They’re mostly bogleheads so are a little risk averse, but for most that’s probably the right move anyway.
The great thing is you can read the subreddits casually for ~3 months and learn everything you need to know to autopilot your financial plan for decades if you go the boglehead route. After that you mostly need to pay attention to major changes in tax law and entitlements.
I still read them all the time but I haven't learned anything new in years.
There's much better advice on /r/fatfire in terms of more advanced investing and tax stuff, but you have to sift through a lot of not-so-humblebragging posts. There is so much to learn outside of the "make a 100k-200k income and put everything into three securities" even if you don't use it. Real estate investing, entrepreneurship, angel investing, trusts, different corp-types, estate planning, etc.
And little things like that can help in the long run.
Boglehead advice agrees, with an explicit principle of “Never bear too much or too little risk”, suggesting 30-40% bonds in your 40s and the rest in stocks.
I think more people underperform from being too risk-averse than under-perform from having too much equity exposure and having an unfortunate overlap of a large expense and a downturn in the market.
I'm fairly risk averse and don't totally believe their leverage calculations. But it did convince me that any non-negligible bond allocation is probably suboptimal.
You talk about maxing out your 401k, but have looked into you maximizing your income to the be able to save more?
(Of course money is not the only important thing in your life)
People reaching 100k/year or so single income should be able to save comfortably. And a lot of programmers are on an appropriate career path to get there in a few years
But I think you're missing the point. The advice for most people (the target audience of the gurus) is wrong. It's just a coincidence that this article is posted on HN and it would be disingenuous to examine it from only this position/context.
The median household income in the United States is $79.9K. Assuming that a family of four can live on $50K (including taxes) in - most - locations, which is twice the poverty limit, they can theoretically save $30K a year in a mix of 401K, IRA, and general investment accounts.
This amount, if invested over thirty years with a 7.5% annual return (which is lower than what the S&P has historically returned by a fair amount), would give them a nest-egg of $3M. If they only manage to save half of that amount, they would still have $1.5M by retirement.
Now, this is a very feasible scenario for families in their twenties to late thirties, which is why many of the names mentioned in the article harp on the importance of investing early. It doesn't work nearly as well once you reach that point.
However, the opposite - not saving or investing, and having a large amount of consumer debt - leads to significantly worse outcomes.
No, its not, that's the median family income, which only counts groups of two or more people related by birth, marriage, or adoption living in the same home, whereas median family income includes single-member households and those whose members have no family relation, and thus is significantly lower, about $65K.
I think the main problem here lies in assumption of the distribution over the various locations. $50k+ in Appalachia is good money and you might be able to save $30k out of $80k. One would not be saving and investing in many of the large cities and their suburbs (where more people live).
One thing to note is that the $1.5M-3M is not inflation adjusted and would be worth much less than it is today. It will result in better outcomes, but it won't make people rich, like many claim. $1.5M is just enough to keep a couple out of poverty who will be retiring at 65 years old, 35 years from now. This is especially true if people live longer and the cost of healthcare continues to increase much faster than inflation.
"(which is lower than what the S&P has historically returned by a fair amount)"
The next decade is supposed to be much lower. (Past performance is not an indicator of future returns).
A 50K expense target is comfortably doable in most locations (that is, outside of San Francisco, New York City, and VHCOL suburbs). Keep your housing and car expenses reasonable, and cook at home.
> It will result in better outcomes, but it won't make people rich, like many claim.
$3M in investments allows for a ~$150K annual withdraw at retirement in near perpetuity. Add in social security, and the average take home for a dual income family will be at or over $200K a year. With this and assuming no other changes to their expenses, every year, they can 1.) go on 4-5 overseas vacations flying business class, 2.) eat out every night, 3.) purchase a new Mercedes E or S class. This isn't a bad way to live.
> One thing to note is that the $1.5M-3M is not inflation adjusted and would be worth much less than it is today.
$3M today will be worth ~$1.5M thirty years from now, assuming a 2.5% inflation rate. Even if they have only invested $1.5M, the $30K thrown off every year by $750k when, added with social security, still makes for a comfortable retirement.
"they can 1.) go on 4-5 overseas vacations flying business class, 2.) eat out every night, 3.) purchase a new Mercedes E or S class. This isn't a bad way to live."
I find it hard to believe that people making $85k or $58k today can do these things. I think it will be even tougher with healthcare costs associated with aging.
"still makes for a comfortable retirement."
Yes, I think it would be a comfortable retirement. Where is the claim that it would make one rich? Otherwise where is the argument...
"It will result in better outcomes, but it won't make people rich, like many claim."
You also haven't addressed the $1.5M side of it properly. That $30k you're talking about is only worth $12k. If the income is $100k per year (half the $3M number), that's the equivalent of about $42K per year at retirement and only $29K after the first 15 years. I'm pretty sure money would be tight in any suburb or city on that amount. They certainly aren't rich.
What are the advantages of 401k instead of say dumping it into half-VOO half-crypto and making millions one way or another?
Buying VOO buys a share of the profits of the work of many millions of people. It also speculates that other people will continue to want to buy those profits.
Buying a token only speculates that more people will want to buy that particular token. It's much harder to project that people will continue to want it.
Financial advice in general sucks. But when we get into the specifics... such as any say $150k/year programmer or higher, the generic financial advice of 6 months saving + max out 401k plan works.
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The plan for people at average, 50k/year combined income is closer to the go to college and get some skills that will launch your career.
What I do find amusing is our collective inability to talk about things that matter. Ex: the paycheck is the elephant in the room. And even though it is brought up in this post, the paycheck differences between families can lead to grossly different experiences.