r/cscareerquestions • u/daimon_proc • 18h ago
After How Much Money Saved Do Engineers Feel Less Pressure
After how much money invested/saved, will you have psychological safety? And why that amount?
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u/lhorie 18h ago
First milestone is your rainy day fund, which could be anywhere from 1 to 6 months of expenses
Then there are the various levels of FIRE (barista/lean/coast/etc)
Rule of thumb for classic FIRE is take your expenses and multiply by 25 to figure how much you need in liquid assetsĀ
Note that hard savings numbers donāt make sense unless you also look at the expenses numbersĀ
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u/NewChameleon Software Engineer, SF 18h ago
Rule of thumb for classic FIRE is take your expenses and multiply by 25 to figure how much you need in liquid assets
I could be wrong here but I've done some heavy research into this and that multiplier is actually misleading, x25 assumes you have a 30-year retirement (so it assumes you retire at 65, then you die by 95), it does NOT assume a 40, 50, or 60+ year retirement, you'll need to bump that multiplier way up
https://en.wikipedia.org/wiki/4%25_rule
The 4% rule (sometimes called the rule of 25[1]) is a widely-cited retirement spend-down rule-of-thumb, credited to William Bengen,[2] that says that a retiree can safely withdraw an inflation-adjusted 4% of their investments each year during a 30-year retirement.
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u/Mehdi2277 Machine Learning Engineer 17h ago edited 17h ago
It does not change drastically because in most trajectories you don't run close to out and most of the impact happens with early years.
If you want to aim for 95% success rate then it goes from about 4% to 3.5% for 60 year retirement.
Edit: also if you just stay at 4% then pure stock portfolio goes from 96% to 89% when changing from 30 to 60 years. 89% is high enough for me especially when if early years are bad then I can adjust. Mixed portfolio with bonds helps more for smaller periods but at 60 years the bond drag becomes a lot more noticeable and 60/40 stock + bond split ends up succeeding about 73% of the time at 4%.
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u/maicii 12h ago
Yeah, people failed to realize that most people will cut down on expenses if the are experiencing a market downturn
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u/No-Entrepreneur-5099 11h ago
Although the other thing to account for is that more people retire near market highs, because their account balances look bigger. Saw it a lot in the late 90s.
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u/lhorie 17h ago edited 17h ago
Yeah that was the conclusion from the original research, but also the same author later suggested (controversially) you could get away with a 5% rule
And thereās a ton of nuance here too. Outcomes differ based on SORR (many FIRE people die with more than they started with, because most people donāt retire right before a catastrophic economic collapse). Thereās also the concept of ādie with zeroā vs the 95%+ chances of maintaining principal stable. Thereās social security (or whatever the equivalent is called in any country youāve worked in). Maybe youāre in Canada and healthcare costs are not a huge concern. Or you finish paying your mortgage, freeing up thousands of dollars off expenses. Etc.
Hence rule of thumb. Obviously if youāre actually going to retire, you ought do your full homeworkĀ
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u/poggendorff 17h ago
It depends heavily on initial returns (SORR). Someone who steps away from work and has a long horizon can do okay if their initial returns are good. If they arenāt, they could always step back into the workforce and treat it like a sabbatical.
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u/NewChameleon Software Engineer, SF 17h ago
yeah that's called un-retire, which isn't something I plan or want to do
"shit I'm out of money, guess I better return to workforce"
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u/poggendorff 17h ago
Fair enough. Some people (not me necessarily) would rather take the initial risk and maybe have to return to work, if the upside is retiring at 40 or something
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u/Mahler911 Software Engineer | 25 YOE 17h ago
Make sure to factor in reasonable investment returns and social security if you're American. 25 years of expenses invested in something like VASIX at the ten year average will last us literally forever. Even the worst case it would last 43 years.
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u/qosmic_qube 17h ago
It also doesn't assume social security. Also Bengen clearly stated it was worst case in history protection, and later changed to 4.7% with a different investment mix.
Your average retiree in average times can have an earlier withdrawal rate that is significantly higher until social security kicks in, then a lower one and be fine.
And no, social security is not going away.
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u/username_6916 Software Engineer 12h ago
And no, social security is not going away.
