Time For Gen X To Rally

Important things to figure out for yourself.

Marketwatch wrote an article about Tanja Hester who is one of the more well known FIRE proponents and who by all accounts appears to be doing well having retired at 38. I think she's been profiled before and I think I've written about her previous profile. She and her husband have income from "side interests" and I have no idea whether their side interests cover their expenses or if they actually draw on their savings to pay the bills. There was one line in the article that really jumped out at me;

"Every day of freedom you buy yourself before age 65 is a big win and worth celebrating.”

The context was that freedom came by virtue of having retired early. I am a huge believer that time equals freedom and is equivalent to wealth but the notion that the only way to have freedom is by not earning an income is a dreadful sentiment. If you're lucky enough to have a job you enjoy then you know what I mean. I can appreciate that time spent on a job you do not enjoy would not equate to freedom but merely pursuing work you would enjoy can itself be uplifting and then finally finding a job or work situation that you enjoy would be life changing.

Also embedded in that quote is something that has been bugging me about FIRE (I've written about this many times) which is the inability of people at 25 or 35 or whatever to conceive that 50 or 60 years of age does not have to be old. That's not a knock, it is normal, at 25, I had no concept of what 40 meant. Because they cannot really envision themselves at 60 they are willing to favor the short term not over the long term but at the expense of the long term. "Retiring" at 40 means getting very little Social Security. You might think it won't be there when you are eligible (I used to believe this) and while I now doubt that the program will fail, by stopping working at a very young age you give up that optionality. Another point is that if you start to draw on your savings to live on in your 60's (or later?) then you might expect to endure two or three bear markets in your retirement. If you start to live off your savings in your late 30's or early 40's you might expect to endure seven or eight bear markets. Bear markets increase the chances of making some sort of behavioral mistake with your portfolio. You're more likely to understand that this time is not different and that after the bear market ends the market will go on to make a new high if you're older and have endured a few more of them.

At 25, 35, maybe even as old as 45 people think that 50 and 60 must be old and they will be limited in what they can do. Outside of some unfortunate situations, behaviors related to diet and exercise can stave off chronic illnesses and frailty that often come via a combination of age and sedentary lifestyles. As one example, where insulin is concerned being sensitive to insulin is healthy and resistant to insulin is unhealthy (look this up and learn more about it). When we are younger it is easier have insulin sensitivity without doing much. When we get older, the path to being sensitive to insulin is more difficult without regular, vigorous exercise and changes to diet (again, look this up and see for yourself) but people willing to make these changes are very likely to delay the declines that we associate with aging by many years with exhibit 1 being the 78 year old dude at my gym who decline bench presses 500 pounds;

Where time equals freedom, the ability to continue to do what you want to do (including work that you enjoy) makes life longer and more enjoyable.

I think a lot of older Gen-X and younger Baby Boomers are at a crossroads of sorts today of maybe no longer wanting to work, some having enough money where retiring now could work out financially and in varying states of health (no matter how old you are you probably know people your age who can do amazing things physically and others who are much "older" than their age would imply). If you're with me in that age cohort it is natural to size up where you stand physically and financially (I feel no sense of trying to measure up to others but I care about being able to do the things I like) and trying to assess whether something needs to change and you're optionality to effect that change.

If you have more in the bank by virtue of living below your means you have more optionality. If you are physically capable by virtue of good diet and exercise habits you have more optionality. And circling back to a point from up above, of you've been gainfully employed most of the time then you have more optionality where Social Security is concerned, you're much closer to your full payout in your mid-50's versus your mid-30's.

I often like to quote our friend Bill from here in Walker who said you can figure it out now, or you can figure it out later but if you can figure it out now, you'll be much happier. I think we need to add the topics in this post to the list of things to figure out.

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