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Still_Small_Voice

The average American 401(k) balance by age

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Guest Scott
26 minutes ago, anatess2 said:

Even with that... Putting 3% of your salary in a 401K and then gaining 20% free money right then and there... add the tax shelter plus the gains over time...still a win. 

I agree.   Even without a match, it still should be a win if you invest into it over time.

Quote

The plain fact of the matter is that most companies MATCH your contributions. 

Sadly, they do not.

I tried to dig for any data with percentages.    The below is the best I can come up with, but is a few years out of date (If anyone can find anything more recent, it would be appreciated).   

According to the Bureau of Labor Statistics 2015 National Compensation Survey, 56% of companies offer a 401K plan.    Of those, 49% (of that 56%) only offer a 0% match.

https://www.bls.gov/opub/mlr/2015/article/automatic-enrollment-employer-match-rates-and-employee-compensation-in-401k-plans.htm

https://www.bls.gov/ncs/

https://20somethingfinance.com/401k-match/

If the above is accurate, that means that fewer than 29% of companies (at least at of 2015) are offering matching 401K plans to their empolyees.  

The only source I can find that are significantly different from the above is this one:

https://www.money-rates.com/investment/how-401k-matching-works.htm

The quote Vanguard, but provide no link to the data and I can't find anything supporting the calim on the Vanguard website.  

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2 minutes ago, Scott said:

I agree.   Even without a match, it still should be a win if you invest into it over time.

Sadly, they do not.

I tried to dig for any data with percentages.    The below is the best I can come up with, but is a few years out of date (If anyone can find anything more recent, it would be appreciated).   

According to the Bureau of Labor Statistics 2015 National Compensation Survey, 56% of companies offer a 401K plan.    Of those, 49% (of that 56%) only offer a 0% match.

https://www.bls.gov/opub/mlr/2015/article/automatic-enrollment-employer-match-rates-and-employee-compensation-in-401k-plans.htm

https://www.bls.gov/ncs/

https://20somethingfinance.com/401k-match/

If the above is accurate, that means that fewer than 29% of companies (at least at of 2015) are offering matching 401K plans to their empolyees.  

The only source I can find that are significantly different from the above is this one:

https://www.money-rates.com/investment/how-401k-matching-works.htm

The quote Vanguard, but provide no link to the data and I can't find anything supporting the calim on the Vanguard website.  

Scott, my understanding of the "Average 401K balance by age" figures presented above is - it only includes all Americans that have a 401K.  So people who work at companies without a 401K do not count in that figure nor are those people who work at companies who offer 401Ks but they don't avail of it (like people who work for companies who have 401Ks but don't offer matching).

That said, it does bring up something in my head that would skew those statistics - people who only worked for a short period of time in a company that offered 401K matching then moved to a company without a 401K and decided to hang on to their 401K accounts without continuing contributions.

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I would recommend going big and getting a job with a company that offers a pension plan. That's if you don't want to run your own successful business. If a 401k is all you got then do your best to save more on the side. You can do Roth IRAs or some other form of investing. Put your money to work for you. Even with a pension you can look for ways to grow your money that is low risk.

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3 hours ago, anatess2 said:

That said, it does bring up something in my head that would skew those statistics - people who only worked for a short period of time in a company that offered 401K matching then moved to a company without a 401K and decided to hang on to their 401K accounts without continuing contributions.

The article actually points out that the older the age bracket the more unreliable the averages become because of the scenario you describe, and a similar one where a 49 year old has had 3 employers but didn't roll over her 401K. That's treated as 3 accounts, each owned by a 49 year old instead of 3 accounts owned by the same 49 year old. That is, if she has $30K in each, the average for 49 year olds will be $30K instead of $90K.

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16 minutes ago, Overwatch said:

I would recommend going big and getting a job with a company that offers a pension plan. 

That number continues to shrink, and also underfunding in the nation's remaining pension plans is a concerning thing.

2018 told us 22% of workers participate in a pension plan, but some of those (like me) are grandfathered in with companies that no longer offer them.  I can't find a source on how many companies with employees in the US still offer pensions.