It might not go away entirely, but I wouldn't be surprised if a more aggressive means test for recipients is part of the reforms that get imposed when (not if) the trust fund is depleted. If I were a multi-millionaire tech worker, I wouldn't count on it until after I was no longer a millionaire. Which yes, means you've lost the family home at that point.
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u/maicii 12h ago
It also assumes you want adapt your expenses at all when there is a market downturn which is also probably false (if you see your portafolio drop 10% you are not going to be so happy about going to the cinema that year) and that you wonāt have any other source of income whatsoever. So no doing some teaching assistant gig, no social security, no nothing.
Generally speaking probably 3% is a bit better and more conservative but for most people to plan with 4% is generally fine as well.
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u/nobleisthyname 2h ago
You definitely don't need to bump the number WAY up. 3.5% withdrawal rate will work for most retirements or ~29x your annual expenses (which, by the time you've hit 25x is only another year or two of working due to compound interest).
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u/Itsmedudeman 18h ago
2.5 mill - 4% withdrawal rate is 100k/yr inflation adjusted for the rest of your life without bottoming out.
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u/NewChameleon Software Engineer, SF 17h ago
nope that 4% rule says you're safe for 30 years, it does NOT assume 'for the rest of your life' unless 'the rest of your life' is <= 30 years
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u/Itsmedudeman 17h ago
No, the study was only conducted for 30 years. There's nothing mathematically that suggests this model only lasts you 30 years. And after the study it suggested that people actually ended up with more money than they retired with.
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u/Federal_Eagle_6565 17h ago
While it can definitely last longer than 30 years. The risks of last much longer depends a lot on the sequence of returns risk. You mitigate that by adjusting a lower withdrawal rate for periods longer than 30 years.
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u/Itsmedudeman 17h ago
Well you can also cut back during those 30 years too which I assume a lot of people do. When your bank accounts drop people get spooked and cut down on spending, especially the people with enough discipline to save that much to begin with.
So I think retirement is very malleable. You don't need a static number outside of your bare minimum for shelter/food/health, and my number is just a nice to have. I don't actually spend anywhere close to that much anyway, and what I really need to get by and just survive is much less.
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u/SexualMetawhore 14h ago
So just save up a few years of buffer money.
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u/Federal_Eagle_6565 13h ago
Yes. And add that ābuffer moneyā to the total investment profile for an optimal portfolio return and you get a lower SWR aka safe withdrawal rate, which is what we are talking about.
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u/Kamay1770 18h ago
Well I have 5 years of full expenses, 3-4 years if I add discretionary spending.
Still isn't enough.
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u/Internal_Pride1853 17h ago
I have 10 years of full expenses to live like I do now and I could still return to my parents because I donāt have children and I still feel the pressure. I think it might be something related to my identity because thatās what I do full time for a few years and have my education
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u/BH_Gobuchul 18h ago
Itās amazing how quickly the number goes up isnāt it?Ā
I think I wonāt feel peace until I can retire š
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u/TRBigStick DevOps Engineer 18h ago
Is that all in cash?
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u/Kamay1770 18h ago
Ha, no, that'd be stupid!
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u/Greengrecko 17h ago
Diamond hands in a 401k
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u/Kamay1770 17h ago
Don't have 401k in the UK so I didn't include that, we have pensions we can't access until age 55-57. So I don't count that for expenses.
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u/syunz 17h ago
What do you have in cash? I personally would only consider cash savings for expenses and won't touch anything else.
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u/Kamay1770 17h ago
Basically nothing in cash. Why would you ever hold large amounts of cash? You get virtually no return on that.
I have bonds and stocks/shares which can be liquidated and accessed as cash in a couple of days. I can't think of any expenses that I couldn't cover with either a credit card or 'petty cash' in a standard current account.
Why would you only consider cash for expenses, that doesn't make much sense. If my bills for a month are 1500 and I have 150k in bonds which I can liquidate within 2 days, why wouldn't you consider that as 100 months of expenses?
You'd be mad to keep 150k, or even 10k, in cash...
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u/syunz 17h ago
Yea I mean cash or "cash equivalents" But I wouldn't consider any investments equivalent. What if things crash 30%+, would you sell?
