Financial Security in an Insecure World

 

Over the last few months, the stock market has proven yet again it is no place for sissies. Huge drops in the Dow Jones average one day (over 1,100 points in a single session last week!), followed by encouraging partial recovery, only to be dashed by another fear-induced sell-off, makes for an emotional roller coaster. What will the Fed do about interest rates? What happens to the price of oil? Who can do something about inflation? Will the supply chain problem ever be corrected?

The war in Ukraine drags on, with millions of its citizens displaced and thousands killed. Putin doesn't know how to quit without putting control of his country in serious jeopardy. The underdog lives to fight another day, but the outcome is pure speculation. The world economy is in a tizzy, and Europe trying to make do without Russian oil, gas, and wheat. NATO might gain new members, but only if Turkey allows it. 

China has become the financial equivalent of jello: a seemingly solid mass that quivers and shakes with each new move by its government to hold things together. Covid is back, resulting in millions back into lockdown.

The bottom line is financial headaches, real or imagined, for nearly all of us. Even if you don't have much skin in what happens on Wall Street, we are all affected by what happens worldwide. It is absolutely true that if one developed country sneezes, we all worry about catching a cold. 

So, what does all this mean for the concept of planning for retirement financial security? If you are retired, close to leaving the workforce, or even just thinking about the time when you will be freer to live your dreams, what are you supposed to do when the Dow drops 1,000, you can't afford your dream home, or China, the world's second-largest economy, starts to slow down? 

Do you rejoice when gas prices drop or realize that it is likely a temporary blip Prices around $5 a gallon may be the new norm for quite a while. ? What about the West's drought...how will that affect food prices and life for the 40 million people who depend on the Colorado River to keep flowing?? Lake Mead and Lake Powell are draining faster than a toddler's bathtub.

As regular readers know, I am a non-financial blogger. I still managed to retire at 52 by following a simple rule: spend less than I made. I have had a few financial advisers over the years. Generally speaking, they have been positives for me.

Yes, some of their recommendations were poor (think Greek banks in 2012), and I lost money. Since the financial markets are not logical and are subject to seemingly counterintuitive moves, I  know losing is part of the process. As long as the growth exceeds the decline by a decent percentage, I am happy. 

So, what is financial security, and how do you achieve it? I suggest there are three parts to the answer:

1. Knowledge. I don't mean understanding derivatives, swaps, or other esoteric financial tactics that helped launch the 2008 meltdown. Obviously, many professionals didn't understand what they were buying either. I mean knowledge about your goals, the actual state of your financial health, and the amount of risk and uncertainty you are willing to tolerate. Self-knowledge is key. Without it, your future is at the mercy of others.

2. Patience. This is a tough one in a culture that literally screams at us, "buy now and buy often." Saving for something and delayed gratification is not part of our collective mindset. An article in the paper last weekend recounted the trend of those under 35 giving up on saving for retirement. After two years of Covid, these folks have decided that planning for an unknown future is silly. Enjoy life while you can before another ...whatever...knocks us on our rears again.

Even if we have little or nothing invested in stocks, when the market falls, we react in precisely the wrong way by allowing panic or fear to dictate how we manage our financial assets. When housing prices begin to skyrocket like they have been for the last few years, we decide to sell our homes so we don't miss out on the rising tide - completely forgetting that the house we are moving to is also hugely more expensive. 

Patience is a winning strategy in much of life, particularly in financial matters. The hare lives up to 10 years. The tortoise is closer to 150 years. There is a reason he eventually wins the race. 

3. Attitude.  This is the belief that you have successfully prepared for your retirement. Life may make that difficult, but without an attitude that the problems can be overcome or worked to your advantage, severe damage will have been done to your long-term success. This isn't just positive thinking. Instead, the proper attitude allows you to make appropriate decisions, execute your plan, and adjust your goals. I know that the losses my investment account is showing are only real if I liquidate now. My attitude is they are paper losses, I will not deviate from my plan.

Financial security does require some money. It does require being smart with your investments. It does require a certain level of resources, though that level is different for each of us. That is the reality. 

But, I contend that the mental part of the equation is as important. With self-knowledge, patience, and the right attitude, your financial security is not just what is in the bank or the broker's, but what is in your mind. 

And, unlike a stock market that runs more on emotion than logic, I find it quite comforting that the mental part of financial security is 100% under my control.

 I find that quite satisfying.

Grownups in The Room

 

The title grabbed my attention: 10 Ways to Live More Frugally. In the section on retirement, this article in a national newspaper listed ideas for cutting back spending during retirement.

Unfortunately, the author used an approach I refer to as "Eat Your Vegetables," meaning the information is so basic, so much common knowledge, it is like telling someone to stop smoking, exercise more, and eat more fruits and vegetables to improve his health. There is nothing new, nothing that hasn't been suggested a million times before.

A sampling of the 10 Ways included:

* Plan carefully if you are thinking of moving
* Plan your meals for the week
* Review your cable or streaming bills
* Be a savvy grocery shopper
* Check out discounts and freebies

I am a little surprised that the list didn't include: don't walk in front of a bus, and close the windows when it is raining. OK, that is a bit snarky. But, seriously, the best this national newspaper can come up with is to review your Internet bill and look for dining discounts?

