This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
I like to play poker. Two or three times per week, I’ll play online against 8 other people in a 1-table tournament. I like these kind of tournaments because I know exactly how long they’ll take (around 45 minutes) and I can play for $2, which is about as much money as I really feel like risking on my mediocre skills. I have read several books, and unless I get good cards (which are less than 5% of cards dealt) I basically sit and fold hands for the first 20 minutes of the game, hoping that other people knock each other out.
The problem arises that eventually, I have to make a play because if I haven’t won any hands my chip count is getting low. If my chip count is low enough, I basically have to “gamble” (statistically) on a hand…..pushing “All In”.
To me, retirement is similar to this poker move – instead of 20 minutes of playing poker, it’s a 15 year intricate financial plan that comes down to an exit date. The problem of course with the retirement plan, is that I won’t find out if I “won” the retirement game 10 seconds later, it will be more like 20 years down the road when I find out my plan wasn’t as successful as I thought when I was in my 30’s. The problem at age 65 is if my plan isn’t working, my skills are no longer usable in the workforce, which would probably significantly reduce my ability to play catch-up.
I think that whether you retire at 35 or 75, everyone is hoping whatever their retirement savings level is at, that they have enough to last until they die (kind of morbid, but it’s the truth). My wife and I both understand the risks (that we may end up broke in our 80s), but are also willing to accept the risk in order to be able to do the things we want to do in the extra 40+ hours per week we are currently working for employers.
The final decision on retirement or even poker comes down to risk tolerance. In both, I know what the end result could be (a zero balance before I’m done playing) – but I also know the gains that can be made – winning some money in poker and a significant period of free time after retirement. As long as the odds seem safe to me, I’ll gamble on either.
Do you see your retirement as a gamble? How do you reconcile the risk of possibly running out of money when you are unable to make more (without freaking out)?