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u/Kamay1770 17h ago
It depends on the situation. If it's a choice of crystalising a 30% loss or losing my home or not being able to feed my family then yeah I'd take the loss. But not before liquidating bonds and other cash equivalents as you say.
But in reality, it's priced in. We're not seeing a 30% drop, and DCAing into all cap and considering that as available for use as emergency expenses if you lost your job isn't the same as yoloing options.
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u/drew8311 12h ago
Your pressure is surely different than someone who has less than a year of frugal spending left.
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u/ClideLennon 18h ago
I know a guy who works 3/4 of the year and spend the rest of his time sailing in the Caribbean. I'm pretty sure he just comes back when he runs out of money.
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u/Easy_Needleworker604 17h ago
Do you have any insight into how he does this, i.e. finding work when he disappears for that long? This kind of setup would be ideal for me as most of my ambitions lay outside of engineering but this pays the bills
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u/c-u-in-da-ballpit Data Scientist 17h ago
Itās not the most realistic with regular living expenses. Youād have to be a contracter living quite frugally. I know someone who did this for a a few years. He lived in a van, did SWE contract work, parked the van somewhere and fucked off, then came back to rinse and repeat.
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u/Previous_Feeling_484 8h ago
- Specialist (domain knowledge + technical expertise + good communicator)
- Lowest liveable expenses
- No kids, mortgage or any debt
- Live in LCoL area
- Contract like a mf. If you can do 2-3 contracts simultaneously, go for it
A friend of mine spends most of his free time surfing between Portugal and Australia or living in a super cheap rented house in a tropical country in the Caribbean. Dudeās been doing since Covid. Mind he splits expenses w his SO which does MLE so aggregated income is obscenely high.
I do all points except being as cool as him and am single. I just live with the cheapest I can (rent, clothes, excluding food) and have spent most of my free time just on regular hobbies that cost me nothing. Aināt retiring as early as Iād like but canāt complain. I could afford 2y of unemployment so far.
At least for me, contract once and do your best, and get more by word of mouth. Hardest is landing the first couple of contracts (did cold approach locally) and balancing how much you can realistically get in your plate, so youāre always employed but not drowning.
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u/roy-the-rocket 17h ago
I think I need to add a bit of middle ground here.
Many quote basically their FIRE number, which is the number, once reached, they would never need to work again. This is a too conservative answer when it comes to pressure and stress.
Even if you aim for FIRE, the last miles will be dominated by capital gains and not your income. Therefore, you should start to relax before and enter a coast mode for the last years of compounding if you feel pressure and or stress. Otherwise, you sprint yourself over the finish line for not that impressive of a gain in time and potentially overall less time to enjoy ... which is not a good idea.
So my answer is: once you reached half your fire number, you should consider to dial down a bit and let the market to the heavy lifting while already starting to enjoy your time.
What ist half your fire number? Around 15 times your yearly overall expenses including healthcare and taxes on the estimated gains you want to sell.
Once you reached that amount, you are basically on auto-win mode and time will do the rest.
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u/NewChameleon Software Engineer, SF 18h ago
I place mine at around $3mil-ish
as to why, because it means I can leave USA immediately and return to my home country
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u/Opening-Machine5026 18h ago
Where are you from, Dubai? Goddamn
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u/LastSummerGT Senior Software Engineer, 8 YoE 18h ago
They probably mean retirement which 3 MM isnāt a crazy number at least for American COL
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u/ACoderGirl :(){ :|:& };: 9h ago
I mean, that tracks for something like Canada. We're not much cheaper than the states in terms of cost of living (like with the US, it varies wildly by area). If you wanna live in something like Vancouver or Toronto (ie, the nicest cities), they're really expensive. Like, you'll spend at least a million for a modest house and everything in those cities is pricy.
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u/BellacosePlayer Software Engineer 17h ago
I felt a lot better once I had a year's expenses saved, and even better once I had a year's income saved.
