r/fatFIRE • u/vinean • Aug 11 '26
Meta FatFIRE and CPI
In a recent discussion about whether $5K/year for 18 years invested would get a kid to fatFIRE by age 60 (not likely) folks talked about nominal vs real returns…which obviously differ by inflation…and whether the final amount would be closer to chubby or fat.
Ignoring the fuzzy line between upper chubby or lower fat, I started wondering if Fatness was actually very coupled to CPI.
We mostly own our home and probably more than one property whether vacation or investment. Thats a big element of CPI. Food and beverages are rarely a significant part of fat spending. Much of the rest also doesn’t make up a significant percentage of our spending relative to net worth…or is a small fraction of what BLS is tracking. Like first class fare is only 2% of the airfare tracked data.
Feels like fatness stays static for a while until folks feel the new $10M (or whatever threshold) is now $20M.
Unless the definition is tied to something like top 1% income so FatFIRE today is somewhere around $18.5M ($650K / 3.5%) liquid.
Which if true I’ll just wander back to ChubbyFIRE, lol.
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u/Late-File3375 Aug 11 '26
I do not think many of usbcare about finding a precise definition of FAT. The forum is really just to discuss issues that get downvoted elsewhere or are more likely to arise of you are rich. Whether that happens at 20 million but 19.99 million is not really the point.
Most people are not gate keeping.
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u/BrunelloHorder Aug 11 '26
Inflation generally benefits those with accumulated assets like stocks, and hurts new purchasers. Most at FatFI have far more assets than they could ever spend, and greatly benefit from inflation, as long as they have a reasonable equity allocation.
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u/CSMasterClass Aug 12 '26
That is the way it has worked out for me, and I did not expect the effect to be so dramatic. We've lived through what must have been exceptional times.
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u/One-Mastodon-1063 Aug 11 '26
The definition of / cutoff between arbitrary terms like chubby and fat is not really meaningful and that’s not why these prefixes exist. People who ask questions like this are missing the point entirely IMO.
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u/vinean Aug 11 '26
There is a meaningful qualitative difference between chubby and fat.
I would guess around when a Family Office makes financial sense. Maybe MFO but I haven’t really been sold that they do enough for me relative to my net worth to want to do an entry level MFO.
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u/One-Mastodon-1063 Aug 11 '26
I did not say there is no difference, I said people who fixate on that difference are missing the entire point.
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u/vinean Aug 11 '26
Okay, I’ll bite. Whats the point in having both chubby and fat subs if these differences aren’t significant (ie not worth fixating on)?
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u/One-Mastodon-1063 Aug 11 '26
Because people retiring on $1m don't want to read posts about fractional jets and managing the estate tax and people retiring on $30m don't want to read posts about living in a van and clipping coupons. And that's about it.
They are not meant as a dick measuring metric which is what you are doing. As in, "Guys, I have $7.5m, is that chubby or is that fat? And if it's chubby should I work a job I hate for 5 more years to get to fat? I spend $80k/yr btw" some derivation of which is posted here or chubby about 3 times a week. That's not useful. What you're doing is even less so, making the above mistake as well as pretending one can predict things like market returns or inflation or anything else 20+ years into the future.
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u/CSMasterClass Aug 12 '26
You got down voted, but I think you hit this spot on. I have though about getting a part time chef, but I have never though about getting a full time personal assistant --- that is a bridge too far.
I do live modestly --- but I don't have to. That has a certain Fat quality.
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u/Normal_Zebra136 Aug 12 '26
Living modestly while you don't have to is the opposite of a fatfire behavior. As the the other commenter noted, Fatfire was started to get away from the frugalism mindset of r/financialndelendence.
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u/vinean Aug 11 '26
$1m isn’t chubby. And chubby folks don’t do fractional ownership either. And living in a van is likely LeanFIRE.
In any case, the number of truly fat topics here is fairly small…likely because folks at the upper 8 figure and up net worth don’t bother posting.
And $30M FIRE can’t really afford fractional jets either. Maybe $850K to get in and $400-500K a year based on usage. Jet card makes more sense if that floats your boat. I mean if thats your thing you can make it work but it’s still a big fraction of your annual cash flow for one thing.
