Bloomberg conducted a survey about how much money people need to retire and the respondents said $3-$5 million. Well, then. I am less interested in the sensational numbers they are throwing around than a couple of smaller observations in the article.
Christine Benz from Morningstar is quoted as saying "It’s no wonder many would-be retirees are doubting the viability of their nest eggs,” in the context of the recent increase in price inflation. When I see these sorts of things, my immediate thought is about how to mitigate problems that might arise from a nest egg that isn't quite as viable as hoped for.
Using the 4% rule for safe withdrawal percentages, if you're 10 years away from when you want to retire, how do the numbers look? What about 5 years away? If you think you need your saving to generate $50,000 but 4% of what you have only generates $41,000, that's not catastrophic, hopefully a little belt tightening on discretionary spending, assuming no other action taken, could be sufficient. If 4% only gets you $19,000 then yeah, that's a much bigger issue. Can you adjust to your nest egg? If not, then what can you start doing now to get out in front of that problem?
Some number of the survey respondents were portfolio managers and 10% said they don't plan on ever retiring. I am in that camp and I guess I am surprised that the number isn't much higher. That rhetorical question from a blog post last week, why would you retire from something you love to do? Can you create that situation for yourself? Can you create an income out of something you love to do, something you wouldn't want to ever give up? Arguably, finding something completely different from your primary career that you love doing could give some powerful emotional momentum to do that secondary career for a long time which obviously would be a game changer for a nest egg that isn't robust enough.
Back to the Benz comment. A long, ongoing theme to these blog posts is avoiding being overly dependent on things going just right in your investment portfolio. If you think you need $50,000/yr from your portfolio and 4% would generate $49,000-$51,000 then you really have no margin for safety. If you had to spend $150,000 on something life-saving then obviously you'd do it but what is the financial fallout afterwards?
Stuff happens and speaking personally, it is very high on my priority list to be resilient to stuff and have optionality if I ever need it. The sense of satisfaction solving tiny problems like plowing the road after a snow storm or splitting firewood is fantastic. I feel like this would only be magnified solving a much bigger life problem. Put in the work, create a path to robust outcomes.
Personal note, I wrote most of this post quite a few days ago. I have been inundated with tasks, not even stuff as alluded above but tasks. We have had an insane winter with more snow storms than anyone can recall having before. We had about 10 inches Thursday night with a similar amount to come tonight, that all on top of 5-6 weeks of storms where the snow hasn't been melting like it normally does. My pickup has had snow chains on since January 16th. In between all the plowing, I've got a day job project to work on and Walker Fire's new Type 3 Engine is just about finished and so there's work associated with that too.
Getting this truck is probably one of the biggest things I've ever done.
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