I’ve read story after story about how to FIRE. The formula always starts with “SAVE HALF” or some similar bromide. What does save half really mean beyond the obvious application of third grade math? I was reading an article stating: “Whopping 62 percent of jobs don’t support middle-class life after accounting for cost of living” I’ve seen it proclaimed by some FIRE bloggers as if anyone can do this FIRE thing, with a bit of a sneer implying “and if you don’t you’re a dope”. To save half, means you have to make twice! Middle class is defined in the article as wages between $44K and $79K. Professional class is $79K or more. This means to save half and remain even in the low end of middle class ($44K) you have to be professional class ($88K). On the high end of the range to save half you must make nearly $160K per year. An entry level engineer makes $84K in NYC, $59K in Chicago. Save half kind of implies you have no debt after say 5.5 years of engineering school.
But wait it’s even worse! It turns out depending on where you live you may be under water even on $44K. Honolulu has a starting middle class wage of $66K and if you apply the same middle class spread the upper limit would be $118K meaning save half would require remuneration between $132K and $236K per year. You might say OK Mr. Smarty Pants, we’ll save 1/4 and work longer! Yes precisely, you will work 9 years longer. Saving half of $88K @5% for 15 years gets you $1M. Saving 1/4 of 88K for 24 years gets you the same 1M. A common scheme I have read espoused by some bloggers is all you need is 15% savings yearly. 15% of $88K is $13K. That pays you 1M in 32 years. I guess if you can land a $88K/yr job at 22 you can retire on almost $44K/yr at age 54 assuming you never get fired or laid off, and live in a cheap place. Does the parlance of a 32 year career fit the fantasy definition of RE? What is the true longevity of $1M at a 4% withdrawal? At 54 you have 11 years to Medicare. At 4% withdrawal ($40K/yr) would put your retirement 10% less than middle class ($44k). You officially get to retire poor. OK Mr Smarty Pants, we’ll work longer! Why yes, yes you will.