Sam Dogen, aka the Financial Samurai and an early proponent of the FIRE movement had an intriguing post saying that Early Retirement/FIRE is becoming obsolete. The TLDR is that having more opportunity to work from home (a Covid byproduct) has created more of a sense of independence from better time ownership and the lack of a commute makes work more enjoyable.
FIRE is an fun topic to write about and explore but the focus here has always been on the financial independence aspect, the FI in the acronym. The commute comments really resonated with me, that was a big driver for me trying to get to the point of working from home which I did, starting in 2003. Anytime I tell someone I've been working at home for that long I always throw in "thank God for the internet" which always gets a nod and a chuckle.
A little while back I commented that I thought I've been in coast FIRE mode for awhile which means not necessarily having to save more for retirement but still needing to let the money grow without living off of it yet. Sam crapped on that one pretty good but didn't elaborate, simply saying it's an illusion and a participation trophy. I wish he would have dug in a little deeper on that because below is a chart he shared that I take to support the concept coast fire.
It doesn't matter whether you agree with the expected amount needed column or not, you're in one of those demographics, you have some sort of framework of what you think you need and you have some amount already accumulated. I take coast fire to be about optionality. If you're 50 and you have 85% of what you think you need, it seems to me like you can coast with some optionality. That might mean gearing down into a lower paying job that you enjoy more or if you enjoy what you do, maybe you can allocate more of your income to whatever your idea of fun or discretionary spending might be.
We all have our own opinions and beliefs about every aspect of retirement from whether to even do it, when to do it and how our finances should work which gets us to one article from Barron's and one from Yahoo, both about when to take Social Security.
The comments, especially on the Yahoo article were worth reading. One common theme to comments on these posts is the belief that people can do better themselves by taking the money early and investing it in the stock market. Speaking to beliefs, ok, maybe you can do better yourself than the 8% annual step up in Social Security payouts but there's more than that, there's also the COLA adjustment. Here's the last ten years of COLA adjustments from Copilot.
| Year | COLA (%) |
|---|---|
| 2016 | 0.3 |
| 2017 | 2.0 |
| 2018 | 2.8 |
| 2019 | 1.6 |
| 2020 | 1.3 |
| 2021 | 5.9 |
| 2022 | 8.7 |
| 2023 | 3.2 |
| 2024 | 2.5 |
| 2025 | 2.8 |
If the average year in the stock market is 8-9% and average COLA is 3.11% or 2.65% for the median if you prefer, then the hurdle rate becomes quite a bit higher. Now add the complexity that there are very few years that the stock market hits the average return (usually more or less than the average) and this becomes even more complicated. If Social Security is like the fixed income portion of an investor's portfolio (Jack Bogle said that) then trying to capture the stock market effect with that money increases the exposure to volatility.
It's not for me to say what someone else should ultimately do but it's important to make all of these decisions based on an accurate framing. This point is similar to whether to take Social Security early or not, irrespective of investing it in the stock market. Take the time to understand the differences between taking it early and waiting (meaning how the numbers and math works) and then once the math is dialed in, applying that math to your particulars.
Uninformed people are going to make poor decisions. JP below is destined to make a bad decision if he doesn't take a little time to understand the problem
Social security payments aren't going away. Occasionally people will comment about taking it before the cuts potentially take effect. Making the decision based on thinking you won't endure a benefit cut is a bad decision. There will not be a cliff like that. Maybe people above a certain age won't be impacted (this is my belief) or maybe not but taking it early will not by itself spare you from a benefit reduction.
If your age 62 payout is $2000 and there is a 25% haircut you'll get $1500, if your age 70 number is $4000 and there is a cut, you will get $3000. When you start won't change that.
If you want to take it 62 but plan to keep working, they withhold $1 for every $2 earned above $23,400 and they do that until you it your full retirement age (FRA). You get it back when you reach your FRA but in the interim the payout would be small. Maybe that is still worth it, not for me to say but the point of digging into these things before you pull trigger is something everyone should do.
I'm seeing more acknowledgment of what I think is an important determinant which is waiting until 70 so that the lower earning spouse has a higher survivor benefit. That's not to say it resonates with too many people, it doesn't seem like it does but that's ok, we each have our own beliefs. Part of the pushback on this point seems to be a notion of winning versus losing against Social Security. Like my breakeven for waiting until 70 versus taking it at 62 is 79 and three months. If I die at 77, then I will have "lost" even though I would have provided for my wife. I might be in the minority on this but if I get what I want out of it while I am alive, I don't understand caring about after I'm dead.
Whatever your beliefs about any and all aspects of retirement and Social Security, invest the time needed to make the right decisions for what it is you actually want. The whole system is overly complicated and it easy to get important details wrong.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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