 

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40 minutes ago, Overwatch said:

I would recommend going big and getting a job with a company that offers a pension plan. That's if you don't want to run your own successful business. If a 401k is all you got then do your best to save more on the side. You can do Roth IRAs or some other form of investing. Put your money to work for you. Even with a pension you can look for ways to grow your money that is low risk.

Outside of government positions, it is difficult to find a job that provides a defined benefit plan.  All the ones I've ever had or looked at used defined contribution plans.  This puts the investment risk squarely on the employee instead of the employer.

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3 hours ago, dprh said:

Outside of government positions, it is difficult to find a job that provides a defined benefit plan.  All the ones I've ever had or looked at used defined contribution plans.  This puts the investment risk squarely on the employee instead of the employer.

Very true. The traditional pension plan is going the way of the Dodo bird. Government pensions cannot be too far behind. Most of them are going broke. 

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I heard of so many people being robbed out of retirement pensions.  In my opinion do not trust retirement money unless it is in your own account.  The best in retirement accounts available to the common citizen in my opinion and hypothesis are Roth Retirement Accounts.  There are other tax free and very low risk options out there that pay good rates of return that I have found but most companies do not offer them.

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21 hours ago, NeuroTypical said:

That number continues to shrink, and also underfunding in the nation's remaining pension plans is a concerning thing.

2018 told us 22% of workers participate in a pension plan, but some of those (like me) are grandfathered in with companies that no longer offer them.  I can't find a source on how many companies with employees in the US still offer pensions.

 

It is true, the number of jobs that offer them are shrinking. It's important that when you do find one, you gather all the resources you need to land the position. However what you say IS true and you have to keep your eyes and ears open for them.

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Rejoice with me!  I just got a letter in the mail from my company.  It said that we would get a profit share from our company that I work at.  I will be given around $1,350 deposited into an Individual Retirement Account.  This made me very happy today.

I do not ever remember getting a profit share from any company that I have worked at before.

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On 8/21/2019 at 3:21 AM, MarginOfError said:

What is most frightening is that these are the numbers for those that have any savings at all.  More than half of American households have no retirement savings. That's going to come back to bite us.

I would have to agree with that.

What is even more alarming is this:
As a Financial Advisor who regularly sees LDS clients (I don't market to them - high LDS population here) I often find they save significantly less than their non-member neighbors. This according to those I meet with is because of a lot less disposable income. 

A faithful member has many more expenses than most other people - Tithing, Fast Offerings, a mission or two or three etc. These expenses consume a huge amount of money which if invested instead of spending it on these categories can/would have compounded to very larger sums. I am not advocating people avoid these expenses, but rather we need to live significantly below our means and save even more money if we want to enjoy retirement (be able to afford it- you define enjoy) because our expenses are permanently higher than the non-members around us. The concept of living below our means has been taught for a long time, but from my perspective it is rarely followed. 

Some may think the non-members just spend all their money at Vegas, drinking or on their boat. Truth is for the average person, Mormons spend more than the non-member does on tithing alone if one is actually paying 10%. I Obviously this is purely anecdotal, but from the people I am visiting with and judging by the numbers they are giving me I am confident I am not too far off the mark. Those who save for the future (Mormon or not) will not be out blowing their money. When you take two people who have different permanent built-in expenses then the result down the road will be significantly different. I witness this all the time.

I pay enough in tithing to max out a 401K, yet my savings rate is very low relative to my peers. I even live in a neighborhood where the median income is probably about 70K because after all my expenses, savings, church obligations, kids on missions, I frankly don't have much left. I know for a fact I will not have enough saved to go abroad on a senior mission with my wife and I am a very aggressive saver. 

When trying to determine what you will need to save for retirement here is a tip: Figure out approximately how much Social Security you will get, factor in any pensions if applicable and finally Subtract that from what you feel is a decent annual income. Whatever that figure is, multiply by 25 and you have your minimum savings goal.

