Embarrassment

I should be proud of my financial situation, right? I've worked hard, saved and invested, and reaped the benefits. But one thing I left out of my post the other day about some of my friends who remind me how lucky I am, is that I can't help feeling a little awkward or embarrassed sometimes when I talk about money matters with them. For all that I can empathize with their struggles, my own life is totally different. I don't have their fears and worries right now. And I wonder if they resent my situation or feel envious. I've realized that I share a lot less about my life on social media now because I worry that I'll sound like I'm bragging or rubbing people's noses in my good fortune. Perhaps that is also why my writing on this site has lagged so much in the last few years (though I have no excuse for losing momentum several years ago, well before I retired!). It's one thing to be striving and working and in the fray of trying to get ahead. But once you just stop and say "I have enough money and I'm just going to chill out for a while" it's not very relatable!

On this site, I can be quite open about things-- that's always been the whole point. And in "real life" I have always tried to be realistic about finances, if not totally transparent. Because our culture can be so caught up in materialism and keeping up appearances, I felt like I was doing a civic duty in a way whenever I'd say "I can't afford that" or "I've been saving a lot of my paycheck so I can afford that" or "I've been maxing out my 401k since a very early age." So many people fall into cliches when talking about money, somehow reinforcing the idea that it is okay and normal to be constantly spending money on nice things and having lots of debt-- I don't want to be part of that. But sometimes it's easier to tell little white lies about one's situation. I've met a number of people in our new community that have asked if I'm retired, with a sort of doubtful look, like "I don't want to insult you by implying you are older than you look but you don't seem to be working and you're not at home with children and I also don't want to insult you by asking if you've been laid off..." In a couple of these conversations I've ended up downplaying my financial freedom and talking more about being "between jobs" or "trying to change careers" or "doing some consulting projects" or "hoping to start a new job soon but it's dependent on funding..." The latter is basically true, but all of these things are easier to say than "well, I don't really have to work right now and yeah, I've basically retired 20 years before most people do, but no, it's not because I've inherited great wealth, I'm just a normal person who was fortunate enough to have parents who could support most of her education and give her a happy childhood while imbuing her with a lifelong penchant for saving money, and I've never been afraid to invest..." That's all kind of a mouthful, a bit TMI!

Ultimately, I can't control what people who don't know me think about me. The truth is too long a story. But I wish there was a way to convey it. Some of my situation is due to luck/privilege, but a lot of it is due to controllable factors. I suppose what would embarrass me most is to be seen as someone who has benefited from pure luck and doesn't "deserve it." But I feel proud if I can serve as an example of someone who has made good choices-- choices that anyone can make.

My Early Retirement Calculations

A commenter on the previous post asked if I'd share the calculations that made me feel confident about retiring early. I'll give you a simplified version!

There are a few different ways that people tend to look at retirement readiness. One of the simplest is the 4% rule. The idea is that if you can live on spending only 4% of your savings each year, you don't need to add to those savings, as investment gains should generally outpace what you are withdrawing. This is also sometimes expressed as a 25X rule-- multiply your annual spending by 25 to see how it compares to your savings.

My total net worth at the point of deciding to quit my job was somewhere around $1.2 million. (It has since been between $1.3 and $1.4 million due to stock market gains.) 4% of $1.2 million is $48,000. My lifestyle while living in NYC was costing me more than that, but by leaving the city, it was possible to realistically budget for a lifestyle where my half would be less than $48,000. And that doesn't include Sweetie's net worth, which is a little over $2 million (not counting the equity in the house we just bought and paid for in cash, as well as some money set aside for renovations). When taking both of us into account, 4% of $3.2 million is $128,000 and our combined yearly budget is well under that. (My current calculations have it as around $92,000 a year, including a generous travel allowance. We'll see how it plays out in reality as we adjust to our new life in the country!)

This method of calculation doesn't factor in Social Security benefits or other retirement income. My Social Security will end up being less than what they project because they don't take into account that I won't continue to make what I was making last year. (It will be interesting to see if the projections will update in the next year or two when my income goes way down.) Sweetie will get Social Security, as well as a defined benefit pension starting in about 7 years. The pension, which appears to be well-funded and safely on track to be able to pay out in full, will be additional income of about $87,000 a year. That obviously makes a HUGE difference in our projections for the future.

I also used the retirement calculator that is part of the Fidelity website (not sure if it's publicly accessible or if you have to have an account)-- it is a fairly complex tool that allows you to input all sorts of info for yourself and a partner, including life expectancy, assets on hand, sources of income, one-time events, budgeted retirement spending, and other goals like paying for college. It then uses a Monte Carlo simulation to model how things will play out under different market conditions, and projects your savings and spending until your "end of plan," which is their delicate way of saying "when you drop dead." You can see 3 versions of the results-- one assuming a "significantly below average" market, one "below average," and one "average." I plugged all our numbers into this, assuming we'd both live til 95, inflating our expenses (by about 50% over what they currently are budgeted at) to allow for plenty of fun and expensive healthcare, and keeping expectations of any future inflow from earnings or inheritance to an absolute minimum. When really pushing this to the absolute worst case scenario, it says I might run out of money in my early 90s after Sweetie is dead. But even by just changing the parameters to "below average" market instead of "significantly below" brings us back to having over $2 million left over after both of us are dead.

No prediction is 100% confident, and a lot of things could happen that would change these calculations, so of course I still have my moments of worrying about whether it will all work out as planned. But we're also allowing for so much leeway in our budgeting that there will be room for us to cut back if needed. And we'll naturally cut back on some things like travel as we age. The biggest worry is that we'll decide we hate living in the country and want to go back to NYC-- we wouldn't be able to afford to live as we did before, but we could most likely make it work if we really wanted to. I feel incredibly fortunate to have this kind of freedom-- Sweetie and I have worked hard and made good decisions, but I also know that pure luck is a lot of what separates us from the half of all Americans who say they can't come up with $400 in an emergency, let alone retire early.