Tag Archives: Calculated Risk

Enjoying Retirement With A Pension? Beware, Treasury Opens Door For Trouble

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Fortunate are those who can enjoy retirement with an employer monthly pension check. Especially from a fully funded pension plan. After years of dedicated service to an employer, the hard-won guaranteed retirement income for life is a valuable asset to have. Even if you don’t have a pension, you probably know a loved one that does.

Something happened on March 6, 2019 without any big announcement or fanfare – The TRUMp administration Treasury rolled back a retiree protection that had been put in place to head off abuse and scheduled to be cemented into policy. They ended rules preventing companies from buying out their retired employees monthly pension with lump-sum offers. Now the door is open for trouble down the road for contacted retirees who fail to properly evaluate and act when confronted with a pension buyout offer.

Enjoying Retirement With A Pension? Beware, Treasury Opens Door For Trouble

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Retirement With A Pension Is Now a Rare Benefit To Have

Companies have been cutting and ending pension benefits for decades. The pension promises to long-time employees are often broken, from benefit qualifying rule changes to bankruptcy reorganization. But even those who have retired with their earned monthly pension can be caught up with corporate efforts to reduce keeping up their end of the bargain. With today’s corporate environment and leadership dynamics, corporations just don’t want pension obligations on their books.

The corporate tool used to shed existing pensioners from their books was to off-load them to an insurance company through what is called pension de-risking. Instead of retirees having a monthly pension guaranteed by the PBGC, with de-risking they were moved to an insurance annuity with their limited annuity protections. But now corporations will have another available tool to rid themselves of pensions, they can make offers to buyout existing retiree pensions with what may appear to be a generous lump-sum. But is it really all that generous?

Why Does Offering Lump-Sum Pension Buyouts Open The Door For Trouble?

What’s the big deal? Many who have a pension benefit are allowed to make a decision at retirement time whether to take a lump-sum or the monthly annuity. They are often not equal, with one having a greater value than the other. There are a lot of considerations that depend on your unique situation to make that decision, like longevity and personal financial discipline.

Those same considerations are necessary for anyone contacted during their retirement with a pension buyout offer. But not everyone was given that annuity vs lump-sum option when they first retired and may be caught off guard. Being contacted now mid-retirement may be the first taste of this critical decision.  

What Needs To Be Considered

First, don’t be fooled by what looks like a huge lump-sum number. Fixed guaranteed monthly retirement income is a luxury that’s expensive to replace. The number offered is most likely insufficient to be fully equal to the real value of your monthly pension. Not to be cynical, but we need to consider that the lump-sum pension buyout offer isn’t out of love for the retiree. Also, especially with this administration, nothing is done by government unless- One, it is politically advantageous, or Two, it was heavily lobbied for by corporate special interest. This pension protection roll-back smells like number Two is smeared all over it. With that in mind….

Check The Lump-Sum Buyout Amount Through An Annuity Calculator

The lump-sum offer is supposed to replace your monthly pension. See if it is by checking an annuity calculator to verify if it could replace your full pension payment amount. Not that you want to take the lump-sum buyout to replace it with an annuity. But instead to see just how close the lump-sum amount is to being able to do so. Use your pre-tax / pre other deduction full pension payment amount. Include in your annuity comparison extras your pension may have like a survivor benefit, inflation protection, etc. The idea is to figure out if the lump-sum amount is really a good buyout offer that fits your unique retirement needs or quickly see if it’s a low-ball attempt to be rid of you.

Retirement Health Insurance

If you have a retirement health insurance benefit, then your premium is most likely deducted pre-tax from your pension check. Accepting the lump-sum buyout offer means your insurance premium would now have to be paid with after tax money from other sources. It might be very difficult to qualify for the schedule A medical tax deduction at tax filing time. Depending on how much you pay this may be something to take into consideration.

Get An Idea About Your Pension Health

As a retiree you most likely get a yearly update about your pension plan financials. Whether your pension plan is fully funded or underfunded, it may play into your decision. If it is underfunded and headed for failure it is guaranteed by the PBGC. You might want to see what the maximum PBGC payout amounts are for your situation if it was to ever go into default. Do some research to understand where the plan stands and where you stand if the worst should ever happen to the pension plan.

Run The Lump-Sum Amount Through A Retirement Calculator

A big lump-sum might look like a fantastic offer but will it be enough to continue funding your retirement?  You must roll the money into an IRA to defer being immediately taxed. It’s then part of your overall portfolio. Run your numbers through a retirement calculator to make sure it can even meet your needs for as long as you are on the planet.

Self Assess Your Risk Tolerance

Accepting the lump-sum buyout offer means increasing risk in your retirement funding. That’s the whole point of companies making these offers in the first place. It’s all about moving the risk from them to the retiree. There can be rewards with an invested lump-sum if market conditions are favorable. But the opposite happens during market and economic downturns. Decide if that is something you can or want to handle in retirement.

Evaluate Your Health and Longevity

If your health is failing then you might be tempted by a lump-sum buyout to leave something more behind for your heirs. There are also long-term care considerations. If you have no long-term care plan, your State may treat monthly pensions differently than lump-sum assets held in an IRA when it comes to Medicaid.

Talk With A Trusted Certified Financial Planner

Consult with a CFP before making any moves. They can weigh in on the offer and provide insight into other things that should be considered. They can show you the best portfolio diversification strategy to use. You can also see whether your risk tolerance favors either staying in the annuity or taking the lump-sum buyout offer. After all, you want to enjoy your retirement, not worry about your finances.

 

Don’t blindly believe a slickly worded pension buyout offer or any hard-sell limited time offer pressure. Do your research and consult with a CFP professional. The last thing anyone wants to do when contacted out of the blue with a pension buyout is to later end up regretting their decision.

The Retirement Calming Effect of More Cash and No Mortgage

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There are a lot of financial decisions a retiree has to make. How to best fund their retirement, when to begin social security benefits, etc. But once that is settled, there’s a couple of decisions a retiree might have to make that can bug us to no end. How much cash should I keep and should I pay off the mortgage? If you have the funds to even consider these questions then the mental conflict is to just keep the money fully invested in the markets. That way it can possibly provide decent returns. I made these retirement money moves and can attest to one under-reported and powerful aspect to these decisions – The retirement calming effect of increasing cash and being mortgage free.  

The Retirement Calming Effect of More Cash and No Mortgage

My Retirement Calming Decisions of Cash and Mortgage

It’s certainly a first-world problem for those of personal finance success. Even talking or writing about it feels a little dirty knowing the struggles of many underfunded retirees trying to figure out how to pay for retirement when there isn’t enough. I am only able to reign in guilt when I think about where I came from to get here. Just another poor working stiff who used frugal living to feed an early retirement plan.

