The basis of my entire Early Retirement plan is that I will be able to achieve enough in the way of investment returns over 10 and a half years to live off for 55 years (which will bring me to age 100). Both my wife and I realize that this goal is aggressive, and may not be doable – depending on both our investment returns, as well as our spending patterns over the next decade. If either differs significantly, our plans could change.
Although our day-to-day life is relatively stress free, due to my inherent nature as a financial worry-wart I do get concerned at times about our ability to maintain the lifestyle we want to have after retirement. I get troubled about the possibility of health problems, of market crashes, and many other things that could possibly go wrong – sometimes in excess.
The thing with most of these negative thoughts is they would be an issue whether I was retired or not. I don’t get insomnia from these kind of dark thoughts, they just exist at the back of my mind sometimes – a part of my “personal finance” brain that won’t shut off. I have (to a certain extent) included contingency plans into my financial “base”.
I haven’t included either my work pension or any government money into my financial plans. My defined-benefit work pension is not inflation-adjusted, which will obviously leave me much less buying power at retirement. I would prefer not to depend on CPP coming through, as I don’t have a lot of faith in my government to pay up 30 years from now (whether right or wrong – as noted I’m a bit of a pessimist).
Either of these sources of income will provide a boost to my available dollars from age 65 – 70 onwards. This is the period of time that I am most concerned about – an age where it would be much more difficult to find a job anywhere, at any pay, and also an age range where the probability is high that health problems will become an issue and an additional boost to retirement funds will be welcome for peace of mind.
Both of these pension plans act as a savings plan that I really had no choice but to become involved with. I would have preferred to have control over either of them to do as I liked, but as a part of my overall plan, it seems like this buffer will add some insurance to my overall aggressive plan – beyond the obvious working for additional years.
Do you have a contingency in your personal finance plan?