Planning for a 60+ Year Retirement

retirement planning

One of the things I dislike about the 4% Rule / Trinity Study is the open-ended definition of success – if you have more than $0 after 30 years, great success!

Having $1 and $1 million both meet that criteria, but will have obviously different outcomes over the next 30 years.

Planning for a 60+ year retirement requires looking a little closer.

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How are the 2000 and 2008 retirees doing?

4% Rule

Your typical Trinity Study / 4% Rule style portfolio longevity analysis requires a full 30+ year period to determine retirement success. If the portfolio value was still positive after 30 years of spending, you passed. If you ran out of money, you didn’t…amongst other things.

Since we don’t have a full 30 years’ worth of data for people retiring in 2000 or 2008, the most recent scary dates, these periods are left out of the pass/fail statistics of the most common retirement calculators. [The most recent possible start date is 1989 (1989 + 30 = 2019)]

This dearth of data is exacerbated for early retirees since we expect our retirements to be much longer than 30 years. [The most recent start date for a 50 year period is 1969 (1969 + 50 = 2019.)]

But let’s see how these retirees would be doing mid-stream, and compare to other difficult times in history.

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What if it all went to hell?!

Well, whattaya know… 7 years ago today-ish I walked out of my office building for the last time.

A lot has happened since that day. We traveled full-time for a couple of years before becoming parents and traveling parents… Jr has now been to 40+ countries. We started a couple of blogs, Winnie wrote a book, and we had maybe 5 minutes of fame when our story was shared throughout the media. We lived large, practiced intentional lifestyle inflation, and grew as people and as a family.

Thankfully, throughout all of this, our investment portfolio has also continued to grow. This is largely due to an extended bull market in US stocks, but also in small part due to blog and book income. (More is more.)

It’s been a good ride.

But… what if things didn’t go so well? What if the stock market crashed and the economy tanked? What if our hobbies never made a dime? What if it all went to hell?

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The Cost of Working One More Year

one more year syndrome

Early retirees are an interesting bunch… on the one hand, it takes a lot of audacity to leave the workforce decades early. I mean, who does that?!

On the other hand, most of us are extremely fiscally conservative. People are even competitive over who is the most risk-averse… “You go ahead and target a 3% withdrawal rate, buddy, I’m going to keep working until I can spend less than 1.76852%!”

For most people though, the debate is primarily internal and manifests itself as One More Year Syndrome. “I’ll just work one more year to cushion the portfolio a bit more, THEN I’ll quit…”

It’s a very reasonable discussion to have with yourself. But working one more year also has some costs.

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Money is Fungible

In economics parlance they say money is fungible, meaning no dollar is unique or special and they are all fully interchangeable. A dollar is a dollar.

I learned this concept early in life when I successfully paid for a GI Joe action figure entirely with pennies. Go Joe!

But this is a little more complex in the modern world, so here are some money fungibility related questions/comments I’ve received over the years.

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Accidental Market Timing

In rough terms, market timing is the practice of trying to make money by predicting future market performance. It is almost universally agreed to be a poor investment practice… “time in market is more important than timing the market.”

Predicting future market performance is… difficult. Even when your hypothesis is sound the market can remain irrational much longer than you can remain solvent. Not only do you need to be correct (often twice) but taxes and fees can erode any gains you do make.

But sometimes, when the stars align, it happens accidentally.

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