Reply to s/o living on $25k or $36k a year

Forum Index » Money and Finances

Reply to "s/o living on $25k or $36k a year"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous]
It's not a legal requirement to have home insurance, obviously.  But it is stupid not to, unless you have a huge pot of money to replace your house if it burns down.  And if you are living on $25,000 per year, you obviously don't have a huge pot of money.

Same with life insurance.  There is obviously no requirement that you have it.  But if you have a family and do not have a huge pile of savings, it is incredibly irresponsible not to have life insurance.

If the point is that you can life on $25,000 if you shirk important responsibilities to your family, I suppose that is true.  But should that the be the point?[/quote]

[b]If you are sitting on investments that generate more than $25,000 in income every year then you ARE sitting on a pile of savings.[/b] If you look back at the first post of this thread, it's not supposed to be about people working hard and only bringing in $25,000 a year. It's supposed to be about people who are choosing to live off their investments.

Expected value on all insurance is negative. It exists almost exclusively for people who are NOT sitting on a pile of money and cannot absorb the costs of a catastrophic event.

The PP who FIREd has investments that throw off something significantly more than $25,000 a  year. If he dies tomorrow his investments are not going anywhere, and that income will continue.

There are a lot of situations where having a lot of life insurance doesn't make a whole lot of sense. That's part of the reason that term life insurance exists. If you are working and have people depending on your income, then YES, you should try to have life insurance if at all possible (again, some people get rejected). If you don't have people depending on your job income, then there's really not much reason to have it.[/quote]

At the standard withdrawal rate of 4%, you need $900,000 to generate $36,000 per year.  And yes, that's a pile of money.  But for FIRE to work, the principal has to remain untouched, and continually kick off that income.  If the replacement cost is $100,000, with no insurance, the $36,000 return all of a sudden is down to $32,000.  (And that's not including ancillary expenses, such as rent, replacement of furnishings and personal items, etc. if the house is destroyed.)  When your margin for error is so small, that's a big difference.

This just further demonstrates that many of the FIRE people are only "financially independent" by cutting corners, taking significant risks, and relying on the charity of others and the largess of government.  [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics