Retire early? You need ‘at least $5 million,’ according to Suze Orman

This lifestyle leaves you exposed if disaster strikes

Suze Orman just threw cold water all over the FIRE movement that’s been spreading across the internet.
FIRE is short for “financial independence, retire early.” Work hard, make money, SAVE!!!, and, then, stop slaving away for “the man.”
Envision your dream of a flexible future and do what it takes to make it happen. Sacrifice now, enjoy later. That’s the gist.
On Reddit, there are more than 433,000 subscribers gathering to discuss their FIRE tips and experiences daily. “At its core, FI/RE is about maximizing your savings rate (through less spending and/or higher income) to achieve FI and have the freedom to RE as fast as possible,” the group’s description reads.
For many a work-worn millennial, it’s the Holy Grail. For one of the biggest names in personal finance, however, the approach has disaster written all over it.
“I hate it. I hate it. I hate it. I hate it.”
Tell us how you really feel Suze.
“Listen everybody. I know you want to retire at 25. At 30. At 35,” Orman told the “Afford Anything” podcast (http://podcast.affordanything.com/153-hate-fire-movement-suze-orman/). “But… as you get older, things happen.”
What things, Suze? That’s when the interview turned dark:
“You get hit by a car. You fall down on the ice, You get sick. You get cancer,” she said. “If a catastrophe happens, if something goes wrong, what are you going to do? You are going to burn alive.”
Then, Orman, with a net worth estimated to be in the neighborhood of $30 million, dropped a reality bomb of self awareness.
“Listen, if you have 20, 30, 50 or 100 million dollars, be like me, OK?” she said. “If you have that kind of money and you want to retire, fine.”
If not, and that’s most of us, better build that cushion, because, she says, if you stop stashing money, you’re losing the compounding years of your life.
“When you are younger, the money that you invest makes money and that money makes money and that money makes money,” Orman explained. “You cannot make up for that with sums of money later on in life.”
When Paula Pant, the host, asked what level of wealth would be necessary to comfortably reach FIRE, Orman threw out some big numbers.
“You need at least $5 million, or $6 million… Really, you might need $10 million,” she said — short of that, it’s just not going to be enough for most people.
“You can do it if you want to. I personally think it is the biggest mistake, financially speaking, you will ever, ever make in your lifetime,” she said. “I think it’s just ridiculous. You will get burned if you play with FIRE.”
Listen to the full podcast for more:
(https://www.youtube.com/embed/JbeLhKKg9RI)
There was a range of responses. Some FIRE devotees, like Thomas Insall, appreciated hearing the other side of the argument
“Hearing such a strong, contrarian view from someone who’s spent their life hitting the ground hard and made so much for themselves is great!” he writes in the comments section. “If anything at all, Suze challenges us to revisit, reassess, potentially implement a warier eye and more conservative safeguards over ourselves for if/when we FI/RE.”
Reddit’s FIRE board, however, was much less supportive, in general. Here are just some of the criticisms lobbed her way:
“Suze doesn’t want you listening to anyone but Suze. She only promotes advice that supports something she previously said, and FIRE is way outside of her wheelhouse.”
“This is a situation where the old saying ‘Consider the source’ applies.”
“She had made millions on being the expert to tell you how to manage your money. If you can learn how to meet your goals just by reading the FAQ on a subreddit, her business model is f**ked.”
“Suze Orman is right: private planes and private islands are not cheap.”
What’s your take on FIRE and Orman’s distaste for it?
For more on this topic, check these out:
Here’s why you shouldn’t retire super early even if you can (http://www.marketwatch.com/story/heres-why-you-shouldnt-retire-super-early-even-if-you-can-2018-08-30)
Why early retirement IS all it’s cracked up to be
(http://www.marketwatch.com/story/why-early-retirement-is-all-its-cracked-up-to-be-2018-05-15)
People may be missing the point on retiring early (http://www.marketwatch.com/story/financial-independence-cant-give-you-the-one-thing-you-really-want-2018-09-20)
The bad things about early retirement nobody talks about (http://www.marketwatch.com/story/these-are-the-bad-things-about-early-retirement-that-no-one-talks-about-2018-09-26)
-Shawn Langlois; 415-439-6400; AskNewswires@dowjones.com

October 03, 2018 17:39 ET (21:39 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.