I never questioned retiring with a mortgage when I retired in 2009. There was about $100K still on the bank’s books and I budgeted for the monthly payment. As to cash, I left my first career with only about $20K available. The rest of my retirement funds were all in recession diminished stocks and bonds within my 401k and IRAs.

The Retirement Calming Effect of Cash

Going To One Year Retirement Funding Cash

I did wish that I had set aside more cash but it didn’t overly disturb me. It was just there in the background of the normal “what ifs” all new retirees go through. I had always planned on living a “retire early and often” lifestyle and after a few months put it to action. With my first stepped down retirement gig I continued to live off of my 72t distributions and I used my salary to increase my cash to around $35K. That represented one year’s retirement funding. I invested the rest of my paychecks into the offered 401K and my IRA.

That simple cash increase gave me my first retirement calming taste of having a bigger cash cushion. It reminded me of how I felt when I became non-mortgage debt free. This small cash jump gave me a feeling of calm knowing I added to my financial strength and it told me something about myself. Not only did I feel more confident about my retirement funding, but I didn’t sweat all the market swings as much during this 2010 through 2011 period of my early retirement.

I was a proud risk taker regarding my ditching a long career for early retirement. But I mentally preferred a bigger cash cushion when it came to my portfolio. Financially rational or not, I simply had less market worry and higher retirement confidence.

Going To Two Years Retirement Funding Cash

Two years into my early retirement I left the stepped down retirement gig and started what I call my encore career. I stuck to living off of my 72t and used the new gig’s larger salary like I had done before. Knowing the retirement calming effect I received with my first cash increase, I decided to increase my cash to cover 2 years retirement funding. It provided even more early retirement confidence. I discovered that I find financial calm in using cash to hedge against market volatility.

Going To Four Years Retirement Funding Cash

Years after my encore career and last paycheck ended I decided to once again increase my cash. The market was at all time highs and when running my numbers I found that I could take some chips off of the table to pump up my retirement cash. There’s no doubt about it, I’m really calm now. I should be able to easily outlast a recession or market downturn when it comes and for me there’s nothing more retirement calming than that.

The Retirement Calming Effect of Being Mortgage Free

As I mentioned above, I had never considered retiring mortgage free. It seemed out of reach without staying on the job I no longer enjoyed a lot longer. My total house payment was reasonable after refinancing to lower interest rates and it made for manageable payments in my retirement. I had already dropped below Federal Tax ‘Schedule A’ filing thresholds and wasn’t getting any mortgage interest tax benefits. It was during my encore career after hitting my 2 years cash goal that I made the decision to focus my salary on the mortgage. It was dispatched just 18 months later and I joined the small ranks of mortgage free homeowners. I was surprised at how eliminating this payment made me feel. No matter what manufactured market crisis occurred, I would own my home. It’s an intangible value that provides long-lasting retirement calm and happiness.    

Why How Much Retirement Cash To Have or Using Funds To Clear A Mortgage Are Tough Questions To Answer

The financial argument against cash is its inability to retain value against inflation. My cash isn’t dead money. I do get a little interest from my savings account and money market accounts. I am getting 2.5% from a 13 month CD and will continue to look at other higher interest earning opportunities. Yes, all pay less in interest than inflation. But the majority of my portfolio is invested in the market and I see the difference between cash’s earnings and inflation as the cost of what I call my retirement calm insurance. I find value in the emotional peace and that makes it worth it.

When it comes to paying off the mortgage the financial argument is about the loan interest percent saved in payments vs. the percentage that could be earned if left invested. I locked into a guaranteed return. No matter what else happens in the markets, I have that locked down. But the other benefit is it takes less to live on. When not working as I am now and living off of my portfolio, I’m able to reduce my taxable income by the payment amount. I not only have a guaranteed return but I now will pay less income taxes too.

The argument against both higher cash savings and mortgage payoff includes the lost opportunity for money left in the market for big market gains if invested right. Especially over the long-term. Depending on your goals, this can not only impact your long-term retirement funding but also any thoughts towards leaving a financial legacy to your family. That’s why it’s important to run your numbers through a good retirement calculator to make sure your portfolio will last at least as long as you do. You also need to have a clear legacy plan in place and make sure you can still meet it.

In the end, we all know markets don’t always go up which must also be considered in the arguments for and against having more cash and using funds to pay off the mortgage in retirement.

The Questions That Need To Be Answered

I’m not some super investor, had no inside secrets, nor received a windfall to retire early as I did. I am just an average Joe who decided that I wanted to be free of the rat race and figured out how to pull it off in a way that worked for me. But now that I’m retired, I prefer to not be looking over my portfolio’s shoulder all the time. I prefer the retirement calm of what the extra cash and mortgage freedom provides me.

The questions I needed to answer before making these retirement calming moves were –   

Is now the best time to pay off the mortgage?

We had considered long before retirement that we would sell our home and move to a smaller home in a less expensive real estate market. That way we could be mortgage fee. But after grand-kids came we nixed that plan. I don’t believe it would have made sense to use taxable retirement funds to payoff a mortgage. In my case I had income coming in and no mortgage interest income tax benefits. Payoff also meant reducing my taxable retirement funding needs in the nearer future. Yes, it was the best time to pay it off.

Do the numbers still work with so much cash on the sideline?

When I increased to one year and two years worth of cash this wasn’t an issue. I was happily in retirement gigs and used the extra income to grow cash. This question came in the jump to four years cash while I was relying 100% on my portfolio. Running the numbers through the FIREcalc retirement calculator was my first step. I then made my proposal to my CFP and they also ran my numbers. Yes, the numbers looked good.

If the numbers work, then why risk unnecessary injury playing in a game already won?  

The same question echoed during my decision to retire or stay on the job longer. Do I have something more to prove or can I be happy and satisfied by making the move. I never regretted giving up the title and salary of my career, I had enough. It was easy to answer this question. I had no doubts. I wouldn’t regret about my higher cash savings missing out on any market runs.

Would I really value this as retirement calm insurance?

History and numbers show that staying at two years cash with a diversified asset allocation would work fine over the long-haul. But what I was going for was gaining even less concern about market volatility and being able to fully enjoy my retirement without thinking about finances all the time. The sting of the last great recession hit me hard. When being truthful about what causes me more distress, either having this sidelined money miss out on a bull market run or not having enough cash to get through a long market downturn, the answer was clear.

Are there any other upsides other than the retirement calming effect of jumping up cash?

Along with the memory of the last great recession’s sting is also the memory of all the opportunities to buy heavily devalued investments if only I had some cash. In 2009 as the markets hit bottom and the years that followed, stocks were a bargain. Having higher cash reserves means being able to take advantage of any future investing opportunities.

 

Everyone’s risk tolerance is unique to the investor. Finding the perfect formula that meets both necessary funding needs without adding investor distress is the recipe for a retirement calming portfolio. My mentally preferred recipe just happens to love the higher cash allocation and being mortgage free.

Seek that which keeps you calm, Lokah Samastah Sukhino Bhavantu.

5 Tips on Saving More Money with Annual Travel Insurance

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When it comes to travel insurance, one of the most common questions is, ‘Isn’t single trip insurance cheaper than annual travel insurance? Then why would I sign up for the latter, when a single trip cover is saving me a few bucks?’ Not all of it is true, especially if you are a frequent traveler. Opting for  travel insurance entirely depends on the kind of traveler you are – a frequent traveler or an ordinary traveler.

Either way, getting  travel insurance is necessary, just to make sure you and your family are protected in case of an accident, loss of personal belongings, travel inconvenience, etc.

Annual travel insurance might come up as an expensive venture, however, for frequent travellers, it’s probably the most viable option out there.

Before delving deep into the art of saving money, let’s first see what annual travel insurance actually is.

5 Tips on Saving More Money with Annual Travel Insurance

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Annual travel insurance in a nutshell

In short, you make a one-time investment to purchase an annual travel policy instead of putting your money at work before every trip in a given year. It is a more convenient and feasible option for both business and leisure travelers.

An annual insurance policy usually offers the following:

  • Trip cancellation coverage
  • Covers medical expenses
  • Coverage for loss of luggage
  • Delay in flights and other flight related inconvenience coverage
  • Flight reroute expenses
  • Travel inconvenience coverage
  • 24-hour hotline for emergency situations

Certain insurance policy providers also offer the following:

  • Cover for aadventurous sports like bungee jumping, scuba diving, rafting, etc.
  • Identity theft cover
  • Rental-car collision cover

Apart from these, insurance providers might offer you other additional benefits, which you need to check with the service provider before signing up.

How to save money with yearly travel insurance

Did you know that you can save a lot more money with an annual trip cover? Most frequent travellers are opting for it, and it’s time you should consider it too! Here are 5 essential tips on how you can save more with a yearly insurance policy.

  1. Pay low premium: For multiple trips in a year, signing up for annual travel insurance is the best option. You will eventually end up paying substantially lower premium compared to a single trip policy!
  2. Choose your insurance plan wisely: Make sure that you are opting for the best plan. Do you want independent travel cover for each member of your family or a single plan for the adults? Individual insurance plans are generally more expensive, so choose as per your requirement.
  3. Know your travel duration: You have to pay more for longer duration stays. So, make sure you are clear about your travel plans and have all the itineraries set. Also, how many days of insurance cover do you need in a calendar year? If you have all these in place, you can save more money while purchasing the insurance.
  4. Compare deals and benefits: In Malaysia, you will find a host of travel insurance policy providers, including and not limited to, Allianz, AIG, RHB, Maybank, MSIG, etc. Compare the deals, offers, and rates offered by the insurance service providers and choose the plan that suits you best. In this way you will be able to save a few extra bucks.
  5. Geographical area: Know the areas that fall under the insurance policy. You don’t want to fall sick, meet with an accident or lose your money in a place that’s not covered under the policy, right?

A well-known insurance policy provider will always tell you the benefits of an annual travel plan before you take it up.

So, are you a frequent traveller? What kind of travel insurance plan are you exactly looking for?

 

This informative article was contributed to Leisure Freak by Syed Faraz

Syed is a Financial content analyst/adviser of bbazaar.my, an online platform that provides information and advice on personal finance and money management.

Creating A Recession Hardened Retirement: You Know Another Will Come

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We love to run our numbers through Monte Carlo retirement calculators because nothing causes a retirement bummer like money trouble. Who doesn’t like the feeling of using historical investment cycles to validate our retirement plans? But another historically repeating economic cycle is often forgotten, especially when things are looking so good. It’s the dreaded “R” word- Recession. Chances are that we will have the displeasure of going through some recessionary periods during our retirement. They come in different flavors and can strain both our portfolio and well-being regardless of what the calculator results said. It’s a common retiree fear. That’s why I have thought lately about what it takes to have a recession hardened retirement. I believe it’s impossible to be totally recession-proof because anything can happen. But hardening our retirement to resist a recession’s damaging effects to our overall retirement into the future is worthy of looking at.     

Creating A Recession Hardened Retirement: You Know Another Will Come

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What We Can Do For A Recession Hardened Retirement

There were plenty of lessons learned after the Great Recession that is officially listed as lasting 1.5 years from December 2007 to June 2009. All I can say about that is the Great Recession’s official end was nowhere near the breakeven point for our portfolios, the job market, or anything else.

A quick look at Dow Jones Industrial numbers shows it at 13264.82 on December 1, 2007 before going into an extended free-fall and didn’t get close to that number again until December 1, 2012 at 13101.14.

The S&P 500 in December 2007 was 1468.36 and didn’t approach that number again until January 2013 with 1426.18.

Stock Market recovery took 5 years before reaching breakeven. That’s 3.5 years after the recession’s official end of June 2009.

List of recent history’s recessions and their official lengths:

By looking at our history of other recessions we also get a quick glance at recession frequency. I’m sure if we took a deep dive into investment loss to recovery, it took much longer to reach portfolio breakeven than the recorded official recession timeframes.

  • Roosevelt Recession 13 months: (May 1937 – June 1938)
  • Union Recession 9 months: (February 1945 – October 1945)
  • Post-War Recession 11 months: (November 1948 – October 1949)
  • Post-Korean War Recession 10 months: (July 1953 – May 1954)
  • Eisenhower Recession 8 months: (August 1957 – April 1958)
  • Rolling Adjustment Recession 10 months: (April 1960 – February 1961)
  • Nixon Recession 11 months: (December 1969 – November 1970)
  • Oil Crisis Recession 16 months: (November 1973 – March 1975)
  • Energy Crisis Recession 6 months: (January 1980 – July 1980)
  • Iran/Energy Crisis Recession 16 months: (July 1981 – November 1982)
  • Gulf War Recession 8 months: (July 1990 – March 1991)
  • 9/11 – Dotcom Recession 8 months: (March 2001 – November 2001)

These lessons play a part in a recession hardening retirement strategy.