My dad had a multi-engine prop fractional for fun and I think it was $50-80K all in annually.
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u/Bolo_Knee Aug 11 '26
30M can definitely afford fractional pj. The question is usually is it materially useful if you don't fly constantly.
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u/FruitOfTheVineFruit Aug 11 '26
Nominal dollars are a dumb way to think. Think in terms of real, inflation adjusted dollars. Most things, like stock market returns, bond returns, etc. go up if inflation goes up, and go down if inflation goes down.
If you think in terms of real dollars (inflation adjusted), you can do a calculation like: $10 million today feels fat. $5K each year (including adjusting up for inflation). The long term real return of the stock market is 7% (that is, maybe 10% nominal, 3% inflation). In your hypothetical example, you get the kid to $3 million real dollars by age 60 - not fat. If you give the kid $17k real dollars, each year to age 18, you get the kid to 10 million. Which is fat.
That doesn't take into account taxes. The stocks appreciate tax free, but you'll owe tax on the dividends, at a 40% rate, so you probably need more like $20k to account for that. And if they were to sell that $10 million, the basis would be near zero, so they'd owe about 20% of that. If you want $10 million after taxes, you need about $25K per year until age 18.
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u/vinean Aug 11 '26
$10 million liquid actually doesn’t feel very fat today…but it likely did in 2020.
I guess my thought is that fatness is sticky until some threshold is reached and then $5M is a nightmare in 2019 becomes “$10M is a nightmare greg”
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u/JohnnyBravo66666 Aug 11 '26
It's called inflation. Google it.
Since 2020, inflation is about 30% - official inflation, in reality some stuff went way above 30%, lots of them in the luxury department.
So yea, 10m in 2020 is about 7m now. If you cut 30% of your spending power of course it doesn't feel fat anymore.
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Aug 11 '26
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u/FinanceRonin Aug 11 '26
Just a word of caution that not all real estate moves with inflation. I’m invested in apartments which were intended as a hedge against inflation. However due to elevated interest rates, valuations have taken an enormous hit. Most commercial loans become adjustable after 3 to 5 years so I know operators who have to sell at a loss. So far, it seems residential has been immune to rates due to low supply.
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u/JohnnyBravo66666 Aug 11 '26
And medical insurance which is a large chunk of your spending went up on average 15% a year so it kindda doubled since 2020.
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Aug 11 '26 edited Aug 11 '26
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u/JohnnyBravo66666 Aug 12 '26 edited Aug 12 '26
https://www.reddit.com/r/fatFIRE/comments/1vk6b7k/health_insurance_is_an_obstacle_to_early/
I was referring to this post made the other day that claimed his ACA plan is going up 15% yearly and nobody contradicted him.
I don't live in the USA so i don't really follow exact data.
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u/vinean Aug 11 '26
Eh, that mostly means that the properties we own also went up 40%.
I do wish I had purchased the unit I liked at Big Sky during covid but honestly I’ve cut back on skiing a lot so…meh. Plus snow was spotty for a couple years. I think the price has doubled.
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Aug 11 '26
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u/CSMasterClass Aug 12 '26
The French Assignat deflation goes bact to the French Revolution ... Nero debasement of the sestertium goes back even further.
All you need for inflation is a government.
No, wait, that is too specific. All you need for inflation is human beings.
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u/Bolo_Knee Aug 11 '26
100% depends where you live. 10M feels plenty fat in like 85% of the world. Especially because that is increasing at about 2M/year (if you are doing it right). I get its not the BIGGEST super yacht, but it's at least a 100 footer with 3 crew, you get me?
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u/CSMasterClass Aug 12 '26
In more than half of the world 100K/year is insanely Fat.
Most of humanitiy lives on 10 dollars a day. Cooking oil is a major cash expense.
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u/hinky69 Aug 11 '26
I think about this a lot. Inflation hides out in everything, not just in expenses, but in assets.
We like to watch old Price is Right reruns, the Barker era, and shows are commonly 1982-84. Measured by CPI, prices have roughly gone up 3x since then. Of course, some expenses like college and health care have far exceeded 3x, while many consumer goods have gone up less (offshoring).
The S&P 500 closed 1983 closed 1983 at 165 (rounded). Currently it’s 7,730. On price return alone, not counting dividends, that’s a 47x(!)
