Do We Have Enough? Has This Been A Terrible Mistake? Fear & Anxiety In Retirement
Managing our "finsecurities" in retirement. FINsecurities, get it!? I crack me up.
Disclaimer: I’m no investment advisor nor am I acting as your fiduciary. Any investment-related musings below are my thoughts, and my thoughts only. They exist for your entertainment only.
It’s September 2022 in central Florida and Ian, a slow-moving category 4 hurricane, has just begun its devastation about 90 miles to the southwest of us. We are prepared, but not overly so.
We have stowed away any outdoor belongings that could conceivably defy gravity in 100+ mph winds.
Our car is tucked away in the garage, while our daughter’s Nissan is parked down the street (away from the two large oak trees that canopy our driveway).
We’ve stashed away a bit of water in various containers. Our pantry and fridge look like they always do, with about 1-2 weeks of food.
We have flashlights, candles, batteries, and propane for the grill.
There is a moment of quiet when we exhale, survey our home and belongings, and wonder “Have we done enough?”
I am guessing that the people fighting with each other over jugs of water at the grocery store would answer “No!”
The truth is, we were inland. We were lucky. And while it was enough during this hurricane, it may not be enough for the next hurricane. And so no, I will not cast stones at the people peeling out of their local Home Depot with 3 generators in the back of their truck. We all get afraid. We all want to be prepared. But I do want to acknowledge that fear is expensive.
“Fear is expensive.”
There is similar preparation anxiety that washes over us in retirement. When we decide to leave our steady paychecks behind, it can feel a bit unnerving. Have we done enough? Do we have enough?
Retirement anxiety, and the stories I tell myself to feel better
Allen? Are you there? It’s me… er… it’s you. Emotional you. I’m really worried. It’s the stock market. It’s going down A LOT! What if it goes to zero?
Oh hi, emotional me! Wow, it’s been at least 4 minutes since I’ve heard from you.
Listen, the stock market will definitely go down. You can count on it. But it will go back up, too. That’s investing.
Individual companies certainly may fail and go to zero. That’s capitalism. But the market will never go to zero.
Ok but shouldn't we sell everything and wait until things look a little better out there? And how are you so sure it won't go to zero, smart guy?
So, I should sell when stocks are lower and then buy them back when they are higher? Try and relax, emotional me. We don’t need this money for nearly a decade, and stocks historically trend higher.
Here is a quick thought exercise for you to hopefully help you feel better:
Go back in time to 2008 and buy $100,000 of the S&P 500 at the highest possible price in 2008, just before the market nosedives and kicks off the financial crisis.
Now sell those shares at the lowest possible price in 2020, in March after the market nosedives again due to the pandemic.
If you bought shares at the highest price in 2008 (before the financial collapse), and you sold shares at the lowest price in 2020 (during the pandemic), that $100,000 investment is still worth roughly $160,000. You're still up 60%. The only thing you had to do was not panic.
Time in the market really does matter.
“If you bought shares of the S&P 500 at the highest prices in 2008, and sold them at their lowest prices in 2020, you are still UP more than 60%”
The market won’t go to zero because there are real businesses underneath those symbols and share prices, with real sales, earnings, assets, and cash flow. Berkshire Hathaway, for example, has 130 billion dollars just sitting in cash. You will never be able to buy the whole company for $1.
Allen? Are you still there? It's inflation, Allen. Did you see the latest Consumer Price Index? We're up more than 8% year over year. All of our expense projections in retirement are now wrong!
I’m with you, emotional me. Inflation definitely sucks. But remember, the CPI tracks a basket of goods that we may or may not use. Try and remember that we live a little bit differently. We aren’t all that spendy, to begin with, and we can’t assume that our expenses are automatically going up at the same clip.
Home and car prices are up, but we aren’t really in the market for either one of those, are we?
Clothing costs more, but didn’t we just buy an awesome $13 prom dress for our daughter at that cool new thrift store we found? Aren’t we always thrifty with our threads? Heck, our closet is full of t-shirts people gave us for free. We’re a walking billboard 90% of the time.
Food is more expensive, but we mostly cook awesome meals at home anyway. And remember how we switched from diet soda, which isn’t very good for us, to homemade iced tea? We went from 60 cents for 12 ounces of soda to about 5 cents for 40 ounces of iced tea.
Gas is higher, but remember that we bought that awesome Honda scooter? We feel like batman on that thing, and it gets around 130 miles per gallon.
My point is, everyone lives differently, and there are a lot of things we can do to offset inflation. That number doesn’t just get automatically stamped onto everything we buy. Also, we FIRE folk are pretty well practiced in the art of frugality.
Ok, but what if it gets out of control and we have hyperinflation? What if we become the next Venezuela? Should we hold some bitcoin?
The complete collapse of the US and global economy? I don’t know, emotional me. I guess we could stock up on firearms and whiskey, and start digging the bunker. Or, we continue to bet on the American economy and choose to live our lives with some optimism.
And so far, bitcoin has traded like a tech stock, not some magical inflation hedge.
The chip shortage, Allen! What about the chip shortage!? And the war!? And the bees!? My god, the bees!? And...
Emotional me, we will do the best we can for this world, for others, for ourselves, and yes, for the bees.
Is it enough? I’ll be honest with you; I don’t know.
But we choose to live in our hopes and not in our fears. There are things we can control and things we cannot.
“We live in our hopes, and not in our fears.”
What I do know is that we are problem solvers. We have a growth mindset; we are lifelong learners. We do this change thing very well. We’re going to be ok, buddy.
Allen, I continue to love your writing style. You are funny and make thoughtful, useful points. Thanks for sharing yourself! Sending emotional you and regular you a hug!
"Fear is expensive." "What I do know is that we are problem solvers. We have a growth mindset; we are lifelong learners. We do this change thing very well." Allen, you turn a great phrase. Really enjoyed reading this. And my own "emotional me" was soothed. :-) Thanks for posting!