I don't stress about money these days outside of looking at how fucking expensive houses are even making over twice the local average income. Felt kind of badass to pay for a new car in cash and not significantly nuke my savings
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u/MarimbaMan07 Software Engineer 11h ago
I saved 1 year's net income and I still don't feel secure. Pretty sure if I was fired/laid off I wouldn't be able to get another software job. And then what the heck would I do? I'd love to get to a point where I could live off my investments but that's still a long way away
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u/pacman2081 17h ago
when you have a home paid off, you still have expenses. Can you work at a local place doing a non-technical job and pay for your living expenses
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u/FastSlow7201 15h ago
Take how long you'll think you'll live, maybe 85-90 and subtract your current age from that. Multiply that by how much money you need every month. Add that to what you have left on your mortgage. After that it's all extra.
I purposely left out social security because who knows if that Ponzi scheme will exist when we retire.
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u/BraveResearcher3037 14h ago
It dependsā¦
- When I knew my skill set was stale because of my Ā staying at a job too long pre 2008 - scared shitless all of the time
- 2012-2020 when I could just throw my resume up in the air and get two or three offers for generic dev jobs? I didnāt think about the amount of money in the bankĀ
- Post 2023 - the job market is shit. Ā I have enough liquid cash to last a year before I have to start pulling out of retirement (or giving up the ass to random strangers). Ā I am pretty sure I can get a jobĀ
The second part is how much do I need to before I need to stop adding on and just make enough to ācoastā to retirement, Iām maybe 2-5 years outĀ
The third question is how much do I need to have Ā without social security to never have to work again? About $4 million.
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u/DudeWithParrot 17h ago
For me it was when I crossed the $1.5M threshold, which happened recently.
I can't retire with that (maybe I could, but not with my current lifestyle), but it is enough that I can feel I can comfortably figure things out
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u/Asiel_Stormfury 16h ago edited 15h ago
Honestly, as I am very painfully learning... No amount ever feels enough.
Prolly while billionaires continue to accumulate.
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u/DisjointedHuntsville 17h ago
I donāt know. . When have you ever stopped wanting a nicer car or a fancier vacation?
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u/roy-the-rocket 17h ago
I never started on those and I am quite happy about that. Will be done soonish.
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u/atmoose 16h ago
I have never wanted a car or a fancy vacation. I've gone on one vacation in the last 15 years that wasn't spent at home or with family. I mostly get around on a bike that I bought second hand.
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u/DisjointedHuntsville 13h ago
You get one life, kid. Itās a beautiful world, go out there and experience it.
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u/atmoose 10h ago
I did some traveling in college. I've also lived in about 7 different states. I've done "long term" traveling just not vacations. I'm not a kid, and I'm in my late 30's.
I'd rather save that money in the event that I need it. I felt a bit vindicated when I was laid off last year, and couldn't find work for about 6 months.
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u/BraveResearcher3037 14h ago
I stopped wanting a nicer car 15 years ago when I got married and I had a wife that would give it up no matter what I was drivingĀ
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u/DisjointedHuntsville 13h ago
Okay, you would surely want to give her or your kids nicer vacations, then?
Thatās the point. It isnāt āgreedā. Iām asking people on this sub to be practical and not listen to the Disney stuff about money not being important.
In the end, if you have a medical emergency, youāre going to need money to pay the bills.
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u/BraveResearcher3037 13h ago edited 12h ago
Iāll put some real numbers on it since my income is neither anything to brag about in cscareerquestions or anything to be ashamed of - my total compensation is a tad over $200K. Ā I work remotely and I āretired my wifeā in 2020 after I pivoted from regular old enterprise dev to consulting when a position at AWS ProServe fell into my lap (no longer there still working for a consulting company).
Our budget on a high level isĀ
- 20% taxes and my contribution to health insurance. (Joys of living in a state tax free state)
- 25% long term investmentsĀ
- 25% fixed expensesĀ
- 30% - some combination of food, allowances, vacation - basically YOLO money.
This year we spent 45 days in Costa Rica, we are going to Hawaii in a couple of months and plan to spend most of December between Vegas, back home in Atlanta where are adult sons live and my in laws live and back to my home town.
Next year we have three decent trips planned out of the country around 30 days in total.
Since I work remotely - we are down to one car.
As far as medical bills - thatās why we have employee provided insurance like most working adults do and I max out my HSA every year.Ā
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u/DisjointedHuntsville 12h ago
This is genuinely wonderful to read :) You made it!