Lesson #1- Investments can fall for a long time and take even longer to recover. When it comes to retirement, portfolio recovery is what really matters to retirees.

Lesson #2- Stay invested no matter how bad things look, and by March 2009 of the Great Recession it looked really bad. Markets do eventually recover and those who fought the urge to run eventually ended up whole.

Lesson #3- When income and portfolios get slammed, debt still needs to be paid. Thinking you can sell leveraged assets during a recession to cover your keister is near impossible when nobody is buying anything that isn’t extremely discounted.

Lesson #4- Investment diversification reduces risk but won’t eliminate risk. Every asset class – stocks, bonds, housing and commodities all took massive hits. But not all at the same severity.

Lesson #5- Experts really don’t know everything. Most dropped the ball in calling the Great Recession. Recessions seem to come from some financially linked dirty corner that isn’t regarded as being economically dangerous until it’s too late.

Recession Hardened Retirement- defense wins championships

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Preparing For The Best WHEN The Worst Happens

Defense Wins Championships

Everyone loves to score. Having investments gain in value gets all the attention and makes us cheer. But a recession can also score big numbers against us if we don’t have a good defense. Concentrating some of our resources on defense may lower what we score during good offensive runs, but it prevents the opposition, in this case a recession, from out scoring us. The goal is to win.

The Need For Cash

Having a portfolio full of cash isn’t going to earn enough to keep up with inflation. But having enough cash to get through a recession and spare us from selling too many stocks or bonds at a big loss is a good defensive move. If Social Security and other guaranteed income like a pension or annuity pays all or most essential retirement living expenses, then less cash is needed for a recession hardened retirement. For retired people like myself with several years to go before Social Security, the portfolio carries the entire load. Having enough cash to play portfolio defense is a hardening move and is also an important element of a retirement bucket strategy.

How much cash to hold depends on your portfolio size, the amount of your retirement budget that depends on the portfolio, your age, and your risk tolerance guided investment allocations. You do not want to over play your cash defense. You still have to score points by investing to win the long game. I recently increased my portfolio cash holdings for various reasons. I took it to an amount that still allowed overall portfolio performance to meet my retirement funding needs. As it turns out, it also recession hardened my retirement portfolio. Always run your numbers through a good retirement calculator. Adjust your cash holdings for the right balance of defense and offence to meet your long-term and recession hardening strategy.  

The Need For Investment Diversification

While stocks score all the points when they have opportunities to score, not all stocks are the same nor move in the same lockstep. Broad diversification in stock asset classes across different industry sectors reduces risk. Bonds also play a huge role for portfolio diversification. Not only for their fixed income (although usually unable to outpace inflation), but they offer lower volatility than stocks. Bonds were still hit during the Great Recession but not as severely as stocks. According to the Allegiant: Minimizing Portfolio Losses: Lessons of Diversification July 2017 study, diversified stock and bond portfolios recovered faster after the Great Recession than an all stock portfolio. Since having a diversified portfolio should recover faster it reduces the amount of portfolio defensive cash needed to wait out post recession portfolio recovery in our recession hardened retirement plan.

Great Recession Diversified Portfolio Recovery Details

Stocks/Bonds Maximum Loss Time to Breakeven
20/80 9% 22 months
40/60 23% 25 months
60/40 35% 37 months
80/20 46% 42 months
100% Stock 55% 59 months
Stick To Your Investment Strategy and Stay Invested

One of the biggest investment risks we face during a recession is behavioral risk. Everyone behaves differently in a crisis. A recessionary financial free-fall certainly triggers crisis behavior. Trust in your plan and stick with it. Don’t allow your emotions about current events dump it. Selling low is a sure way to feel the pain of a recession for years to come.

Whatever your plan’s stocks/bonds/cash asset allocation was set for, make sure to rebalance on a regular basis. During the Great Recession, stock vs bond allocations required rebalancing. This not only maintained our plan’s allocation positions but we benefited for the long run by moving our higher flying bond assets into the depressed price stock market.

Avoid Debt and That Other Debt, Service Contracts

In a booming economy when everything looks so good it’s easy, even for retirees, to take on easy money. Taking a defensive mindset thinks first that borrowing money that looks affordable now may not be if a recession hits. Debt limits our budgeting options and can be difficult to clear. It isn’t just the standard new car loans or charging a vacation that should be avoided. But also those 2 year interest free home window replacement, kitchen update, or flooring deals you want to go with.

There’s also those internet, cellular, and cable/satellite TV contracts that will still be binding if a recession hits. It’s ok to grab these deals, but only if you have the cash reserves to clear them or could have paid cash for whatever it is you feel you need in the first place. It’s easier on our portfolio and our mental state to get through a recession when all we have to concentrate on is our day-to-day living costs instead of paying debts from yesterday.

Create A Rescission Hardened Retirement Plan during the Good Times

The time to rebalance to get the diversification and cash allocation to fulfill our recession hardened retirement plan is before the feces hits the fan. Experts won’t tell you with any advance when a recession is coming. Take profits and make your portfolio rebalance before you need to. Once the experts admit we are headed into, or already in a recession it will probably be too late.

Stacking An Offensive Bench

Anything can happen and recessions are seldom the same. Since their severity can be anything from mild to “OMG” the worst in history, having some additional offensive plays is something to consider. If our defense begins to struggle against a recession onslaught we can do things to add a little more scoring power to our offence.

Additional Income Streams

Picking up extra income through a retirement job should be on the table. As we learned in the Great Recession, when companies were dumping employees left and right, finding a job was difficult. It took great time and effort. It’s important to maintain our professional network and connections. I landed my encore career during the Great Recession’s recovery through LinkedIn. Staying in contact and active within our professional/social circle can be a huge advantage. We should also gain and maintain payable skills we wish to use. Another option is starting a side hustle working for ourselves. Starting a small business or contracting is another way to make and offensive move, from Lyft/Uber to handy-person services. Passive income can also come from renting out a room in our home.

Make Adjustments To Our Cost Of Living

Most retirees I know have already cut waste from their lifestyle. However, there is always places to scale back to reduce our living costs to better match our recessionary income needs. Choosing to make temporary budget cuts to our hobbies and other perks of retirement should be on our offensive bench. We can always add them back in once a recession and financial recovery is complete.

 

Everything here are things retirees should consider doing regardless if there’s a recession threat or not. In using a recession as a way to visualize and test for the worst economic situation that will happen during our retirements, we can see how our retirement plan holds up. It’s all about creating a retirement plan that we can be confident will last as long as we do.