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Purposes of this blog

The Internet is a medium unique to the 21st century. It allows
communications which are virtually instantaneous and interactive. For current
teachers, the Internet is the primary or sole source of information. For some,
but certainly not all, retirees, the Internet is unfamiliar and unclear. Furthermore,
the rapidly changing landscape of the Internet challenges our adaptability and
should not be seen as a replacement for traditional media forms. Consequently,
the Internet has changed not only how we receive information but also changed
how we process that information, most especially how we trust what we see and
read – no matter its medium.
The
primary focus of the C of 13 Blog must be to effectively address our two
constituent groups: the retirees who depend upon their pensions and are more
willing to work to secure it, and the active teachers and principals who are
contributing from their paychecks into the retirement fund.

The groups have different perspectives on the pension fund and the messages sent to
them should be aligned with those perspectives. Yet our messages must be
consistent across both groups; they must never contradict one another. They
must also be well founded on the value to each group of the strength and
stability of the pension fund. What we say must be trustworthy, reasonable and
backed-up by evidence.

This must be accomplished in an age when truth is not the source of many messages
but rather the perceived truth derived from messages repeated loudly and often.

Jay C. Ritterson, editor

Listen, Talk, Vote

It is an election year for Minnesota. Much is at stake.
Midterm elections don’t usually draw much voter turnout. When the state economy seems to be doing well, voters may think that not voting returns the status quo. These conditions favor the opposition, whose turnouts produce stunning defeats and are followed by dramatic reversals.
Minnesota stands out as a great place to live, for now. The governor’s efforts to hold off the forces of capital side pressure have preserved many gains for Minnesotans. That could come undone in November. There is a fragile and unreliable balance in power.
If the effects of an international trade war sharply depress the equity markets and the economy, pensions and other retirement savings could be similarly depressed and under renewed threat from the investment industry. Losses in farm exports could put further demands on our state’s resources. Meanwhile, prices for consumer goods as well as medical costs and inflation could rise. Social Security and Medicare are already under threat from blossoming Federal debt and the prevailing “everyone for her/himself” attitude in Washington.
We can anticipate debates around gun sentiment and actual education needs upping that piece of the next budget, while the 2017 budget standoff gets revisited attention. The #MeToo movement will rightly demand some actions. Meanwhile, other gender rights agendas lie right beneath the surface. And there will be water quality problems and climate change effects that are unpredictable but seemingly inevitable. Actions taken will have long-lasting outcomes.
Voting in November could not be any more important. Your everyday lives are far more impacted by state controlled factors than any other. Every candidate must be asked about all of the above points, and their answers must be clear and their positions firm. That’s how you must decide your votes.
If you’ve read this far, you were already committed to voting. Now commit to getting family and friends to do likewise. Find out where candidates are on the issues and get yourself and others to the polls in November. Every day you should think about what’s important in your life that the State of Minnesota affects in some way. Listen to what others are saying about these things and talk with them about why you feel as you do. Then every day, tell someone to vote in November.

State workforce, national pension trends discussed at LCPR

The Legislative Commission on Pensions and Retirement (LCPR) on Tuesday heard a presentation on national public pension trends from Alex Brown, research manager at the National Association of State Retirement Administrators (NASRA), and testimony from State Demographer Susan Brower on trends and forecasts for public employment in Minnesota.

Brown called attention to differences between Minnesota and other areas of the United States in pension policy and spending. He noted that the employer-employee contribution rate in Minnesota is more evenly split than in other states (most often the employer contribution rate is higher than the employee’s share).