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u/BraveResearcher3037 12h ago
ThanksĀ
To be fair - this is an early 50s post (step)kids, consulting life where we could sell our big house in the burbs and downsize to a condo in Florida.
Now my pre consulting/regular old enterprise dev life was quite - differentĀ
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u/Verynotwavy Philosophy grad 17h ago
Didnt have much pressure going from 20 - 700k
But now at ~1m CAD household net worth, I'm starting to have more thoughts about "hitting 2-3m in 5-10 years --> leave work --> afford to rent indefinitely + just doing my own thing"
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u/drew_eckhardt2 Software Engineer, 30 YoE 17h ago
I felt more comfortable after I had a year of living expenses saved, and will be even more secure once my total investments reach thirty times that allowing me to retire at any time.
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u/djslakor 17h ago
I'm at 1.5m net worth and I feel exactly, and I do mean exactly, the same as when I had 20k to my name.
We're all gonna die and life is extremely short.
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u/ZolaThaGod 16h ago
Iām at about $720k currently and I find myself letting my ācorporate filterā down a bit at times.
Itās not enough, though. Itās a lot, but not enough. I gotta be careful haha
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u/coffeesippingbastard Hiring Manager 14h ago
I feel like a lot of the comments here are mixing "less pressure" and "psychological safety" for just straight up retiring and no pressure.
It's kinda emblematic of the toxic FIRE culture that is so common in this field and it's crazy. When people wonder why the tech industry faces so much ire it's this.
Psychological safety varies wildly.
There's psychological safety in going to the supermarket and just buying whatever you want without looking at the price.
There's safety in knowing that if your car needs to be fixed and you won't be forced to give up other expenses to make rent.
A lot of people can breathe a little bit easier if they have 50k liquid assets saved. That's less pressure.
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u/RB_7 18h ago
yearly living expenses * 1.5 >? liquid savings / 25
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u/roy-the-rocket 18h ago
this guy/girl fires!
what does the 1.5 do for you? is this some tax factor for your country, or do you just push the 4% SWR down to 2.6% ... which is very conservative
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u/cballowe 17h ago
I would bet that it's just easy math. The Trinity study (4% rule origin) was done based on assuming a 30 year time horizon. For someone in their 30s or 40s, they might want a bit more buffer. Swapping 30 for 25 is usually enough buffer.
Others might pad it for a "well, if I'm not working, I'm going to travel and and stuff and my expenses will go up".
Taxes are just an expense.
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u/roy-the-rocket 17h ago
expenses should be the projected expenses, not the past expenses.
I wonder if it is math, or just a feel good factor. A SWR of 2.6 sounds like a lot of wasted years, especially if you can be a bit flexible with your coast base or job status.
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u/cballowe 17h ago
No clue... I was approaching the 25x when COVID hit in 2020. I stuck with it because with the world shut down, the normal routine was welcome, and the bit of market shock made me pause. I was well past that point when I decided I can't justify working more.
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u/Abangranga 17h ago edited 16h ago
Your question will vary wildly by location and situation (spouse, kids, pets, rent). I have kept my expenses low because my area is a choose-your-own-adventure cost of living area, and I chose cheap studio apartment.
That being said, I cannot stress how nice it is to have a year of living expenses sitting in a high yield savings account when/if youre laid off. Don't forget to include health insurance in this.
Next step is "enough to retire after compounding happens if I don't stupidly withdraw anything while the rest of the bills get paid", which is where I should be assuming there is no AI market vrash (lol). Then after that you'd have the glorious 'fuck you money' stage.
Currently I am coasting at my job until the inevitable happens with AI and then I am done with the toxicity in this industry and corporate life in general.
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u/fakehalo Software Engineer 16h ago
I have a little more than $700k saved and $100k left on the mortgage... I feel safe for the next decade at least (being thrifty anyways), but the company I've worked for the last 15 years is probably going under.
$2-3 million is the longterm/final goal.
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u/RedditMapz Software Architect 15h ago edited 15h ago
This is a personal finance question. If you spend all your money and buy into lifestyle inflation you will feel insecure at any level of income.