Just When You Thought It Was Safe To Retire Early

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You finally made it after working hard, planning, and saving for it. The beautiful scene is everything you imagined. You’re at the edge, wanting to jump in, and everything seems to be perfect. Maybe too perfect. You take a quick look around and see something. What’s that shadow? Is that a fin? There’s something out there lurking about. Your emotional response is that it looks threatening. Second thoughts enter your mind as you back away from the edge and you ask yourself, is it really safe to retire early now?

Just When You Thought It Was Safe To Retire Early

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Is Now The Time, Is It Safe To Retire Early?

All indications look perfect. Record breaking market conditions have provided portfolios that show full retirement funding success. The economy is firing on all cylinders. There is even record low unemployment rates where there are more available jobs than people seeking them. That means finding a retirement job should be easier to land, if you ever want one. But there are also those shadows and fins you thought you saw. Signs that maybe this isn’t a safe time to retire early and a retreating delay is in order.   

Those Shadows and Fins Lurking in the Distance

Social Security and Medicare

Big news came out recently about our government mandated retirement plan that we paid for over the past decades. Social Security will take in less than expended by 2034 and Medicare will hit that status by 2026. What if our elected officials do nothing to fix this? They say 2034 is when Social Security collections would take in only enough to pay about 75% of promised Social Security benefits. But what about Medicare? I guess we don’t know about that yet. They better figure it out. We held up our end of the bargain. What if they don’t fix things? What if they do things like a billionaire corporate fat-cat would do, just claiming a kind of bankruptcy to keep themselves and their special interest clients solvent. Could their fix be throwing the middle class under the bus, stealing our long paid for retirement benefits?

Another Housing Bubble

We all know what the last housing bubble did. Is it possible that it happens again? Just when we are feeling happy about our recovered home value and overall net worth we have to worry about this again. The littlest economic bump in the wrong direction could push many homeowners into default. If there’s enough of them, there goes all that home equity that has put a skip in our step. Hopefully it doesn’t trigger another BS recession. It wouldn’t be a big surprise either since regulatory guard rails established to avoid a repeat financial meltdown are being rolled back.

Overpriced Stock Market

The Portfolio has never looked this good. But all the talk of an overpriced market and impending major correction could wipe that smile off of our face and wipe out our investments. Just when we are depending on it to fund our retirement. Then what?

Trade Wars and Other Economically Tied Political Moves

One thing is for sure, this White House is all over the map picking winners and losers. Business and the market prefer stability in the government’s direction and decision-making. Possible Trade Wars are bad enough. But there’s all this ticking-off world allies while embracing world enemies thing too. Will a stupid political move cost our economy and our retirements? Is all this America First, aka America Alone policies just negotiation tactics or damaging long-term economic policies?

ACA Still Under Political Threat

Just when ACA was left somewhat intact after their destabilizing tweaks and left to limp along,  more threats to kill the ACA spring into the news. It’s still the law of the land, but its future demise would be very concerning if the ACA is your path to job-lock freedom. Can we trust them that they actually replace it with something better? Nobody in Washington has been caught lying yet, have they?

Growing Inflation

So far the Federal Reserve has been successful in slowly guiding the economy back to normalcy. Interest rates needed to adjust upward and there has been a disciplined approach. But what if they blow it? Could living costs rise far higher than our portfolio can support? Could raising interest rates drastically lower stock values?

You’re Wondering If It’s Safe To Retire Early? Well, It’s Never Absolutely Safe!

Early retirement isn’t a safe move because of its audacity to buck the status-quo work until old age system. It’s goes against the traditional norms and everything that a capitalistic consumption driven society demands. One where it’s all about productivity and spending. There will always be something lurking in the distance as far as early retirement is concerned. We need to plan for that and avoid putting ourselves at unnecessary risk. Sometimes we will see it coming and we can avoid it. While other times it can sneak up on us. We keep our eyes open and deal with it as we have done with any problem.

History shows that financial markets are cyclical and will always have periods when it moves up and down, sometimes moving extremely. When the worst happens with markets, real estate, business, stupid government policies, etc., we need to have a plan to outlast the down times. It’s always there and may happen multiple times during a long retirement. What goes up will eventually come down, sometimes falling quick and hard. The reverse is also true. But after a big fall the climb back up usually takes a lot longer. We must cover our bases.

Rely On The Facts As We Know Them, Take Positive Action

All we know is the data we have now.

Current and historical data helps us understand whether we can or should jump into early retirement. Set aside emotion and fear while sticking to the facts and data available.

Worrying about what the government does or doesn’t do is a waste of our time.

Don’t just worry, vote for PEOPLE aligned with your values. Stay informed so you can make necessary moves to counter stupid government decisions that negatively impact future and current retirees. If you believe in keeping the promises of our paid-for Social Security and Medicare benefit then vote for PEOPLE who support protecting and stabilizing it. As far as retirement goes, early or not, everyone who cares about retirement security should care about the only retirement plan that works for ALL Americans.

Stay as healthy as you can.

Healthcare is a huge retirement budget allocation. We all know what we need to do. Eat right, stay current with medical/dental checkups, and get moving off of our keister. As for health insurance, go with our best option available to us now and if things go south, we do what we have to do.

Alter your retirement income calculation inputs for different outcome scenarios.

When running your numbers, change some of your inputs, like using a 25% reduction in your expected future Social Security benefit. Pop up your spending calculation to cover an increase in healthcare cost until your Medicare kicks in. Use a monte-carlo retirement calculator that includes historical data.

Our home is a place a to live and a hedge on inflation.

If the real estate market tumbles it isn’t a retirement killer if you have planned to stay put. If a move is in your plans, then only do it if the market conditions are favorable. If conditions aren’t favorable then plan to wait until it is or look into alternatives, like rental strategies.

Our investment portfolio should be diversified.

There are a lot of things that can bounce the market downward. Look into setting up a retirement income bucket strategy. That way you have the cash needed to get through market downturns and you gain a little peace of mind in the bargain.

Our Valuable Asset

Know that our biggest asset is the financial smarts and discipline that got us to this point where we can even consider early retirement. It’s that skill set that will get plenty of use if something really does come threatening to take a bite out of our retirement.

Is it safe retire early now?

Photo Source

Take An Objective Look

If we look out there a little closer we may just find that the shadow and fin we saw was only a non-menacing dolphin and nothing to fear afterall. Sometimes, especially when making a big move, we can’t be sure what we are looking at from a distance, so we see the worst case. We let fear overrule facts, or the lack of clear facts. We can unnecessarily allow emotions to delay and at worst ruin our plans.