Example: after expenses I need $25K in annual income. $25,000 x 25 = $625,000

$625K to produce about $25K per year in income. That is considering you only will need income for 25 years. If your death is not already planned one would be wise to be invested in the stock market so your nest egg can grow and keep your source of income producing a stream of money indefinitely which can be increased or indexed for inflation as well.

Save lots, live way below your means and stay in the market. Play the long game.

Edited by mrmarket
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On 8/21/2019 at 6:30 PM, Still_Small_Voice said:

I heard of so many people being robbed out of retirement pensions.  In my opinion do not trust retirement money unless it is in your own account.  The best in retirement accounts available to the common citizen in my opinion and hypothesis are Roth Retirement Accounts.  There are other tax free and very low risk options out there that pay good rates of return that I have found but most companies do not offer them.

What kind of low-risk options are you talking about here? Do they produce returns consistently better than inflation (more than 3.1%)? If not, then those investments are to be considered very risky and guaranteed to lose your spending power over time. 

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19 hours ago, mrmarket said:

I would have to agree with that.

What is even more alarming is this:
As a Financial Advisor who regularly sees LDS clients (I don't market to them - high LDS population here) I often find they save significantly less than their non-member neighbors. This according to those I meet with is because of a lot less disposable income. 

A faithful member has many more expenses than most other people - Tithing, Fast Offerings, a mission or two or three etc. These expenses consume a huge amount of money which if invested instead of spending it on these categories can/would have compounded to very larger sums. I am not advocating people avoid these expenses, but rather we need to live significantly below our means and save even more money if we want to enjoy retirement (be able to afford it- you define enjoy) because our expenses are permanently higher than the non-members around us. The concept of living below our means has been taught for a long time, but from my perspective it is rarely followed. 

Some may think the non-members just spend all their money at Vegas, drinking or on their boat. Truth is for the average person, Mormons spend more than the non-member does on tithing alone if one is actually paying 10%. I Obviously this is purely anecdotal, but from the people I am visiting with and judging by the numbers they are giving me I am confident I am not too far off the mark. Those who save for the future (Mormon or not) will not be out blowing their money. When you take two people who have different permanent built-in expenses then the result down the road will be significantly different. I witness this all the time.

I pay enough in tithing to max out a 401K, yet my savings rate is very low relative to my peers. I even live in a neighborhood where the median income is probably about 70K because after all my expenses, savings, church obligations, kids on missions, I frankly don't have much left. I know for a fact I will not have enough saved to go abroad on a senior mission with my wife and I am a very aggressive saver. 

When trying to determine what you will need to save for retirement here is a tip: Figure out approximately how much Social Security you will get, factor in any pensions if applicable and finally Subtract that from what you feel is a decent annual income. Whatever that figure is, multiply by 25 and you have your minimum savings goal.

Example: after expenses I need $25K in annual income. $25,000 x 25 = $625,000

$625K to produce about $25K per year in income. That is considering you only will need income for 25 years. If your death is not already planned one would be wise to be invested in the stock market so your nest egg can grow and keep your source of income producing a stream of money indefinitely which can be increased or indexed for inflation as well.

Save lots, live way below your means and stay in the market. Play the long game.

Well, I've figured out before, when paying on gross, that I actually pay around 20% of the money that I actually get (after taxes).  It's 10% of the gross, but 20% of the actual money I see.

In that light, considering that if one invested it rather than spent it, I suppose could have been a decent amount of money.  I didn't though and will probably work till I die.

I think one big hangup that you find out when you get older is that you are accustomed to a certain amount of money to live on.  If you make 50K normally, and think that you are going to live fine off of half of that (25K), one might be quite surprised at how hard that actually is.  Another gotcha is probably figuring that when one retires they will only need half of what they need now.

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1 hour ago, JohnsonJones said:

Another gotcha is probably figuring that when one retires they will only need half of what they need now.

Do not also forget to figure in inflation (the devaluing of the America dollar).  About every 18 to 20 years your money loses half of its purchasing power.

