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Removing Emotional Friction

Understanding the emotional obstacles to a fulfilling retirement.

Today, Saturday, has been a good day so far. I watched some Scottish Premier League Football very early, did an errand, had a mini-workout at the firehouse, then had our monthly Fire Department board meeting, came home watch the 2nd half of Oregon beating Ohio State, did a bunch of internet reading during the football, cut up a bunch of black mesquite for firewood (crazy story how we got that) then sat down for most of the Iowa/Iowa State game and to write this blog post.

The purpose of that first paragraph was to define what I might think of as a good day and how un-boring this random Saturday was. One of my reads today was about the psychology of boredom. The author isolated four factors leading to boredom including monotony and lack of purpose. I’m never bored and I’m probably lucky. I don’t find routine to be monotonous and I feel like I have a lot of purpose to my life.

This contrasts with what both Nassim Taleb and Naval Ravikant say about being bored. They’ve both talked about the value of having nothing to do because then you can (my take of what they meant) do whatever it is you really want to do. Maybe they’re getting to the same place as the author, not sure. Two quotes from the article that stood out “people who have a strong drive for self-determination and competence experience less boredom” and “when we feel we have no control over our lives, the results are rarely good.”

Both sentiments connect with the idea of setting your own schedule, owning your time. Setting your schedule is the ultimate freedom and I think results in not being bored.

This transitions us to retirement and a couple of interesting articles from Barron’s. The first is from Neal Templin who we’ve mentioned before. He’s semi-retired and his Barron’s pieces are a kind of look over his shoulder (a term I’ve used before to describe this blog) as he transitions into retirement.

In his current piece he talks about liking to work, that his part time work covers most of their expenses and his reluctance to pull from retirement savings. That’s something I have written about quite a few times. I know I will be reluctant to pull from our nest egg when the time comes. Our Plan A is to only use it for emergencies and large one-off expenses not ongoing bills. Templin said he likes to see his account balances increase but he also believes we are in for a valuation reckoning in stock prices. My reluctance is more about optionality and being able to pay for a medical catastrophe out of pocket if we ever need to. Once you spend money, you no longer have it to spend if something better comes along. This is mostly a hang up on my part I know. I can’t even think of a time where we spent money on something and then regretted it because something immediately came along that was better.

Plenty of people have no hang ups about spending from their nest egg, probably the majority. The point is to know ahead of time where you fall on this issue so you can figure out how to solve it for yourself.

And finally, kind of a wild Barron’s interview with Laurence Kotlikoff. I’ve mentioned LK quite a few times in the past as someone I’ve learned a lot from. I’ve learned from him to be sure, but I draw different conclusions about quite a few things.

He believes people should wait until 70 to take Social Security. Waiting until 70 resonates personally. I am six years older than my wife and I like the idea of maxing out my payout for her if I die early. But I do not think there’s any “everybody should…” on when to take it. One way to frame the argument for taking it early is that it is better to live off the government’s money (I know, I know) than yours. The tradeoff is the longer you wait, the more you get each month.

He also believes in paying your mortgage off early, he seems to be saying that everyone who can, should. Again, I don’t think there is a single right answer that applies to everyone. The way I look at the math, it’s clear, don’t pay it off. There is psychic value to being mortgage free but how much value is very individualized. We’re ten years into a 15 year but because we doubled up payments for a while at the beginning, we’ll be paid off next year. I assign a lot of psychic value to no mortgage. If we end up staying here as long as I hope, then we’d need at most one more place to move into when we’re very old and maybe we could pay cash for it with the proceeds from where we live now but we’ll see.

One thing we agree on completely is the futility of a retirement number. This is a point I’ve been making going back 17 years when I first started blogging is having a goal or target is important but it is less important than however much you actually end up with. If you retire with $800,000 it doesn’t matter whether your goal was $500,000 or $1 million; $800,000 is the reality you need to manage. In the same part of the interview, he dismissed advisors who ask people how much they want to spend because again, whatever you wind up with is your reality. If you don’t like your reality, then something will have to give like working longer than you wanted. Back to Templin and I point I’ve been making forever about figuring out how to monetize something you love doing and that you consider a hobby even if just kind of a hobby.

The wild part of the LK interview was that he might have panic-sold equities during the pandemic. He said “I pulled out of the market when Covid hit, and the market dropped, and I was very proud of myself.” The comments section took that to mean he panicked out and he did say he missed the rebound. If he panic-sold then it means he found out at the wrong time that he had too much equity exposure.

If someone like LK can end up in that position, again though not sure that is the case here, then anyone can. The ways to possibly mitigate finding out at the wrong time that you have too much in equities include pulling enough cash to cover some amount of time comfortable for you so that your income needs can withstand a prolonged swoon, reducing your equity beta such that you go up less but you also go down less or maybe take a game-over approach if you, for example, need $2500 per month from your portfolio but you have $2 million accumulated.

All of these things could be summed up as removing as much emotional friction from your retirement as possible. There are of course other sources of emotional friction too but the more you can remove, the better and easier life can be.