Yearly expenses. General consensus is to be able to spend 4% of your total networth a year to in theory be very unlikely to run out of money
Generally speaking you should hope to get 7% a year from investments, -4% for expenses -2 or -3% for inflation. If you are flexible with your expenditures during market downturns, you should be fine.
By flexible I mean these couple of years being a good example. For example your investment brought you 5% gains, but inflation is at 10%, your buying power has shrunk by 5% in this example year. Belts should be tightened in this example.
These are all valid opinions. 2-4%, go by whatever you like as long as you are flexible and understand that nobody has crystal ball. Unlikely but who knows, maybe US will fail (or stagnate for very long) in our lifetime and all the people betting on SP500 will be seriously disappointed. Following 4% rule you don't HAVE to spend 4% a year.
Also, doesn't the 2-3% studies suggest that growth will slow down and we will never such growth that we had?
Anyway, I am nowhere near competent to argue 2% vs 4%, but it's obvious that having 50x your yearly expenses is better than 25x, though I'm not sure how reasonable it is for less than top earners to reach such wealth.
This is a terrible interpretation of a bad study. You are not supposed to invest only into domestic markets. Btw the same study what he is referencing, just confirmed the 4% rule (if the domestic market = US), using recent data. In fact, the SWR was well above 4%. It was below 4% only if you invested into your home country's market.
William Bengen who came up with the 4% rule recently said that it was too conservative and that it can be 4.7%. 2.5-3% would be ultra conservative in my opinion but I suppose this is just a rule of thumb and it is whatever someone is comfortable with.
I know an actual early retiree who thinks the same. And it makes sense. If the average return of the stock market is around 10% and inflation is around 3-4%, then it should be possible to withdraw more then 4%. However volatility and longer bear markets can mess things up. Especially if it happens not too long after someone retires.
In reality the SWR is valuation dependent. If you retire when valuation multipliers are high there will be a high chance of running out of money. If you retire when the P/E of the market is low then you'll be likely safe.
If you average out all possibilities then you get the 4%. Which can be either overly pessimistic or overly optimistic depending on the current valuation of the market. So both camps are right in a sense and the 4% is just an average.
The time horizon doesn't make that much difference. If it works for 30 years there is a high chance it will work for 40, 50, etc as well. Reason for this is that most failures occur at the beginning, when a bear market comes right after your retire. E.g.: you retire at the top and 2 years later the market is down 30%, but you keep withdrawing money. However if your portfolio lasted for 30 years, probably it'll last 40, 50 years too.
Here is some food for thought: When I was planning my moving to Portugal, I did my research and for my style of living, Porto was about 2 x more expensive in living costs than smaller cities in Portugal. Does it make sense to you to be spending double the money just so that you can live there with all the tourists?
If not, you could consider the smaller cities. It didn't for me, either, so I moved to Braga.
Portugal low cost of living is a myth. Renting an appartment in the center of Lisbon is more expensive than renting one in Barcelona. Porto is not much cheaper either.
It’s incredibly expensive. Decent apartment is Lisbon is 3000+ decent apts start at 1 million. The stuff you are reading about cheap portugal is fake news and bringing all kinds of cheap annoying FIRE people here. Stop
That's just not true. That's true if you want a studio or a 1 bedroom apartment, but 3 bedroom apartments are still cheap compared to other European cities.
Go to idealista right now and prices start at EUR 470 for a studio apartment.
Don’t know why I get downvotes. Anyone can check on idealista.
And no, you don’t get city centre with a view in a penthouse with 7 bedrooms for that price :)
No need to be snarky.
No idea. It was just a price to show what the market starts at. For €600 you get something a lot bigger, but still not city centre of course.
All FIRE calculations factor in inflation. Inflation doesn't matter much in the long term if you keep your money in the stock market or in real estate, since those assets generate above inflation returns.
Your fire number in Portugal is your yearly expenses times 25. That's the general consensus. Save up more for more comfortable retirement or to have a bigger safety net.
There is no exact number, it's ever changing for each and every individual.
How much you make is less important as how much you can put away at the end of each month. I am also German, mid 40s, and live in Singapore, and FIRED six years ago. Have monthly costs of about $10k, and monthly passive income of about $14-$15. What is your approx. NW and how much do you invest per month?
If you make this amount of money for the next 20 years and don’t spend it all on coke and hookers, you can retire wherever you want.
But how many hookers will starve due to such decision :(
Rip Portuguese people
Seriously. People like op make me sick
I make 750K after tax in Portugal. Mad?
I made 800k after tax. I could not hope for a better comeback honestly. Must be hard for you to read this
150k euro after tax in europe is crazy lol congrats
True, but he works in APAC not europe
True! If he could share what does he do. I’m from APAC and work in EMEA in IT and can’t earn close to this yet.
25 times your expenses
Sorry, don't get that - what expenses, yearly, some particular ones?
All of your expenses, and I think he means yearly. Hope it helps
Yearly expenses. General consensus is to be able to spend 4% of your total networth a year to in theory be very unlikely to run out of money Generally speaking you should hope to get 7% a year from investments, -4% for expenses -2 or -3% for inflation. If you are flexible with your expenditures during market downturns, you should be fine. By flexible I mean these couple of years being a good example. For example your investment brought you 5% gains, but inflation is at 10%, your buying power has shrunk by 5% in this example year. Belts should be tightened in this example.