He said that nationally in fiscal year 2015, about 4.6 percent of state and local government spending went to pensions. In Minnesota, only about 2.3 percent of state and local government spending went to pensions. In addition, the normal retirement age in Minnesota, age 66, is higher than the national median of age 63. Minnesota public workers also fund a higher percentage of their benefits than the national median. Brown mentioned some of the reforms in the U.S. in recent years, including lowering benefits, raising contributions, conversion to hybrid plans, and the transfer of risk from employer to employee.

Brower presented data on Minnesota’s aging population, the resulting projected workforce changes, and the impact of growing diversity on the state labor force. The transition to an older Minnesota has begun, and the aging of the population will change demand for public services – especially health and human services and K-12 education, she said. As baby boomers continue to transition to retirement, labor force growth is projected to slow over the next decade, transforming the state workforce in the process.

Brower said that the state government workforce is heavily weighted toward older workers, which shows how defined-benefit pension plans do appear to help attract and retain workers. In Minnesota, trend lines show that workers tend to stay employed in state government for a long time.

Both presenters’ slides are available on the LCPR website: https://www.commissions.leg.state.mn.us/lcpr/meetings/agendas/2018/020618_agenda.htm.

Courtesy of TRA Communications

Pensions Are Important to People

Let’s be clear: Pensions are important to people. 51% of American workers say it influences taking and keeping a job. Like Social Security, it is somewhat sheltered from predatory advisers and brokers. While not flashy, a pension is also not volatile as the equities market is.
The average couple in the U.S. will spend roughly $250,000 in medical expenses including Part B and supplementary health and prescription drug insurance but not including long term care, and those dollar figures will inflate. How will you cope? A secure pension looks much more attractive than working until you are forced out to live on an extreme poverty Social Security check and whatever investments the financial industry has left you, if the Market hasn’t scuttled them.
The billions of dollars in nation-wide retirement investments are surely attractive to advisers, brokers and financial firms, all of whom want a slice of your pie. And they may bend, twist or disguise the facts to convince you to depend on them. They work on the businesses and politicians to persuade them that they will take care of you while sparing the big money interests from having their profits converted into taxes. Yet those taxes support the very people who—toiling away in their offices and classrooms and in their snowplows and firehouses—work to make the country educated, safe and pleasantly livable.
Since others want to take some of our money, we must all be vigilant, informed and ready to speak up in defense of the Minnesota public employee pension plans. The health of all of them is vital to the health of each of them. Connect with and support those organizations that are working on your behalf. While the Minneapolis Committee of Thirteen will work tirelessly to secure the retirement future of Minneapolis Public School educators, they need you to do two things.
Your contributions over the next 12 months will make it possible to adequately support pension friendly candidates who will in turn support you if elected. You must also tell friends and co-workers to speak up and step up for legislative support for the Minnesota Teacher Retirement Association and all Minnesota public employee pension plans. The Legislature determines all the changes to our pensions.
Help people understand that tax dollars are the price we pay for a civilized society. Let them know that those who have enough money to buy education for their kids, security systems for their property and insurance for their out-sized homes are not exempt them from participating in society. They drive on the highways, they visit the parks, they enjoy the safety and security that surrounds them, and they even hire public school educated workers who help provide that privileged life-style.
Be informed and be engaged. Stay in touch with the work of the Minneapolis Committee of Thirteen here on comof13.org (the blog), http://www.facebook.com/committeeof13/, twitter.com/committeeof13, and coming soon to Google+, and make contributions, learn about events and connect to other resources to the main Website http://www.committeeof13.org.
For those of you in schools, in Minneapolis and across the state, have a great year. Teach the children well and know that teaching is the finest vocation on the planet. You deserve the respect of all Minnesotans, and the rewards you’re earning. What you do makes America; make it Great. 