Sometimes I think folks who write retirement articles are all in their 20s or 30s and look at us as if we have lost the ability to think. They present ideas as if their target reader is a class of 2nd graders. They have no clue what our life is like or what steps we have already taken to ensure a satisfying retirement. They tend to overlook that we have had to make a lot of decisions and hard choices just to be old enough to qualify as a retiree! 

A thoughtful article on ways to cut expenses during retirement is always welcome. Cutting out waste and evaluating where our money goes is important. A  national survey of those 65-74 suggests that we spend 43% of our money on our home and house-related expenses. 14% for transportation, 13% for food, and 11% for health costs (thank you Medicare!). 

If those numbers are accurate, nearly half our money each year goes to keeping a roof over our head and in good repair. Logically, there are substantial saving possibilities in that category alone. Everything from freezing property taxes for those over 65, or getting help with utility bills if your income is low enough to qualify, to the potential savings from installing energy-efficient windows, solar panels, new siding, or using LED lights are worth exploring. 

My bottom line is simple: articles in national newspapers and magazines that target retirees should be putting more effort into the content. We are not simpletons that need to be told to look for coupons to save money when dining out. We are grownups who have done quite well, thank you very much. Give us meaningful, actionable information that isn't a simple repackaging of hackneyed, trite, and obvious material. 

Does this qualify as a rant?

I feel better now.

When Should I retire?

 Every so often, I am returning to the roots of Satisfying Retirement and rerunning an older post that deals with the nuts and bolts of retirement. This post has been read almost 50,000 times since first published, so if anything I have written before is deserving of another airing, this is it.

If you have yet to leave full-time work and have questions about what is ahead, I trust these posts will help you. If you have already retired, there is never a bad time to review what got you there and how to improve your experience. 

From eleven years ago

"When should I retire" is a question I hear a lot. Comments left on the blog or e-mails filling my inbox ask for help in knowing when it is time to call it quits. The answer I give is usually the same: For your individual situation, I have no idea. Retiring from your present full-time job to begin your satisfying retirement is one of the more important decisions you will make during your lifetime. There are so many factors to consider that you must put in the time and effort to come to the best answer for you.

I wrote the  following post about 6 months ago. In looking it over I think the information is valuable enough to repeat now without many changes. I have a lot of new readers who may not have seen this the first time. If so, I urge you to add your comments at the end. Fresh input is very valuable to all of us. If you remember reading this post when first published, I hope a second time will spark your thinking about one or more of the points raised.

You know it is time to retire when....

You dread going to work every day. You are tired and dispirited. Everyone has an off day or a few days every now and then. But, if that feeling is present pretty much all the time, you may have reached your limit.


You are being asked to do more work for a less money. This is the hidden message in that last productivity memo you received. To preserve your job you will have to accept a salary cut and pick up the slack of those unfortunate souls who got a pink slip. For the short term it may be in your best interest to accept this. But if the situation begins to look semi-permanent, you may have second thoughts.


You feel the essential "you" is slipping away. There isn't enough time for you to do what satisfies you and makes you happy. You find yourself doing things that make you uncomfortable. Your world has shrunk to work-sleep-work.

You can't wait to get home to work on a project or new passion. Closely tied to the "you" reference above. All your thoughts revolve around after work hours. There never is any time to do that thing you really love.

You complain to anyone who will listen (and even many who will not) about work. Spending your energy and life in a negative place increases your stress and shortens your life. It is also a quick way to get fired.

You have saved enough to live without a regular paycheck. You have run the numbers so often your calculator is melting. There are solid income streams that make you feel you can do this. You have thought through contingencies. You have thought about worst-case scenarios. The numbers still work. You feel confident in your financial planning and long term situation.


A loved one is very sick, and you'd rather spend your time with that person while you can. Whether a parent, child, relative, or best friend, there is no do-over if that person isn't likely to be with you through your retirement. Do you feel strongly that person needs you right now? 


Your health is beginning to slip and you have things you want to accomplish while you still can. In this case you are on the other side of the fence. You are sure you will not be physically or mentally able to do what you'd like to do if you wait too long to retire. You decide it is more important to enjoy your freedom while you have it, even if it means a more limited lifestyle.


You have affordable alternatives for acceptable health insurance and care. This question is hard to answer at the moment. Everything seems to be in a state of flux. But, if your health coverage through work will continue, or your Medicare and supplemental policy are working well you are better off than many. Plan to spend much more than you think you will. If the budget still works you have dealt with one of the biggest hurdles to a satisfying retirement.



You are excited about making a major change in your life (where you live, how you spend your time) Change is life. A life without change is in a rut. Change can be stimulating, exciting, terrifying, and necessary. Sometimes you just have to shake it up and that thought gets your blood racing.


Your self-identity isn't defined by your job. You have a life and and sense of self worth not dependent on work. This is important. There are few things sadder than someone who retires and discovers he has no life outside of work. If you have at least some friends who are not co-workers, enjoy hobbies or other activities you are much closer to being ready to leave the job.


What do you want to do with the rest of your life? When do you want to do it? Aren't those the most important questions? When you can answer them, you may be ready.



Which of these questions and statements fit your situation? If you are retired, which ones were most important to you when you made the decision? Retirement today is quite different from a retirement lifestyle of even 10-15 years ago. You may plan for more work. You may want to stay in your home as long as possible. Sun City holds little appeal. You may be chomping at the bit to spend a few years overseas on mission work. You are ready for a new phase of your life, not for your life to end in a whimper. Your thought: retirement  only the beginning of a new part of my life.


How do you know when to retire? You just do.