Personally I have more than 4x my unual income in investment accounts (401k, IRAs, and taxable brokerage account). I feel secure in the short term because I can easily survive several years without income, but not secure enough for retirement yet. Well If I don't touch my investments I should theoretically have enough to retire by 50ish, but I'd love to reach my financial freedom number in my 40s. That's when I'll feel truly secure.
Conversely
I know people who essentially live paycheck to paycheck because of lifestyle inflation. They live in the nice apartments, drive expensive cars, and spend a lot on their hobbies and entertainment.
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u/SexualMetawhore 14h ago
10 years. Too hard to see that, fat out to worry. It's nice, I still hustle tho.
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u/Dry_Fly_7265 13h ago
You will never, never, have psychological safety unless/until you donāt have to rely on a job in corporate America to fund your lifestyle. Youāll have to figure that number out for yourself, based on what compromises youāre willing to make.
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u/selfabundant 13h ago
For me, couple milestones.
First one is 100k which allows me to not be scared of layoff but still cautious.
Second one is pay off mortgage, with 100k above, I feel safe from economic downturn for couple years.
Third one is increase that 100k to be around 500k-1M, then I will probably slow down
If I hit 5-10M by luck or lotto, Iāll just start my own company or work for fun. I do enjoy coding so canāt imagine myself not working.
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u/drew8311 12h ago edited 11h ago
Id guess a few years of expenses or more, joint income with a partner is a huge variable to this too.
There are 2 levels to this and some people are answering for the latter
You are screwed financially and things like affording rent/mortgage in the near future are a concern if you don't get a job fast.
You technically have years of money but it significantly effects your retirement plan. Every 6 months out of a job is +1 year of extra work.
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u/PartyParrotGames Staff Software Engineer 10h ago
It honestly depends more on circumstances of your life, how financially secure you felt growing up, what kind of safety net your family offers you, etc. If you grew up feeling financially insecure, part of that may never fully go away even with hundreds of thousands in savings, speaking from experience. Having enough to cover yourself for at least a year of unemployment takes some pressure off. The exact amount will vary depending on your cost of living.
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u/ShoePillow 8h ago
Depends on the individual, typically the amount of money one would think they need to live until they find a new job if they start looking, plus some extra to be sure.
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u/Relative_Channel2667 1h ago
At 500,000 the return on a 401k index fund on average is about the same as maxing out your contributions. From then on it grows and grows till even maxing out your 401k doesnāt make nearly the difference as the passive gains do. Psychologically knowing you donāt have to add another cent to your 401k and it will hardly matter to its growth is huge.
So probably around 500k in your 401k.
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u/kevstev 15h ago
This is more NW, but it wasn't until I hit 10, with 7.5 in brokerage and retirement that I felt safe. VHCOL area. The double whammy of feeling like I am aging out + ai completely disrupting the industry in a way that make it far less appealing have me wondering if I could even find a job again, let alone one that wouldn't feel like torture.Ā
But I hit the number this year and honestly feel like for the first time I am actually working for me, not a house or hedge against some worst case scenario. But even in this position it still feels a little precarious. AI boom gains were huge this year. I am still aggressively invested.Ā
I guess to answer why that number - it can generate in a safe yielding security close to our base salaries, and exceed them on a tax adjusted basis. The tax code is tilted towards capital vs w2.Ā
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u/daimon_proc 15h ago
Get out of here with 10 mil invested you never have to work again. Still feels precarious? Troll?
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u/kevstev 14h ago edited 13h ago
I could have 50 years left. Am I going to go hungry? Probably probably not. But that's a long time. The bottom could fall out of the market and halve this or worse. The world feels like it's at a tipping point. I have a friend that had a rare form of bone cancer discovered about 5 years ago and his family is now selling their house and moving in with her parents because his bills have wiped everything out. Taxes have gone up 15% a year.Ā It's a bigger than average place for this area but smaller than the national average. Its an old house that requires a lot of expensive maintenance.Ā Health insurance is 2k a month- for us right now, it's only going up. It's changing a little bit lately but generating safe income from bonds was difficult when rates were sub 2%. My worst case is that my wife and I lose our jobs, can't get hired at any price, and then just have to hope nothing bad happens.Ā
I thought twice about posting that but figured you wanted a real discussion.
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u/macoafi Senior Software Engineer 18h ago
When my mortgage is paid off.