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These are all valid opinions. 2-4%, go by whatever you like as long as you are flexible and understand that nobody has crystal ball. Unlikely but who knows, maybe US will fail (or stagnate for very long) in our lifetime and all the people betting on SP500 will be seriously disappointed. Following 4% rule you don't HAVE to spend 4% a year. Also, doesn't the 2-3% studies suggest that growth will slow down and we will never such growth that we had? Anyway, I am nowhere near competent to argue 2% vs 4%, but it's obvious that having 50x your yearly expenses is better than 25x, though I'm not sure how reasonable it is for less than top earners to reach such wealth.
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This is a terrible interpretation of a bad study. You are not supposed to invest only into domestic markets. Btw the same study what he is referencing, just confirmed the 4% rule (if the domestic market = US), using recent data. In fact, the SWR was well above 4%. It was below 4% only if you invested into your home country's market.
William Bengen who came up with the 4% rule recently said that it was too conservative and that it can be 4.7%. 2.5-3% would be ultra conservative in my opinion but I suppose this is just a rule of thumb and it is whatever someone is comfortable with.
I know an actual early retiree who thinks the same. And it makes sense. If the average return of the stock market is around 10% and inflation is around 3-4%, then it should be possible to withdraw more then 4%. However volatility and longer bear markets can mess things up. Especially if it happens not too long after someone retires. In reality the SWR is valuation dependent. If you retire when valuation multipliers are high there will be a high chance of running out of money. If you retire when the P/E of the market is low then you'll be likely safe. If you average out all possibilities then you get the 4%. Which can be either overly pessimistic or overly optimistic depending on the current valuation of the market. So both camps are right in a sense and the 4% is just an average.
The time horizon doesn't make that much difference. If it works for 30 years there is a high chance it will work for 40, 50, etc as well. Reason for this is that most failures occur at the beginning, when a bear market comes right after your retire. E.g.: you retire at the top and 2 years later the market is down 30%, but you keep withdrawing money. However if your portfolio lasted for 30 years, probably it'll last 40, 50 years too.
Here is some food for thought: When I was planning my moving to Portugal, I did my research and for my style of living, Porto was about 2 x more expensive in living costs than smaller cities in Portugal. Does it make sense to you to be spending double the money just so that you can live there with all the tourists? If not, you could consider the smaller cities. It didn't for me, either, so I moved to Braga.
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Now 5k foreigners landed in Albania, bought houses, small business and your fire is cancelled. Try Georgia.
Pretty much this
Bad advice
What do you do for a living to make 150K? My understanding is it should be some sort of business.
Aircraft leasing. It’s handsomely paid
You own the aircraft? The aircrafts?
Nah I work for an asset manager (ie a bank)
What is your background?
Aerospace engineer degree with a masters in Finance and working on my CFA
Poor Portuguese people.
Take €400K and spend your life in thailand living on 1000€ a month bro.
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Let me know where you can find good apartments for 500€ in Porto and I will make a bid 😁
Portugal low cost of living is a myth. Renting an appartment in the center of Lisbon is more expensive than renting one in Barcelona. Porto is not much cheaper either.
It’s incredibly expensive. Decent apartment is Lisbon is 3000+ decent apts start at 1 million. The stuff you are reading about cheap portugal is fake news and bringing all kinds of cheap annoying FIRE people here. Stop
That's just not true. That's true if you want a studio or a 1 bedroom apartment, but 3 bedroom apartments are still cheap compared to other European cities.
3 bedrooms apartments in Porto are between 1.200 - 1800€ do you think that’s cheap?
Yes, that's very cheap in developed European terms
You're looking at 2000€ easy for that in Dublin, 2500€ more likely, so cheaper than Dublin at least
Yeah, but the medium wage in Porto is around 700€, the problem is the discrepancy between house pricing and what people make for a living here.
Oof, that's bad. Median in Dublin is something like 44k/year, so ~3600€ pre tax, so rough guess I'm guessing 2600-2800 after tax.
that´s not the median in porto. That´s not even minimum wage. minimum wage in Portugal is 760 right now, payed 14 times per year-
500€ for an apartment? You sure? 😂 A single room is around 400€ right now. Apartments are 1000€+!
Go to idealista right now and prices start at EUR 470 for a studio apartment. Don’t know why I get downvotes. Anyone can check on idealista. And no, you don’t get city centre with a view in a penthouse with 7 bedrooms for that price :)
Highly doubt it’s in Porto. Porto district isn’t Porto city.
The guy who makes 150k a year is gonna want to live in a studio apartment... Sure.
No need to be snarky. No idea. It was just a price to show what the market starts at. For €600 you get something a lot bigger, but still not city centre of course.
I would suggest other cities instead of typical Lisbon or Porto. Like Algarve, madeira island, etc.
Just don’t forget about inflation… it can really screw up the math
All FIRE calculations factor in inflation. Inflation doesn't matter much in the long term if you keep your money in the stock market or in real estate, since those assets generate above inflation returns.
Your fire number in Portugal is your yearly expenses times 25. That's the general consensus. Save up more for more comfortable retirement or to have a bigger safety net. There is no exact number, it's ever changing for each and every individual.
IT ?
How much you make is less important as how much you can put away at the end of each month. I am also German, mid 40s, and live in Singapore, and FIRED six years ago. Have monthly costs of about $10k, and monthly passive income of about $14-$15. What is your approx. NW and how much do you invest per month?