Gyroscopic Investing

Is it better to be a hundred-thousandaire than a millionaire?
Should we avoid being a millionaire and instead choose to be a hundrund-thousandaire instead?

Mr. Money Mustache seems to think so:

A Brief History of the ‘Stash: How we Saved from Zero to Retirement in Nine Years

Thanks, J.

Personally for me, I would rather be a hundred-thousandaire than a millionaire because money or stock is not the only variable to live life honorably and worthily. Similar to Permanent Portfolio, money or stock is one of the four components.

A person who only accumulates and never consumes may be missing the point of working and saving.

Why would you avoid becoming a millionaire, all things being equal?

Is the assumption that you have to do something unenjoyable or unethical in order to achieve millionaire status?  Or is there some concern that having more money will make you a worse person than you'd be with less money?

I'd never advise anyone to give up anything they cherish, whether it be their personal integrity, their joy in life, or time with their families to become a millionaire.  It sounds like there's an unspoken assumption that any millionaire has made some sort of awful trade-off to get what they have.  But is this always the case?

So all things being equal, count me in for millionaire, coming and going.  The economic security you have with $1,000,000 accumulated is much, much greater than what you get with $100,000.  If you can get to either one while having a good time, why not take the bigger number?

jmourik wrote: Mr. Money Mustache seems to think so:

A Brief History of the ‘Stash: How we Saved from Zero to Retirement in Nine Years

Interesting blog, jmourik.  I always like to hear people's personal early retirement stories.  However, I'm a little concerned that he didn't plan for health care costs.

It seems like the biggest drawback to retiring early is that there is no way to afford healthcare from the years before age 65.  That's why you need to be a millionaire.

If you were to ask me, can I retire on $900K right now in my 30s?  I'd say sure, if you used the PP and drew down 4% annually, you could probably live on $36K a year in a low cost of living city no problem, but what happens if you get sick?  Health insurance for a family of 4 is going to run you probably around $2K a month, if you can even get it, and the out of pocket costs will probably be another $3-5K a year.

Storm wrote:...  However, I'm a little concerned that he didn't plan for health care costs. ...

I always wonder about that myself. MMM mentions it sometimes, like in this quote (from here):

mmm wrote:But once he quits the cushy job, he will want to replace his current employer-paid health insurance with a self-paid policy. At a good outlet like ehealthinsurance.com, this will cost him a similar amount to what he now spends on the mortgage interest.

Now I can maybe see that a healthy 30something can get health insurance for a decent amount. But what about a 50something with a medical history?

jmourik wrote: Now I can maybe see that a healthy 30something can get health insurance for a decent amount. But what about a 50something with a medical history?

And that is exactly the problem.  Even if you could afford insurance when you first retired at the young age of 30, you'd be unable to afford it at age 50, and you'd have to reenter the workforce with outdated skills and education.  That is something that a lot of ERE advocates fail to consider.  I guess at 30 you think you will be healthy forever, but unfortunately for all of us, life doesn't work like that.

Mmm answered the health care question. See his post here:

http://www.mrmoneymustache.com/2011/09/ ... ustache%29

The site he mentions doesn't let me enter any pre existing conditions though. So I'm still not sure about that.


Btw. Thanks for answering, Mmm! Feel free to chime in here. And maybe the Hbpp is a nice place for your stash...

jmourik wrote: Mmm answered the health care question. See his post here:

http://www.mrmoneymustache.com/2011/09/ ... ustache%29

The site he mentions doesn't let me enter any pre existing conditions though. So I'm still not sure about that.


Btw. Thanks for answering, Mmm! Feel free to chime in here. And maybe the Hbpp is a nice place for your stash...

