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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][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]

I have a nest egg so very little risk. [b]If I lost my house I could build another one for $150,000.[/b] With no debt, I could pay that mortgage from delivering pizza if necessary. I have enough in savings to cover it though. Very little risk invloved[/quote]

Are you sure about that? Maybe ballpark, sure. But it might also be more like $200k. 
Also, you would have to replace your belongings. All of them. 
Also, you would have to live somewhere while your house is being built. That wouldn't be free either. 
Could you get a mortgage without a job? Maybe you could, but that would be a drag against your nest egg. 4% rate wouldn't be safe anymore.
Also, if you live as close to the beach as you brag, hurricanes roll in every year, with a direct hit every 3 or 4 years. You need insurance. Unless you are counting on government aid but that isn't a given. (I'm not judging, but risky in this political environment). [/quote]

I grew up in Alabama. I don't know a single person that lost a house to a hurricane unless they had beachfront property. My brother lives up the street and he is single and would have no problem letting us live with him while we rebuild. I could easily build a house with $150,000. It's not even a concern. I started with a nest egg of $1 million 4 years ago. Look at the stock market since then and figure out how much I have now. I have $50k in an emergency fund. I have very little risk in my life. I planned it that way, there was a lot of planning that went into this.[/quote]

Go talk to some folks in Mississippi and ask how they fared during Katrina.  Heck my ILs are an hour inland and still and a lot of damage.  But you do you, I think you're just taking more risks then you realize.[/quote]

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