When I retired early during the recession in December 2009 everyone was screaming shark. But after already delaying my retirement by a year I then had a clearer view to see the shadows and fins differently. I made some best to worse case calculations. I then optimistically and confidently jumped in even with the future unknowns. It was the best financial and lifestyle move I have ever made. I knew it wasn’t absolutely safe to retire early, but I did it logically, based on the data at hand.

 

Caution is always good, but not if all we do is freeze and do nothing. We should instead understand the risks and do everything we can to avoid or counter them. Sometimes that might mean taking a step back until we can get a better view of what’s lurking about. If your numbers look good, don’t waste your valuable time worrying about what-ifs. Plan for them and move forward by taking necessary actions to attempt de-risking any threats. There will always be shadows and fins lurking about. Are you ready to enjoy what you’ve worked so hard to achieve? Are you ready and willing to jump in?

How Much Cash Is In Your Portfolio? Why I Increased Retirement Cash Holdings

Bucket Strategy, Funding Retirement, Investment Strategy, Protect Assets, Risk Tolerance, Saving Money,

I decided I wanted to cash in a few chips and take some of my profits off of the table. I sold off investments and increased retirement cash holdings in my portfolio. Not just a little bit either. I’m on my way to 20% of my portfolio being cash. My decision had nothing to do with in-depth analysis of the yield curve or stock price to earnings (PE) ratios. Nor inflation threats or claims a lack of available workers may drag down this country’s latest economic growth predictions. Not to mention the possible negative economical impact of trade wars. Nope, it’s simply because of the convergence of my age, life expectancy, and the numbers to cover my nut with less on the table. It’s personal.

Increased Retirement Cash Holdings

Increasing Retirement Cash Holdings – What’s the Right Portfolio Percentage?

We all know we have to accept investment risk if we want decent returns. You have to play to win. Nobody can exactly predict or time the market. Major drops happen when they happen. That means we have to stay in through thick and thin.

Investment history suggests that over the long-term the balance of risk vs returns is generally favorable to the investor. Especially when we are practicing dollar cost average investing through both good and bad markets. But that all turns more into a gamble as the investor’s age vs longevity ratio tightens and we are no longer feeding the portfolio with earned income but instead depending on the portfolio to fund our retirement lifestyle. Market recovery time becomes more critical. A 5 year recovery period is a bigger percentage of your remaining life when you’re 60 than when you’re 45.

Portfolio Rebalance and Re-Running the Numbers

When I retired at the age of 51 I kept a small amount of my net worth in cash. I have different expectations now that I will hit the age of 60 later this year and can almost see my Social Security full retirement age ahead of me. I know how fast my years in early retirement have flown by thus far and will soon no longer be considered an early retiree.

For the most part I use the 110 minus age declining equity glidepath approach to rebalancing my portfolio. Subtract your age from 110 and that is the equity portfolio percentage to consider having. Logically that leaves the rest to bonds and cash. I use 110 instead of 100 for my declining equity glidepath rebalance calculation because Social Security will eventually play a role in the non-equity side of retirement funding. The calculation doesn’t explain how much cash is appropriate in the non equity side of the portfolio. Opinions seem to always be critical of holding too much cash. As far as I am concerned, when you have experienced a good run and have enough, it’s time to set aside some of your winnings.

I settled on 4 years retirement funding in cash plus a $25K emergency fund. My retirement withdrawal strategy uses a bucket approach and the cash is in my IRA’s bucket #1 and a savings account. My portfolio allocation looks like this:

  • 18.5% Cash/Cash Investments
  • 29.5% Bonds Fixed Income
  • 48% Equities
  • 4% Alternatives

To determine how much cash I wanted I simply understood my overall goals.

  1. Not have to worry or sell equities during a rotten market.
  2. Have my portfolio last as long as I do.

Increased Retirement Cash Holdings looks good

I then ran the numbers through the retirement calculator-FireCalc. I used 35 years of funding, 45% equity investment position, social security provided estimate amount, bumped up my yearly spending amount by $10K to counter higher cash holdings with its lower returns, and let her rip. The results looked great!

Full Proof? Hardly

Cash doesn’t offer anything in earning interest today and I have no idea how hard inflation will hit. Will interest earnings climb enough to offset inflation? Who knows. I also don’t know what will happen with social security, the markets, or the price of tweets in the White House. However, I am comfortable with this level of cash holdings even going to 20%. This is a decent time to take profits and I will continue rebalancing as long as the market continues to climb. I feel that the FireCalc calculation padding I used in my income numbers and longevity (I seriously doubt I will live to 95) that my odds look really good. Aside from all the financial considerations there is also the mental benefits to my increased cash move.  

High Retirement Cash Holdings – Cowardly or Courageous?

I do have a healthy fear of another market crash and multi-year recovery. There have been enough of them in my years of investing to know there will be more. I am making some optimistic assumptions when there are plenty of unknowns going forward. But what’s new there, there’s always unknowns when it comes to investing and retirement. I do count on adjusting things as needed.

I don’t see pulling a higher amount of cash to the side as either cowardly or courageous. This is simply wanting to hedge my bets and have options. I can cease selling any assets or taking IRA withdrawals in a down market and take advantage of opportunities to buy investments when they arise.

 

As far as I can see, taking profits after a historically long running Bull Market to have higher retirement cash holdings provides both downside protection and upside opportunity. At least in my personal situation. What is the perfect percentage of cash holdings to have in one’s retirement portfolio? How much cash is in your portfolio?

Holiday Season: Time To Think About Home Security

Protect Assets, Protect Your Home, ,

The fast approaching holiday season means many wonderful things, celebration, good food, and most importantly time with loved ones. However, this oncoming season for many people often means time spent away from home, visiting family or vacationing. Especially for retirees who are able to be away for extended lengths of time. While this is wonderful, this also means our homes are left vulnerable to theft and damage. Don’t let burglary ruin your holiday season, prepare yourself and your home now by thinking about your home security.

Know the home burglary facts –

Break-ins can happen year round but we should be especially careful around the holiday season. Many of us go out of town and leave clear signs we are away this time of year. Many break-ins happen because of things like piling up newspapers or lights not going on or off.

Even for those of us who stay close to home during the holidays there is still burglary risk. Most of us will be away from our homes for what can be many hours doing everything wonderfully holiday related. Of course burglars know this so it’s crucial to know the facts so that you can prepare for the worst-case scenarios.