Wow, I feel honored that the "stash" answered my post... I still think he's misguided because he quoted rates for catastrophic health coverage.  Here is my comment I posted on his site below:

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Hi, I was the poster of the original comment on the Gyroscopic Investing forum that you quoted. I appreciate your response, but I was talking about non-catastrophic coverage.
Catastrophic coverage is the type of coverage that employers like Walmart offer to their part time workers so that they can claim they have “health insurance,”? when in reality it doesn’t cover much. Most catastrophic coverage has an extremely small lifetime maximum. You didn’t mention the lifetime maximum of those policies. Insurance with a $10K deductible and $100K lifetime max should just be called throwing your money away. REAL health insurance as in one with a reasonable out of pocket max of $2K-5K, $3-5 million lifetime max, and $20-30 copay (not 20%) is going to run you at least $1500-2000 for a family of 4, depending on which state you live in.

You will be denied if you have any pre-existing conditions.

As one of the other comments astutely observed, catastrophic coverage is not adequate if you acquire a chronic condition.  Here is how it works:

1. You’re a healthy young lad trucking along and doing everything right. You retired early and live a happy life with no worries. You have catastrophic coverage with an out of pocket max. of $10K
2. You turn 50 and find out you might have the beginnings of heart disease. Your doctor prescribes statins to lower your cholesterol, and other prescription drugs.
3. Your monthly pharmacy bill is now $400-500 and you have to pay 100% out of pocket because you haven’t hit your deductible yet. I hope you planned on an extra $5000-6000 annual expense because you just got one.
4. You spend another $10K or so annual expenses on office visits and maintenance for your chronic condition.
5. At this point, you decide maybe you need a real insurance policy, and not one that just covers “catastrophic”? needs. You apply for insurance and are DENIED due to a pre-existing condition.

This is how healthcare really works in this country. I have an older in-law that is on Lipitor and he still pays about $286 a month for his prescriptions, even after being covered by a very generous city employee pension medical plan.
I don’t disrespect your idea of retiring early, but you need to think about what you will do before you turn 65 and your government health insurance kicks in.
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Storm wrote: REAL health insurance as in one with a reasonable out of pocket max of $2K-5K

One question -- why would you want an out of pocket max as low as 2k?  I'd want a really high out of pocket max and a really high lifetime max.  To me, that's what I want out of insurance -- insurance against serious catastrophes against whose risk I do not have the means to protect myself.

Why pay a higher rate rather than just make sure your savings are adequate to pay the higher out of pocket max if it comes to that?

Agree with LW.

I tend to see high deductibles as the litmus test of any proper insurance policy.  If it's too low, or even "average," you're probably over-insured or simply in some kind of cost-deferral program, not real insurance, and therefore just a glorified credit card balance.  Plus, once you make an insurance claim at these low-deductible levels (in the auto/homeowner world) I believe they simply charge you even more going forward.

Part of me (though I still have it) even thinks that having anything but liability auto coverage is a sign that you 1) can't afford the car you're driving, or 2) have too small or inaccessable an emergency fund.

This isn't to say that I follow my own advice, and as a car is a relatively long-lived asset (15 years if you take care of it) I am not too vehiment on this point, but it's at least a good itch to have in the back of one's head when deciding what kind of car you can "afford."

Lone Wolf wrote:

Storm wrote: REAL health insurance as in one with a reasonable out of pocket max of $2K-5K

One question -- why would you want an out of pocket max as low as 2k?  I'd want a really high out of pocket max and a really high lifetime max.  To me, that's what I want out of insurance -- insurance against serious catastrophes against whose risk I do not have the means to protect myself.

Why pay a higher rate rather than just make sure your savings are adequate to pay the higher out of pocket max if it comes to that?

I completely agree with you, LW.  As you build a retirement 'stash you have enough money to self insure for some things.  You could deal with a $10K one time hit, no problem.  The problem is that most "good health plans" are geared towards middle income people that can't afford to take a big hit and so they have lower out of pocket, but higher premiums.  I wish we had ala-carte insurance where you could pick your own deductible, out of pocket max, and lifetime coverage limit.

There is one problem with large deductible plans, and that is chronic conditions - if you have a chronic condition the hundreds of lower priced bills for single visits, lab tests, and medications will kill you financially by the death of a thousand paper cuts.

What I'd like to have, personally, in retirement, is a plan that is less than a thousand a month, has a decent $5K or so deductible, and a $5-10 million lifetime max.