's true that I disagree with your experts here, and Lumifer speaks to some of my reasons. I even disagree with the LW consensus which is much more conservative than the one you quote.
That said, even taking your predictions for granted, there are still two huge concerns with the singularity retirement plan:
Even given that it will occur in your/my lifetime, how do you know what it
thanks for the links -- although I think some of the people in Millionaire Next Door skirt closer to what OP was referring to -- people who never spend money, not to retire early or do something interesting with their money, but just to hoard it.
I have known a few people who I considered pathological savers -- people who, like the fictional Scrooge, seem to save for the sake of saving, and do not ever enjoy the wealth they have created, nor do they turn it to a useful purpose in the world via large charitable donations. This is very rare in my experience, however. The only people i have known like this are in the generation that grew up during or shortly after the Great Depression.
Agreed that inflation adjustment is important -- it usually makes sense to annuitize a portion of your portfolio to reduce longevity and market risk. The ballpark I was using is based on a 1% per year increase. hedging more against inflation with a higher escalator or CPI adjustment would be more expensive. Not adjusting at all would be less.
On housing -- it doesn't always make the most sense from a financial standpoint to pay off your mortgage. If you do, on the one hand, that's less money that you need for living expenses, on the other hand, it's net worth tied up in home equity -- tends to be close to a wash in terms of the net worth required to retire at various points. In the current low mortgage rate environment, many people would need more net worth to support expenses with a paid off house than without.
To answer your specific question, there are a bunch of potential alternatives.
You can use a Roth IRA to have access at least to your contributions without penalty, and have tax deferral and tax free earnings.
You should probably put enough to get the full match into your 401k no matter what, as long as you expect to become vested for the company contribution, since taking that out early and paying penalties is still a win versus forgoing the free money your employer is offering.
You can invest in plain old retail investment accounts. You will pay tax every year, but it's possible to minimize the tax hit with tax-efficient investing strategies (low turnover,... (read more)
In a relatively healthy economy, to a first approximation in the medium and long term, the amount of money you make approximates how much good you are doing. As a liberal, I'll be the first to say that this has a lot of flaws as a benchmark, but in general, if you cannot find people willing to pay for, or donate to support what you are doing without you having to live on ramen forever, there has to be some question about whether what you are doing is providing value to the world comparable to a standard job in tech, finance, sales or a professional discipline, as long as you are moderately careful about who you work for in the latter cases.
Outside view of your 1 2, 3 and 4: most people end up in trajectory number 4, so thinking this is the least likely scenario needs some really good evidence.
In particular let's look at 1: How do you plan on an event that has a reasonable probability of not happening in your lifetime, and about which you know relatively nothing (if we could well predict what will happen on the other side, it won't be anything like a singularity).
Who is to say that a singularity results in happiness for everyone -- even for a positive one? From the standpoint of someone sitting in the 18th century, flipping... (read more)
I think it is partly about mixup, and partly because many people don't think clearly about their financial planning until forced to. If someone who makes 100k+ and spends most of it wants to retire in the same style they are used to living, they may well need 2-4M to do so comfortably and safely if retiring early. Social security is progressive, the max you can get as a single person is around 42,000/year. To get that, you must work for 35 years at a high income level and wait to draw your check until age 70. Then you still need to produce another 58,000 somehow... (read 373 more words →)
I think the biggest thing people who haven't thought about this deeply miss is how large the potential liability exposure is if you don't carry property and casualty insurance. As your wealth rises, and the financial hit from losing your house becomes small enough that you could realistically self-insure (say net worth 10-20x home value), it starts to be pretty much mandatory to carry some kind of umbrella policy to insure against crazy liabilities, and nobody will sell you an umbrella if you don't also have house/auto/etc. insurance. Like all insurance, this is -EV, but it's so cheap compared to the potential loss that it's generally crazy to... (read more)
So one of the major issues I've identified with why our gut feelings don't always match with good expected utility models is that we don't live in a hypothetical universe. I typically use log utility of end state wealth to judge bets where I am fairly confident of my probability distributions as per Vaniver in another comment.
But there are reasons that even this doesn't really match with our gut.
Our "gut" has evolved to like truly sure things, and we have sayings like "a bird in the hand is worth two in the bush" partly because we are not very good at mapping probability distributions, and because we can't always... (read 452 more words →)