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Hard to predict inflation.  This is what it's looked like in the past:

image.png.a42c516416dccb20673007b3e10a11ec.png

 

That thing that happened in the '40's and the '70's - will that happen again in the next 20 years?  Will the overall moderate trend since the late '80's continue?  My dad bought his house for $22k in 1970, and it sold for $150k in the '90's, but the value remained the same because of all that inflation.  Will we live to see the same thing happen, where by retirement age we're making 2X what we do now, but everything costs 2.1X more?

Yeah, worry about inflation.

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11 hours ago, JohnsonJones said:

Well, I've figured out before, when paying on gross, that I actually pay around 20% of the money that I actually get (after taxes).  It's 10% of the gross, but 20% of the actual money I see.

In that light, considering that if one invested it rather than spent it, I suppose could have been a decent amount of money.  I didn't though and will probably work till I die.

I think one big hangup that you find out when you get older is that you are accustomed to a certain amount of money to live on.  If you make 50K normally, and think that you are going to live fine off of half of that (25K), one might be quite surprised at how hard that actually is.  Another gotcha is probably figuring that when one retires they will only need half of what they need now.

Working till  you die? Most get sick, disabled etc and don't work for 10-20 yrs before they die. That is the problem. At that point someone else (usually relatives) has to pay the difference until you die. A family member of ours never saved any money and now in their golden years we have to help pay for medical stuff because they have no savings to live off of. 

I agree with the cost of living. I rarely have a retiree living off much less than they previously earned unless their home is payed off. Generally they have Soc Sec between $1800-$2200 per month and then they subsidize with their savings. 

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4 hours ago, mrmarket said:

. . . now in their golden years we have to help pay for medical stuff because they have no savings to live off of. 

You don't have to.  It depends on how important you think it is for them to stay alive.

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On 9/1/2019 at 4:10 PM, mrmarket said:

Working till  you die? Most get sick, disabled etc and don't work for 10-20 yrs before they die. That is the problem. At that point someone else (usually relatives) has to pay the difference until you die. A family member of ours never saved any money and now in their golden years we have to help pay for medical stuff because they have no savings to live off of. 

I agree with the cost of living. I rarely have a retiree living off much less than they previously earned unless their home is payed off. Generally they have Soc Sec between $1800-$2200 per month and then they subsidize with their savings. 

Rule of thumb in the financial planning business is that one needs about 75% of one’s normal earnings to be able to afford to retire decently. This assumes one has eliminated commuting expense and other work related costs such as eating away from home and special items like suits and ties or nicer clothing for women. 

I have a joint life table on my desk at work and for married couples contemplating retirement, I show them with the use of the chart that one of them is likely to live 30 years. And they need to prepare for the accompanying inflation etc.  They won’t be buying their “last” car, nor will the roof on their house likely last that long. 

Many of these decide to work and save a little longer. 

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1 hour ago, mrmarklin said:

Rule of thumb in the financial planning business is that one needs about 75% of one’s normal earnings to be able to afford to retire decently.

Even for the norm, I think that estimate depends on what someone considers to be decent retirement.  I am not the norm, but once I no longer have to save for retirement, no longer have a mortgage, and am no longer raising 7 children, I could retire exactly as I live today on no more than 50% of my current income (inflation adjusted).  I'm happy to say that I plan to retire early 🙂

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3 hours ago, mrmarklin said:

Rule of thumb in the financial planning business is that one needs about 75% of one’s normal earnings to be able to afford to retire decently.

 

1 hour ago, person0 said:

Even for the norm, I think that estimate depends on what someone considers to be decent retirement.  I am not the norm, but once I no longer have to save for retirement, no longer have a mortgage, and am no longer raising 7 children, I could retire exactly as I live today on no more than 50% of my current income (inflation adjusted).  I'm happy to say that I plan to retire early 🙂

I got 2 more years and my last kid graduates from high school.  That's what I consider my retirement age.

