The Things He Got Wrong
Most of the people in the FIRE movement that I have had the pleasure of reading about all seem to have one thing in common. This one thing is, to me, the one thing that makes me take it all in with a grain of salt. Considering the fact that the financial wellbeing of me and my family depend on many of these concepts, it would be more accurate to say I take some of this advice in with the whole salt shaker.
This one thing that is the source of my skepticism is youth.
I think the FIRE movement is trending in part because we are witnessing a shift in our society’s priorities as the younger generations behind us march forth with their own unique collective experiences, biasing their approach to financial wellness. Events like 9/11, the great recession, and the lingering devastating unemployment that ensued for years. These young and inspiring people are creating a whole new economy with creativity and ingenuity and changing the way people think of what defines a career.
Why youth hurts the message is obvious. They have not walked the walk for very long. I will first say that it seems to me these voices come from people much smarter than I. There are complex strategies and calculations. They are looking at the future with actuarial precision. You will find no such data at this blog! But what I really want to hear is how it pans out. How accurate were those calculations? What storms were weathered? Were there any storms so strong that it sank the proverbial early retirement ship? And if so, how adaptable were the sailors?
Perhaps because I have had my own financial traumas. Perhaps because I had a brush with a life-threatening illness. There are many experiences that shape the decisions we make, and I blame my own experiences on my strong fear of uncertainty and insecurity with regards to the future. Current domestic and global events aren’t helping my outlook either. I want solid proof that these ideas will guide my family and me to the ends of long and healthy lives with security!
This was the inspiration for this 2-part blog about my father. He retired 30 years ago at the age of 55, before it was fashionable to do so. In general, there have been many things my parents “got right” to have a successful early retirement , as I have previously discussed in Part 1 of this post. Now I examine some things they may have gotten wrong.
Not Planning for Early Retirement.
One of the biggest surprises I learned recently was that my father’s choice to retire early was an impulsive one. He did not start his career early on thinking he will work hard for a set number of years and retire early to pursue his passions. He was very active in wildlife conservancy but knew he would never be able to make a significant income doing this. He did not do his homework on how to retire young. He did not know about passive income options nor had he ever heard of the 4 percent rule. He simply was burned out. Combining burnout with an uncertain future for his company and a change in responsibilities that made him unhappy with his work was his personal recipe for his FIRE decision. He reacted his way into his early retirement, he did not plan for it.
My parents have almost all of their net worth in stocks, other than their two homes. This enabled them to have quite a bit of growth and prosperity over the years but I fear, as they have aged and their needs have changed, that this lack of diversity makes them vulnerable in the short term. Even with the guidance of a financial advisor who takes into consideration end of life needs and risk adjustment, I worry that if, in the unlikely event there is a turn down like 2008, this would put them in a very different financial situation. I think if they were more diversified, perhaps in something like rental properties, they would at least have an income even if the value of the properties went down.
Hiring a Financial Advisor.
As I mentioned in Part 1 of this blog, this one gets honorary mention as both a good AND bad decision. My parents hired their current advisor a few years into my father’s retirement, over 25 years ago. I do believe that now, as my father has become incapable of managing their finances due to his Alzheimer’s disease, these people have been trustworthy. I genuinely feel they have my parents’ best interests at heart. They have also been helpful in the day to day handling of transactions required to keep them afloat as well as planning and budgeting for my father’s expensive 24 hour in-home care. They are the stewards of their financial ship in a way that I, regrettably, do not think I am capable of. I trust their advice and know they have long term goals to consider as my mother, who at a healthy 78-years old, intends to enjoy many more years playing with her grandchildren. They have seen them through several significant downturns in the economy and my parents attribute their financial wellbeing today to the help of their advisor.
However, despite all of these “pros”, I cannot help but wonder where they would be without them. My father had done very well managing his own investments for many years. Considering he paid them them 1-2 % per year for over 25 years, this potentially adds up to hundreds of thousands of dollars. What would have been different if they had managed those investments, saved in fees, and then turned to a trusted advisor at the very beginning of evidence that his health was faltering?
Factoring End of Life Circumstances or Long-Term Care.
No one likes to think of what the end of our lives might look like. Hopefully for most of you reading this, it is only an abstract concept. The reality is that, unfortunately, many of us may need some degree of skilled care at some point, and potentially for a long period of time. As much as we might all hope to live long, healthy lives that end suddenly, painlessly, and at a ripe old age, the reality is this is rarely the case. One of the many privileges of my job in medicine is that I help take care of patients on some part of this spectrum of end of life care. What I have learned over the years that this is difficult and taxing on both the patient and their families as well. Currently my parents are spending close to fifty thousand dollars a year on my father’s care. And that was one of the cheapest quality options we could find. What was most frightening is that for almost one year, my mother was not well either and we had to start thinking about what happens if they both needed help. And though they are lucky to be in a position to afford the care they need, to double that would devastate them financially. Also, because of their good fortune, they are ineligible for any type of subsidy or assistance. Would they be in a better situation if he had worked for 5 to 10 years more? Changed to part time? Purchased expensive long-term care insurance? We have yet to see how this pans out.
Considering the Effects of FIRE on Health.
This one is a little controversial. No one will argue that working long hours in a stressful job will negatively impact physical as well as mental health. Scientists have actually done studies to quantify these metrics.
But there is also plenty of research out there that supports that sense of purpose is linked to increased health and longevity. Also, and specifically for the case of my father, I cannot help but wonder if his early retirement had any role in his cognitive decline. There was no known history of dementia or Alzheimer’s disease in my family. There have been several studies attempting to identify risk factors for Alzheimer’s with the hope that, by so doing, we could decrease its incidence as our population ages. In one overview, it is mentioned that there was a significant reduction in the risk for Alzheimer’s in people who had high IQ, high levels of education, high “occupational attainment”, and for people that engaged in mentally stimulating leisure activities. My father qualified as low risk for all of these, at least while he was working. Does it not make sense then, to halt all of these “protective” activities, might put one at risk? Interestingly enough, in searching for any studies correlating retirement age and cognitive decline, there are several studies to suggest there could be a weak association between retirement and cognitive decline in certain mental abilities, but only for individuals retiring from jobs high in complexity.
When I reflect on all of things, I can’t help but worry what would happen if I were to stop working all together before a traditional retirement age. Thankfully, I have found the sweet spot with regards to my work and I plan on working indefinitely. It is because of the things I saw my parents do right that I unconsciously made many decisions to enable me to work less and maintain a comfortable lifestyle. By working part time, I am also able to stave off the burnout I see affecting so many and an added benefit of this is that I have fallen in love again with the work I do. But perhaps most importantly, I have hopefully put an extra safe guard to avoid some of the financial (and possibly health) risks of quitting work altogether at a young age.