Be proactive to reduce burglary risks –

We can do simple things like set up automatic light timers, trim our landscaping for unobstructed views from the street or neighbors, properly install deadbolt locks, and when away overnight setting vacation holds on our mail and newspaper deliveries.

When expecting deliveries from Amazon or other online retailers we should be careful to be home or have a neighbor remove packages quickly. Not only are those porch sitting packages a huge attractant to thieves for the items themselves, it’s also a clear sign to burglars that we aren’t home.

We can also move our valuables out of our master bedrooms where thieves go first and put them in a floor bolted safe. At least move valuables to a less likely place in our homes hoping that their need to be in and out quickly means they don’t find them.

But will it be enough?

These things may give thieves pause in targeting our home or cause them enough time delay to at least lessen the loss from theft. However, that may not be enough as there is no guarantee it will work. For some of us, having additional home security should be considered. Not only to reduce any loss from theft but to provide additional peace of mind. There are a lot of home security system providers out there to choose from with varying levels of price, options, and service.

Know your home security needs –

Many people want a home security system that is pretty hands-free. If this is true for you then look for a system that is based around home automation. A good system should be easy to install, easy to use, and easy to understand.

It should cover:

  • Intrusion – Broken windows, doors, glass, etc.
  • Environmental – Fire, flood, etc.
  • Surveillance – Cameras
  • Life safety – Life alert and panic buttons

All of these should be covered to be a well-rounded home security system. If you need help identifying your needs or want more information this resource can be very helpful.

Know what to look for in a home security provider –

When it comes to protecting our homes we want transparency and clarity. When dealing with a service provider make sure to watch for things like transparent pricing and good customer support. Aside from the system itself, that should be another top priority in choosing the right home security provider for you. Since you will be trusting this system and these providers with the safety of your home and your family, they should check every box on your wish list.

Cryptocurrency: Rocket Fuel for Your Retirement Fund?

Investment Strategy, Risk Tolerance,

The risks and the gains of Bitcoin are becoming increasingly well-known as this previously under-the-radar cryptocurrency hits the mainstream, with everywhere from specialized exchanges down to your local pizza place now trading in it. But if income tax is making a hole in your retirement funds, then this unregulated, untaxed market – even with all its attendant risks – may begin to look attractive.  Earning Bitcoin is becoming more of an option for growing your overall portfolio, not something to go all-in with. But what are the best ways to make it pay? Here are some of the easiest:

CryptoCurrency: Rocket Fuel for Your Retirement Fund?

Join a mining pool

 

Traditionally, the way to earn with Bitcoin was through ‘mining’ – solving sophisticated mathematical algorithms to create new ledger blocks. However, those days are probably over now. You will need to invest in a Bitcoin mining pool to get access these days, as the current algorithms are too complex to be processed on a home PC and require specialist hardware that harnesses the processing power of many computers. A Bitcoin mining calculator can help you work out how profitable this might be.

 

Create a faucet

 

Bitcoin ‘faucets’ are basically websites that give away micro amounts of the currency to their users, and earn revenue through hosting advertising. The business model is referral-based, generating high-volume traffic to create more ad clicks. This can be done ‘out of the box’ with no experience in coding needed, just a domain name and website creator, plus a micro wallet payment processor service like FaucetHub. Once built, monetize the site through a provider like Google Adwords or spend time building affiliate revenue streams, where you make a small percentage of commission on referrals.

 

Invest in funds

 

It’s now possible to invest in funds that themselves invest in bitcoin. Values are increasing and have been known to double in a matter of months. So although there are definite risks, there are also significant gains to be made by doing this. With a finite supply and tightly regulated production, in theory, Bitcoin should always gain in value over time. There are other cryptocurrencies backed by global conglomerates to invest in such as Ethereum  and you can even set up an ethereum IRA online.

 

Become a Bitcoin lender

 

Becoming a lender is another way to get a slice of the Bitcoin action. Buy up some currency from an exchange, and then lend to another party with interest.  Lend either with no collateral and higher returns or secured against something for a lower interest rate. However, this should be approached with caution due to the lack of market regulation. Cryptocurrency is not part of any insurance scheme or regulated by any official bodies.

 

Accept payments in Bitcoin

 

The other channel is to add Bitcoin to accepted payment methods for whatever goods or services you can sell. But obviously, this depends on being able to effectively market whatever you need to in order to create the wealth. Bitcoin has brought with it some new entrepreneurial opportunities as it removes a lot of the barriers to conducting global business by virtue of its totally digital format.

 

Although its newness makes it a fairly high-risk option, Bitcoin is becoming increasingly mainstream. For a savvy investor, meaning knowing when to get in and get out, there may be opportunities there to make swift gains.

Can cryptocurrency be rocket fuel for your retirement fund? I still have a lot of research to do before I can honestly answer that. But with knowledge comes opportunity and understanding whether something is too risky to invest in.

 

Disclaimer- Leisure Freak is in no way advising readers to invest in cryptocurrencies. Invest at your own risk. Crypto is a high risk investment scheme. This article is for information purposes only. 

Do You Have The Audacity To Retire Early?

Retire Early,

Face it. Early retirement is an audacious act. It is flipping the bird  to the conventional work and retirement norms. In the end it comes down to being able to say YES to a big question. Do You Have The Audacity To Retire Early? Early retirement takes financial discipline and years of plan execution to successfully pull it off. But early retirement takes more than having a sustainable frugal debt-free lifestyle, budget and savings/investment strategy. To successfully retire early it also requires having and maintaining an audacious mindset. One that allows us to buck both conventional and traditional consumer, work, and retirement beliefs.

Having The Audacity To Retire Early

Audacity carries both positive and negative connotations. How our audaciousness is viewed depends on a couple of things.

Succeed and we may be admired as bold and daring risk takers. Fail and we are viewed as recklessly defiant and deserved falling on our face.

Do You Have The Audacity To Retire Early?Regardless of our success or failure there will also be the element of perspective. To our supporters our audacity is praised. To traditionalists and those who are biased toward having people stay within THEIR BIASED defined standard boundaries we are arrogant. Our audacity is considered a reckless disregard of normal and traditional restraints. For most of the consumerist world, early retirement is considered unobtainable and a foolish contemptible pursuit.

The 2 Audacious Keys to Successfully Retire Early

Having the ability to not care what other people think

Not caring what others think begins early in the financial independence-retire early (FIRE) journey. It starts when all our needs to keep up with the Jones’s are set aside. Focus turns to choosing to live with a happiness based purpose, eliminating personal debt, and saving/investing our way to early retirement.