So here's the sketch of what I plan on doing - we're gonna sell everything and get an off-grid Tiny House and a dually truck and live a vagabond life when we're in the USA so we can move between the kids (who is looking like they're gonna end up in completely different States) and our extended families all over the country at our leisure.  If we get tired of family, we can live on BLM property for free if we're good with moving around every 2 weeks.  Or live in a reservation in Arizona for $85/year and right on the sand dune of the Pacific Ocean in Baja Mexico for another $150/year if we want to sit still for a longer period of time.  The one in New England is $1385/year if we want to be fancy.  In any case, holding all 3 reservations would be less than $2K a year.  Food, water, propane, etc. would be $500/month, so $6K/year.  Meds, leisure, etc.... I'd say we can live comfortably off of $20K/year... that's waaaaay lesser than 75% or 50% of our current income.

Then, there's the time we're in the Philippines... $20K/year especially since I already have several properties and a homestead farm there is living it rich.

Anyway, I'm not sure if this is really what's gonna happen but what I'm trying to say here is... you don't need a lot of money to enjoy life.

 

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On 9/3/2019 at 2:38 PM, anatess2 said:

 

 

Anyway, I'm not sure if this is really what's gonna happen but what I'm trying to say here is... you don't need a lot of money to enjoy life.

 

I’m of an age when most people are already retired. 

But im addicted to a very good lifestyle. I like event vacations in foreign countries. I like my vacation home, and it’s not cheap to maintain. I enjoy several fairly expensive hobbies. Life is good and I have no desire at all to live on a restricted budget.

So, I keep working, albeit at a semi retired pace.  I’ll need my 75% when I decide to retire.

 

But more power to those of you who are willing to forgo the niceties.

 

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11 hours ago, mrmarklin said:

I’m of an age when most people are already retired. 

But im addicted to a very good lifestyle. I like event vacations in foreign countries. I like my vacation home, and it’s not cheap to maintain. I enjoy several fairly expensive hobbies. Life is good and I have no desire at all to live on a restricted budget.

So, I keep working, albeit at a semi retired pace.  I’ll need my 75% when I decide to retire.

 

So... my dad passed away at age 70.  If he would have lived the "standard American lifestyle", he would have been tied to an 8-5 working to please his boss until age 65, not able to see his grandkids living in another continent except for 3 weeks out of a year at the mercy of his company vacation, and would have only 5 years to live the life he really wanted.  That's crazy.

Rather, my dad retired at age 49 when the youngest graduated college (because in the Philippines, college is a necessity to flip burgers at McDonalds), traveled so he could enjoy his kids and grandkids as well as his sibling's kids and grandkids scattered in 5 continents around the planet, and basically lived his chosen calendar instead of the calendar his "work" tied him to.  How did he afford his travels?  He stayed in the USA for a while and learned to work credit cards (he's the kind of guy that doesn't put anything on loan, not even the house).  He learned that there are certain credit cards that give you points that you can use for airfare.  Of course, he uses the credit card to buy something for the points and then he pays it off when he gets home.  Then he has his "black book" of relatives.  He stays with people in the book when he travels.  So, one time, my aunt went on a guided cruise through Europe and bragged so much about how good it was my dad bought the same cruise for my mother.  They got to London and my cousins in the UK started calling to be included in their calendar and they couldn't because they have to go with the tour... they were so miserable they never did that again.

When my dad passed away, my brother went through all his assets and we found out he died a multi-millionaire - even after spending beau coup money to treat his lung cancer for 5 years as he didn't have health insurance that covers going to Houston to treat his cancer.  Nobody, not even my mom, knew he had all that money.  So we asked my mother - what do you want to do with all this money?  My mom says - "I don't know, I don't need it. You divide it among yourselves."  And all 4 of us siblings were like - none of us needs it... so we kept it in the investment accounts in case my mother gets sick or one of us gets cancer.

tldr; what I'm trying to say is.... the way my dad lived his life was according to his perfect calendar - the most important thing in the calendar is family.  And so that's how he spent his retirement years - enjoying family.  He didn't need much money to enjoy family so his money didn't get spent.  How he ended up with all that money is a topic for another post (I've actually shared it on lds.net before).  The most important thing for my husband and I is also family.  So, we're following in my father's footsteps and mapping out our Perfect Calendar. 

 

11 hours ago, mrmarklin said:

But more power to those of you who are willing to forgo the niceties.