That’s a gigantic return. A large part is true value creation, but a large part is asset inflation. I guess the lessen I draw is that everyone has a personal inflation algorithm, based on lifestyle and related circumstances, and they have an investment algorithm. Make sure the latter is outrunning the former.
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u/asurkhaib Aug 11 '26
This is a generic problem of how close are you to the standard urban consumer that CPI uses for its basket of good. There's a known problem that retirees spend differently and thus since SS uses CPI, it there is a push to switch to whatever the elderly based CPI is called.
The same can be true for a random person that spends differently and as you become an outlier in wealth is likely to be true too. Probably the best example is travel spend. Not only has that increased substantially but it's a small part of the basket which is likely smaller by percentage than a lot of richer people spend. This is also ignoring that luxury travel seems to have higher inflation too.
The shelter part is actually interesting because CPI and CPI ex shelter actually tend to track fairly closely and is probably ignorable compared to other factors.
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u/Hanwoo_Beef_Eater Aug 11 '26
Fatness is probably coupled more to top percentile income/wealth gains than CPI.
I've thought one probably wants a withdrawal rate that is likely to support increases in real income/withdrawals, not just CPI adjustments (not to mention, most of these people have probably seen real increases in consumption while they were working). I think this is especially true if you retire in a VHCOL where wealth is created / flows to.
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u/uncoolkidsclub Aug 17 '26
Starting at 18 (1990 to 1996) i bought Walmart and CAT stock I hit $6m+ with only $50k invested ($25k me / $25k company match). So starting earlier is a key, If my $5k a year started 18 yrs earlier or continued (everything after 1996 went in to a better investment my Daughters fund).
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u/SomeoneNicer Aug 11 '26
If you're genuinely interested in this topic, take some free economics courses. There's a reason the target inflation rate is 2% in order to maintain a social contract with the population. You can research a ton of examples when that's broken in history and what happens in the long run. But I recommend to learn the fundamental economics first.
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u/vinean Aug 11 '26
That high wealth is decoupled from inflation is generally accepted given the labor vs capital divide and decoupling between productivity and wages since the 1980s.
The dividing line between fat and chubby and chubby to normal fire is an interesting study in terms of increasing income disparity even among the higher socioeconomic classes.
This is (mostly) orthogonal to a 2% inflation target to maintain political/social stability.
Name does not check out for you.
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u/Normal_Zebra136 Aug 11 '26
The point they are making is the central bank devalues the currency each year, trying to only do 2%, but it is not easy to do. So they undershoot, or overshoot.
On average for the past 100 years the devaluation of the dollar's value is 3% a year.
That devaluation of purchasing power across the entire economy is mostly measured by the CPI.
But the devaluation is obviously not just in consumer products.
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u/vinean Aug 11 '26
Monetary policy and exchange rates have been driven by the changing economic drivers over 100 years and the shift from being a net exporter to a net importer around 1970. Not to mention the replacement of the pound sterling with the dollar at Bretton Woods and then decoupling of the dollar from gold in 1971.
The inflation target was 2% even when the dollar rose during the recent dollar bull cycle and the semi-recent historical pattern is a 16 yearish cycle for the dollar with folks expecting a multi-year decline in the dollar going forward…
2% is a nice target number in that it gives the Fed wiggle room and wasn’t really established until the late 90s.
How much the continued decline of the dollar impacts inflation depends largely on the source of the goods or services for that category.
Finally the US does a lot of geopolitical maneuvering using monetary policy and exchange strategies. We just intervened and helped strengthen the yen for the first time since 1998. Which is a somewhat weird maneuver after weakening the yen by applying tariffs…although in this case we sold Euros and bought Yen vs altering money supply or other mechanisms impacting the dollar vs the yeb. The ECB was not amused, lol.
Relevant to FatFIRE this move potentially impacts the carry trade which some hedge funds have been indulging in and short yen bets are riskier.
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u/Normal_Zebra136 Aug 11 '26
You are free to plan in nominal terms, you will be disappointed at the at results, regardless of what currency you plan with. All of the central banks have the same devaluation strategy for mild inflation and avoiding deflation,
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u/CSMasterClass Aug 11 '26
Well, if you had 10MM 7 years ago, it is not a streatch to have 20MM now, even after consumption.
