Your Finances Aren't As Bad As You Think
A few things I read this week.
The first article is from the Financial Samurai. He "retired" at 33. That is not a path I have ever had any interest in but he has good insight into quality of life issues that are useful to touch on here. In this post is looks at the pros and cons of retiring early as well as a couple of other observations.
He says that you need less money when you're retired than you might think in part because you're no longer saving for retirement. This opens up a crucial concept for people not necessarily wanting to retire in their 30's but for the guy who is 58 and has decided he wants to retire soon and maybe doesn't have millions saved. I have written more times than I can remember that replacing 70% or 80% of your income in retirement is nonsense. It is very unlikely that you're living on anywhere near 80% of your gross now and probably nowhere near 70%.
Run your own numbers but what is your gross? How much do you net after taxes, 401k and any other savings vehicles? Is it close to 60%? Let's go with that. What portion of that net goes to your mortgage? If you time things well and you make your final mortgage payment coincident to retiring then you might need to replace 45% of your gross income maybe even less depending on how mortgaged up you were. How much will get in Social Security? Per the ssa.gov website someone born in 1960, making $100,000, taking social security on their 67th birthday would get $2418/mo in today's dollars. Combine that with a spousal benefit of $1209. With $3627 in combined benefits and needing to replace 45-50% of gross income, things don't look so bad. This scenario doesn't have much margin of error without savings but is far from dire.
Here's an article from Plaid Zebra about the benefits of minimalism as relates to happiness. I am not a minimalist but love the idea of having less stuff when possible and practical. We have a little workshop/barn type of structure and we have a lot of tools and other stuff in there and we also have a couple of piles of building materials. Living where we live, tools and materials make sense to have as things come up all the time that need fixing or some project that needs doing; practical. But I don't have a closet with 20 suits and 15 pairs of shoes; less stuff is practical. To all of these ideas about how we should be living our lives there is a balance that is right for each of us individually. I probably wouldn't need a chop saw if I lived in an apartment in Manhattan for example.
James Altucher talks about 10 things he values more than money. Numbers 1 and 3 tie into successful retirement; community and giving. There are countless studies about how staying engaged in some sort of community or social structure helps with how we age. Engagement with people is beneficial. I see this all the time at our fire department where people who may no longer be able to be firefighters help out with many other things. They give their time. I don't know how many of our volunteers also donate money, we are a donations based organization, but to the extent time is a more valuable gift than money, this can be done without having a lot of money. It is amazing how much time people want to give to the department, this is not something you do because it makes you unhappy.
Here's a great quote from Sean McDonough on moving from play by play on Monday Night Football back to calling college games;
I say that after a lot of reflection and mostly a lot of belief that, ultimately, what is the most important thing in life is to be happy,” McDonough said. “As much as it was a great honor to be the voice of ‘Monday Night Football’ –– and you guys know me well enough, and certainly a lot of my friends and family do –– it wasn’t a tremendous amount of fun the last two years. When I took my ego out of it, when the conversation about a reboot of MNF came up, when I took the ego part of it out, and rationalized it, I really could be fine with not being the voice of MNF, then it became easy. I love college football. For me, it’s more fun, and that’s a personal taste.”
I write a lot about taking bits of investing process from other people to create your own investment process. This works for life as well. Most of us can maybe give a little of our time and get rid of a little of our stuff all on the path to evolving as people.