I certainly took some crap from friends and relatives about the cheap cars I drove for many years, our frugal lifestyle and our sensible vacations. They had new cars/trucks, RVs, jet skis, boats and exotic vacations. All paid for with credit. The consumerist world considers it normal to pay for our present lifestyle by leveraging our future pay checks. That to me is the reckless path. Yet I was the one viewed as audacious just for my wanting early retirement to live a free life on my terms. Something they saw as unattainable and different from their traditional view of living.  

Overcoming fear and pulling the early retirement trigger

The ultimate act of audacity comes when we call-it and we do retire early. Walking away from a career that got us to this point takes bold audacity. We must have the confidence in all our planning to leave the only work-based life we really know for the early retirement dream. Retiring early becomes our biggest audacious act. It will be met with praise, disbelief, warnings, and envy. It takes strength and courage to audaciously push through and defy our doubters and our own self-doubts and fears.

I announced my early retirement from my long telecom engineer career during the recession in 2009 where I received all kinds of reactions from coworkers. People I worked with and respected couldn’t believe I was being so reckless. Some were sincerely happy for me. While others who lived only for today and could never consider early retirement were betting against me. They were talking smack behind my back. I know because it later made its way to me. When so many were worried about being laid off, were on the chopping block, or already laid off, the audacity of announcing my early retirement  was an affront to everything they believed.

In Closing

Audacity and its perceived good or bad view is in the eye of the beholder. Good thing I didn’t care what others thought. If I had, I may have never made the best decision of my life. Financial independence and early retirement is a worthy goal. I knew exactly what I was doing and happily entered my life’s next phase.

Early retirement takes doing many things financially right. But it also takes having an audacious mindset to set and stay on course. It is exactly what made me and many others early retirement winners. It starts with daring to think differently about what is truly important; knowing when enough is enough, and then having the audacity to retire early.

Do You Have The Audacity To Retire Early?

On FIRE but Afraid to Retire Early? The Unspoken Fear Erasing Asset That You Own

Financial Independence, Retire Early, Retirement Doubt,

Anxiety appears for many who are nearing or at their Financial Independence Retire Early target. Being a little afraid to retire early is normal. I certainly felt something hidden behind all of my excitement. But anyone reaching this FIRE milestone has an incredible asset.  It is an asset that grows regardless of market conditions. Once it’s recognized it should ease any sleepless nights about pulling the early retirement trigger. Yet it is an asset nobody really talks about. The best part is it’s a retirement fear-erasing asset that we already own. I only found out about it after my first early retirement. Having this knowledge gives me a lot of early retirement confidence.

Being at Least a Little Afraid to Retire Early Is Only Natural

Not afraid to retire early with this asset

Image Source

Here is what I believe based on my own early retirement experience. With all the planning, budgeting, debt elimination, saving and investing, we only really KNOW one thing. That one thing is living our life as a worker bee, living the taught and traditional career-driven, job oriented existence.  We create a frugal lifestyle focused on all the right things but it is alongside needed salary producing work.

Even after running our portfolio numbers through retirement calculators with successful funding results, we can still hesitate making the leap. For me, even though I longed for rat race escape, I still only really knew that one way of living.

I did take into account all of my many vacations from that career oriented way of living. I figured it gave me a taste of rat race freedom which certainly provided excitement about making my escape. Yet with all my positive calculations and retirement lifestyle planning there was still some hesitation to ditch worker bee life.

There are also anti-early retirement advice and articles from so-called retirement experts to feed anyone’s early retirement anxieties. Headlines like: Early retirees regret retiring or    Long Life spans means people should delay retirement are attention grabbers.

All of it is of course great advice for most people. It is certainly something to consider in our early retirement planning by having counter-strategies to avoid regrets. But for those of us on FIRE, the unspoken asset we have provides a retirement advantage over the average consumerist retiree.

People Who Are On FIRE needn’t be Afraid to Retire Early – Our Super Asset

The super asset I am talking about is the knowledge and experience that we gain on our journey to financial independence. Nobody really talks about the value of the skills and knowledge that gets us to FIRE. There isn’t a little box to check-off on retirement calculators either to improve retirement success rates. Yet these are crucial learned and practiced skills that will aid us in our early retirement. It is an advanced early retirement asset.

I didn’t recognize its value until after retiring. Had I given it respectful thought I would have had far less hesitation in pulling the early retirement trigger. It has been over 6 years since my first early retirement. I just wanted to share what I believe to be an unspoken early retirement asset.

This asset grows with experience

Something every early retiree should do is stay curious and always increase their knowledge. We keep learning and grow our early retirement knowledge-asset regardless of market conditions.

Stay actively engaged

Any early retiree who didn’t just fall into a pile of money and quit their job has been actively involved in their portfolio and budget. That doesn’t end when pitching the rat race. Skills learned will continue being used and grown. When anything looks challenged, decisions will be made and actions taken just as learned and done before retiring.

The skills of living below our means

Living below means seems to be a huge problem for a large part of the population. If we skillfully avoided lifestyle inflation while in the rat race, then we are far ahead of retirees who have later said they regret retiring when they did because they overspent. Our brains have been conditioned to change our spending or add to our income stream (see below) if we find our income becomes unable to meet our expenses.

Ability to side hustle or as I call it, retire often 

I know from experience that all of our ambition and abilities don’t just end with early retirement. That drive that gets us to FIRE doesn’t go up in smoke. It just changes its focus. Understanding that the definition of retirement isn’t the absence of work but instead is the absence of needing to work means we have no problem being open to opportunities of passion and interests.

There are no guaranties and we know it

We not only know it but accept it and are able to be successful with it. Risk has always been there on our FIRE journey. We do what we need to do. It separates us from the consumerist debt-ridden hordes. We have learned to take calculated risks to make it to early retirement and that skill continues throughout our lives. We know that things can happen beyond our control. But we won’t crawl under a rock and wither. We will take necessary action just as we did during the years before reaching full FIRE.

In Conclusion

There all kinds of reasons to be cautious about giving our final notice and retiring early. It’s only natural when walking away from the only lifestyle we really know and have known for our adult lives. But we needn’t be afraid and suffer through sleepless nights once our FIRE target comes into full view.

Use all of your FIRE- knowledge to counter any thoughts of early retirement gloom and doom and erase any fear. Celebrate when seeing your retirement funding calculations as positive. Throw in a few worst case scenarios. Then know that YOU are one of your biggest assets in early retirement to add to your early retirement confidence.