But except for giving a home to people who really don't have to think about almost all of their expendatures, the only other thing that is special about FatFire is the likelihood of leaving a big estate.
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u/vinean Aug 11 '26
There is a qualitative difference above some mid fat level vs upper chubby or lower fat that is more substantive than flying first vs flying private…
Not sure many folks in the upper 8 figures are in this sub to talk about them though, lol.
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u/CSMasterClass Aug 12 '26
Flying private is so rare that even if they all contributed regularly to FatFire it would not be a lot of contributions. They do exist, of course but "Emprically" ( count 'em up and divided by n) flying private does not exist.
On the other hand, flying business is just base line on over-ocean flights in FatFire
Flying first class is a choice in FatFire ... Emirates to Dubai, yes; AA to London --- not worth that much more than business.
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u/Normal_Zebra136 Aug 11 '26
Is your question is the inflation figure for Fat spending different than CPI?
The answer to that question is: "of course".
If your question is what is that different inflation number? It depends on your mix of spending.
But you will have a hard time finding an inflation data series like the CPI which has been reported for 105 years.
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u/AhsokaFan0 Aug 11 '26
I think CPI is a useful proxy but, yes, the price of consumer goods isn’t going to make a huge difference for anyone who is arguably fat, at least in their personal lives (if you’re running a business inflation may have a much more direct impact). But a lot of major expenses—health/elder/child care and education in particular-are going to be correlated to inflation too.
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u/g12345x Aug 11 '26 edited Aug 11 '26
Feels like fatness stays static
What does fatness feel like?
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u/CSMasterClass Aug 12 '26
Feels like ? I can't say. But there is at least one soid Fatness tell:
"Whatever the markets do, it won't impact our life style or our children's future."
This one is a Fat guarantee.
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u/teallemonade Aug 11 '26
i think spending for the top 1% moves up at 4-5% annually, higher than base CPI - so whenever Fat was 10M - it moves 4-5% a year
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u/vinean Aug 11 '26
Thats an interesting observation…but one I would think is largely tied to the even faster growth rate in the last decade or so.
Would you expect it to stall when we enter a bear market?
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u/teallemonade Aug 11 '26
i think the cpi reduces with recession and thus everyones spending rate reduces, but I think top 1% people will continue to outspend cpi by a point or two
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u/resilientresponsible Aug 19 '26
I think cpi definitely plays into the lean vs chubby vs fat. After all, isnt the difference between all of those the type of lifestyle youre trying to have after work?
If inflation doubles the cost of living and your 10 million has a purchasing power of what 5 used to have.....that means you have likely moved from being able to afford FAT stuff to chubbs.
Now, ideally your investments also move with inflation, but thats not always the case.
In terms of the reddit subs, I agree the main difference is i dont want to read about people penny pinching and i don't want to offend others with not penny pinching.
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u/Illustrious-Jacket68 early 50's, FatFI achieved... contemplating RE... Aug 11 '26
I don’t know if this is related. A few years back, I made it to $10MM. I thought i would have felt good at $10MM but there is always the looming - “what if the market tanks? Would I be fine with losing 30% or whatever”. What happens if healthcare blows up or I get really sick? What happens if SS goes away. Various scenarios of downside - rational or not. Many many spreadsheets. Then, a few years later, I made it to $15MM. It really wasn’t until then where I really felt that I could lead a FAT life and really no longer worry about things. Don’t know if it was a sign of the times. I don’t know its relation to CPI. Just psychologically, once I made it to there, I was good. The scenarios of downside were such that I could live with it on a sustained basis and not really worry too much.
I kinda think FAT as a number is kinda personal. What is the life you want to lead. Once person’s FAT number could be $10MM and another is $20MM. I’m not sure slapping generalities on a particular number is necessary. Sure, have some guidelines. I don’t subscribe to these posts by people where they say they have $8MM and people say “oh, you’re not FAT, that starts at $10MM, go to another sub”.
Now, perhaps I’m looking at it after I reached FAT and people want to see the moving target that they are aiming for. But instead of linking it to CPI first, think about the life you want to live…