Tuesday, April 30, 2013

Retiring at 30

After doing an interview with the Washington Post, Mr. Money Mustache has gotten quite popular.  Retired at 30 due to lots of heavy saving, and very low debt (no student loans, buying used, cheap cars, buying fixer-upper houses and doing the work themselves...he does seem to be advantaged by being very smart and capable).  This is certainly possible--though it would be very hard with a median family income--but it is only possible for a very small subset.  The thing is, if everyone tried to do this, the economy would crash and nobody would be able to get the jobs necessary to get started.

Rent seeking (which can be owning rental properties, or living off investment returns) is a strategy that works very well so long as only a very small subset of the population attempts it.  If everyone buys a house, then you won't be able to rent out properties to anyone.  Similarly, if everyone tried to by used beater cars, then no new ones would be produced (and those companies would go under, and lots of jobs lost and...).  This works at just about every level.  If you want to invest in anything and get any return, then whatever you are investing in needs customers.

Our economy needs for lots of people to dine out more often than MMM, and to buy new things (cars, bikes, furniture) and to pay for other people to do work on their houses, and to rent, and on and on.  There is certainly some subset of jobs/careers/companies that would continue to exist in a high saving world (e.g. we would still need food, shelter, education and transportation) but even that still wouldn't be a world where people could, in large numbers, live off their savings.  The more people try not to work, the more things produced by work would need to cost.  Someone needs to produce the food.  The other alternative would be for all people to become much more autonomous, but that isn't retirement, that is just doing lots of jobs and not sharing/trading the fruits of your labor.

So good for them, and good luck to people who try and do something similar, but most will fail, and that is good.  It is good for the whole economy but it is particularly good for MMM.

Also: please note that in most ways that matter, MMM is a 1%er.  His income is not necessarily that high (though higher than the $25k/year they spend), but he has far more wealth than most people.  For the 9 years of work that he and his wife put in they likely combined to have quite a high income (to 10% at least).

No comments: