Prepper Mindset

This post is inspired by the following Tweet;

I think I've been espousing this idea forever but I like the way Daniel articulated it. Your plans won't get derailed by things going right, plans get derailed by negative surprises. 

One negative surprise that shouldn't be a surprise if it happened was if the Feds do something radical with Social Security. That Social Security has issues is not new. For many years, younger people have been responding to polls that they don't expect Social Security to be there for them. The possibility of a 23% haircut sometime in the mid 2030's has been looming out there for a while and lately there have been a lot of pro Democrat/anti Republican political ads saying the GOP wants to "put it on the chopping block." Here's an article from Marketwatch that says the Repubs "really are talking openly" about making changes.

This post is not going down a political rabbit hole on this. The objective here is think about preparing ourselves in case it does get altered somehow. No one is worse off if this is just political theater but plenty of people stand to be adversely affected if, I say if, there are big changes made. How vulnerable are you to that and what can you do to protect against that outcome. 

To me, the simplest way to overcome this is to work longer. Working longer does not have to mean staying in a job you are desperate to leave, working for a boss you can't stand, perpetually navigating bureaucratic nonsense. 

At some age, maybe as early as 50 or maybe 60 or so you might get to a point where you've maybe saved enough for retirement or you're very close to your number such that you may not have to save any more money and at the same time maybe you've paid off your mortgage. In that scenario, it seems like it would be reasonable to downshift into something you would enjoy much more even if it paid a lot less. 

With the right type of planning and ground work I think it would be reasonable to figure a way to work half the time for maybe 2/3rds of your full time pay. Here's a relevant success story I heard about today that is fire department related. One of our volunteers is a retired city firefighter from down in the Phoenix area. He affiliates with us so that he can go out on large wildfires as a Medical Unit Leader (MEDL). We were talking this morning and he said he'd been out for 45 days this summer as a MEDL and even though that was fewer days than 2021 he still made about as much money in 45 days as he did from his department salary before he retired. While there is kind of a long runway to that outcome, it's not insanely long by any means. 

Now is the time to plant those seeds to see what grows for your future. I have some understanding of fire service opportunities as a function of volunteering so those examples are easy for me to cite. You probably have examples from your life that you could pursue and line your ducks up now for down the road even if it takes a lot of planning. A lot of planning is good, it is your future and no one will care more about your future, about your outcome more than you. 

Extending this out a little further, Barron's took a look at the current state of the Secure 2.0 Retirement Bill. There's a lot in there about catch up contributions and how 401k plans would be offered to employees but for purposes of this post, the most relevant is the bump in age to 75 for having to take required minimum distributions from traditional IRA accounts. 

Someone wants to retire from their primary career at 62. As noted above they are pretty much on target, not way ahead or way behind, their house is paid off and they are in good shape. This person has a lot of optionality. How reasonable is it to find a way to monetize one of their interests to be able to cover the bills (mostly insurances and utilities) and have a little left over for some fun? I think that's doable. Yes, you might have to pay your dues for awhile ahead of time, that's ok, especially if we're talking about something that interests you. 

Can this 62 year old then delay Social Security until 70, letting it grow to max out, take it then in case this part time gig is no longer feasible at that age? Then at 75 they start taking from their IRA, or sooner if they need. 

Who knows what cuts in Social Security might look like, or how people would be impacted. Someone who is today 65 might be impacted differently than someone who is today 45 or 50. The scenario I'm laying out might insulate against a cut to Social Security if you can make an income from something you enjoy to an older age, you delay taking from your accounts such that maybe your money only needs to last for 25 years not 35 years.

For anyone not where they want to be physically for improved optionality, this idea gets scoffed at or dismissed but I am telling you there is a lot that is reversible or can be improved but it is up to individuals to do this for themselves. Start lifting weights and reduce your carbohydrate consumption. Some people are hesitant to lift weights because they think they'd be using too light of weight and be embarrassed. That is pure ego, no one cares how much or how little you're using. There is no downside whatsoever to starting to exercise and eating less sugar.