HIATUS

Serving Minneapolis Public Schools educators, active and retired in securing, maintaining and enhancing strong pensions for their retirement years
After 5 years, there is a hiatus and perhaps an end. Please continue to check in. We should know better the status of of social media arm.

LCPR considers several bills and hears testimony from Center of the American Experiment

March 22, 2017 – Last evening the Legislative Commission on Pensions and Retirement (LCPR) considered several pension bills and heard testimony from Kim Crockett with the Center of the American Experiment (CAE).
In a discussion about funding for the major pension bills, Rep. Paul Thissen (D-Minneapolis) asked LCPR Chair Sen. Julie Rosen (R-Vernon Center) whether the LCPR can act on the major pension bills this session since the recently-released House GOP and Senate GOP budget targets do not specify funding for pensions. Rosen responded that pensions are a priority and that “in the end, we will take care of pensions.”
Kim Crockett*, who is CAE’s Vice President, Senior Policy Fellow and General Counsel, made a presentation (available on LCPR website), “Keeping the Promise: Pensions 2017” and was accompanied by Ross Bowen, an actuary and Financial Advisor at Merrill Lynch Wealth Management, who helped CAE analyze the Minnesota pension system valuations.  In her testimony, Crockett pointed out that there are 630,000 public pension retirees, survivors or active public employees in Minnesota who are counting on their public pensions.  She said Minnesota has been making pension promises without paying for them and highlighted how the funding ratios of the systems have dropped from being fully funded in the early 2000s to being 77 percent funded by 2016, leaving a $17.8 billion shortfall.   She indicated that “Anyone in a DB right now, I want to see it fully funded.”
Crockett stated that current investment return assumptions are too high and understate the deficit. She provided estimates showing that the current $17.8 billion shortfall would be $31.6 billion if a 4.3 percent return is assumed and $44.2 billion if a 2 percent return is assumed.  Unfunded liabilities are crowding out other spending priorities, she said, and referenced a quote from Warren Buffett that calls pension costs a “gigantic financial tapeworm.” Crockett pointed out that contributions for the plans have been rising but those contributions “are not getting us out of the hole” and she added that the “market crash did not cause the pension problem as the funds would have you believe.”
Crockett proposed solutions: “fully fund the defined benefit plan for retirees and current employees,” and then close the plans in order to stop adding new liabilities.  Crockett recommended new employees be offered a defined contribution plan that she believes would be more appealing to younger employees.  With respect to COLAs, she indicated that they “eat away at the asset base” and are not provided by private sector pensions.  LCPR members had no follow-up questions of Crockett.
In action earlier in the hearing, LCPR approved a special individual bill (SF 1839) that would permit a Winona State University employee a second opportunity to elect TRA coverage with the costs of that coverage borne by the employee and Winona State.
The LCPR also heard legislation (SF 1864/HF 2390) affecting PERA-covered employees receiving workers compensation.  Under current law, an employee may elect to purchase service credit for a period during which the member is receiving workers compensation, but in order to receive credit, the employee must pay both employee and employer contributions on the compensation.  The bill would require employers to pay PERA contributions on workers compensation when the employee elects to pay contributions on such compensation.  The bill limits the purchase to up to one year.  The bill was laid over for possible consideration in the omnibus pension bill.
LCPR also considered a bill (HF 2236) that would grant a benefit increase to retirees and surviving spouses of certain local salaried police and fire relief associations that consolidated with PERA. The benefit increase would be funded by state aid to PERA.  The bill was laid over for possible consideration in the omnibus pension bill.

Laurie Fiori Hacking, Executive Director
Minnesota Teachers Retirement Association

* C of 13 editor’s note: Kim Crockett has consistently provided an absolute worst case interpretation on publicly held pension systems. Some of these border on “alternative fact.” The CAE has a clear interest in moving billions of public employee pension funds from State Board of Investment control into the hand of private investment industry hands–hands that keep a bit of every transaction.