If you live your life such that you need a lot of money for niceties, then you're gonna need a lot of money for niceties when you retire.  My dad and I simply believe - suspending your Perfect Calendar until you're 65, being tied to a job to have money for niceties is not really living in niceties - it's just silly.  The Perfect Calendar is the goal... not the niceties.

Edited by anatess2

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10 hours ago, mrmarklin said:

But more power to those of you who are willing to forgo the niceties.

I would be able to live on 50% without forgoing what I consider to be the niceties.  That said, I don't like foreign vacations, and most of my hobbies are relatively inexpensive.

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3 hours ago, person0 said:

I would be able to live on 50% without forgoing what I consider to be the niceties.  That said, I don't like foreign vacations, and most of my hobbies are relatively inexpensive.

For those who do love foreign vacations... You don't need to wait until you retire to live your life travelling from one foreign land to another.  And it doesn't take a lot of money to do so either.  Yes, you can do this with children too.  A friend of mine is even living this life right now.  He's been doing it for 5 years and he's in his early 30's now.  He left Florida for Germany, ended up in Austria where he met a girl, they got married, and they continued to travel.  They went all over Europe and a couple years ago they hit Asia.  They're now in Thailand teaching yoga to the locals to earn some money for that leg of the travel.  They've done tons of work - teaching English, yoga classes, tour guides, writing for travel magazines and blogs, etc.  Their one great asset is being multilingual and that's what they capitalized on. 

Another friend of mine from almost 20 years ago, had the last kid leave for college, so they sold everything they owned, then lived off of 2 carry-on suitcases and a laptop bag and traveled all over the world.  My friend continued his programming job on his laptop taking short-term contracts.  They planned on doing this for 5 years but, it's been almost 20 years and they're still traveling.  He must be in his late 60's by now!

Another guy I know is a surfer.  He found himself very handy with electricity and plumbing so he got certified to do those right out of high school.  Then he put everything he owned out of his dad's house and moved to a van and followed the surf... he makes money by advertising his handyman business on the van and on craigslist.  He got himself a girlfriend and they take turns visiting each other.  Don't know if they got married.  He did say he'll settle down when he gets married but last I heard his girlfriend wanted to travel with him.  She wants to homeschool the kids while they travel.

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3 hours ago, anatess2 said:

For those who do love foreign vacations... You don't need to wait until you retire to live your life travelling from one foreign land to another.  And it doesn't take a lot of money to do so either.  Yes, you can do this with children too.  A friend of mine is even living this life right now.  He's been doing it for 5 years and he's in his early 30's now.  He left Florida for Germany, ended up in Austria where he met a girl, they got married, and they continued to travel.  They went all over Europe and a couple years ago they hit Asia.  They're now in Thailand teaching yoga to the locals to earn some money for that leg of the travel.  They've done tons of work - teaching English, yoga classes, tour guides, writing for travel magazines and blogs, etc.  Their one great asset is being multilingual and that's what they capitalized on. 

Another friend of mine from almost 20 years ago, had the last kid leave for college, so they sold everything they owned, then lived off of 2 carry-on suitcases and a laptop bag and traveled all over the world.  My friend continued his programming job on his laptop taking short-term contracts.  They planned on doing this for 5 years but, it's been almost 20 years and they're still traveling.  He must be in his late 60's by now!

Another guy I know is a surfer.  He found himself very handy with electricity and plumbing so he got certified to do those right out of high school.  Then he put everything he owned out of his dad's house and moved to a van and followed the surf... he makes money by advertising his handyman business on the van and on craigslist.  He got himself a girlfriend and they take turns visiting each other.  Don't know if they got married.  He did say he'll settle down when he gets married but last I heard his girlfriend wanted to travel with him.  She wants to homeschool the kids while they travel.

Don't know about the last one, but the first and second sound almost like those who are Begpacking.  BegPackers aren't really seen in the best light by some (many).  Of course, they might not be that, and even if they are the Lord loves all his children...but not a big fan of Begpackers myself.

They tend to write travel blogs and other things, but when you say he's teaching Yoga classes and English in Thailand...alarm bells kind of went off in my head. 

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