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Wednesday, March 29, 2017

The Dark Fears

Posted by Tim Stobbs on August 24, 2016

I’m now finally towards the end of my long goal to save enough money to retire early at some point in the next year or two.  So on the one hand, I do fully admit to being a bit excited by that idea.  On the other hand I notice little bursts of fear and doubt surfacing periodically that for a moment crush that excitement in a burst of negative emotions.

Of course I think to myself: Dude, what’s your problem? You should be thrilled to be this close to done.

Yet those dark fears that I don’t spend much time thinking or talking about still bubble up.  Some of those thoughts include: Do I have enough money saved? What if I forgot something in my calculations? Can I actually pull the trigger at the end or will I fall to saving for one more year? Or even worse, if things go really well could I change my plan and pull it earlier than I’m planning? Should I save a bit longer and just don’t worry about some part time work?

Then after those thoughts burst through my head I remind myself that doubt is normal.  Hell even fear is completely normal in the case.  I’m planning to alter the single biggest part of my week days and leave full time work and the career I have always know for a completely uncharted area of my life.  So yes, fear is perfectly normal.

Yet acknowledging the fear as normal doesn’t make it go away.  So instead of avoiding these thoughts I have decided to spend some time in them looking at those questions in detail and trying to determine some idea of what that uncharted part of my life will look like.

In effect, I’m down into the weeds for a while looking at:

  • How exactly will I take the money out of the investment accounts to live on? Monthly, every quarter or yearly?  Which accounts do I use first?  How do I keep our income tax to a minimum?
  • I’m also looking at fears.  So I retire and the stock market tanks immediately – what do I do?  How much of a reduction in the markets do I tolerate prior to using that plan B?
  • What if I fail at retirement?  At what point do I go back to work full time?
  • What if I fail at writing fiction? Do I keep at it or switch to non-fiction? Or do both?
  • What else do I want to do with my life?  I’ve gained over 25 additional years without work, so what exactly do I want to accomplish with it?

Some of those are easier to answer by just writing up an investment plan that includes what do do when the stock market drops 5%, or 10% in a year.  I’ve also created a fairly detailed model of the first five years of retirement and stress tested various scenarios so I can see what happens if I don’t do any work at all during that time.

But even as I look at some of those questions I’ve come to realize something important.  You can’t always know everything in advance.  Some questions can’t really be answered in advance of that uncharted area of life.  I don’t really know what I will accomplish in the next 25 years of my life and well that isn’t that much different that most people.  I can’t know everything that could go wrong in the next 25 years with the stock or bonds markets. I can’t know government policy that will make things better or worse for me.

But I do know that I’ve learned to be more flexible about things.  I have managed to handle of lot of stressful situations in my life such as a 10 week premature baby, or working several jobs at once.  Yet I found a way to make it all work and I’m not about to really lose that skill set all of a sudden.

So in the end, I do think things will work out.  After all, why I’m considering all these dark thoughts I seem to forget something equally important: what if things turn out better than I expect?  After all I’ve been saving for over 10 years now towards this goal and I’ve consistently beaten my targets (hello, the title of the blog of free at 45, but I’m now looking at leaving before 40).  If I earn some extra money I will likely save it, since that is a really hard habit to get out of.  I’ve never spent everything I have earned and I really don’t think that will change in my retirement.

What are some of your dark fears about your retirement plans and how do you deal with them?

Comments

12 Responses to “The Dark Fears”
  1. beth says:

    I am building my dividend flow and trying to build a retirement budget but I am still struggling with how to pay for large and unusual expenses like replacing my car, false teeth (you never know) or a large travel budget if my children move to a place I have to fly to.

    The answer to this problem is to save more money but I do want to retire at some point so I am worried that I may not save enough in the unusual expenses fund.

  2. deegee says:

    When I was putting together my ER plan back in2007-08, I made sure to build in a surplus of monthly dividend income over expenses so I could cover unforeseen, short-term, relatively small expenses. But I also built in a “slush fund” to cover larger, unforeseen expenses the smaller surplus couldn’t cover. I have had to tap into the slush fund a few times in the last 8 years, but not for a lot of money.

    Having these two elements in my ER plan gave me great peace of mind when I finally pulled the trigger back in late 2008 and retired at 45. Also, my ER income plan was not very sensitive to big changes in the stock market because the price per share of my mutual funds didn’t matter when determining my monthly dividend income. Only the number of shares and the monthly dividends per share mattered.

  3. veronica says:

    Thank you for writing about this. Although I have a ways to go before retirement, I like to ‘practice’ by taking sabbatical years (basically an unpaid year off work) which I spend moving to a country where I know nobody and barely speak the language. Before my departure date everyone always asks me about being excited. They always disapprove when I answer: “well, actually, I’m terrified”. But it’s true. I compare it to being on a rollercoaster: you do it voluntarily, you have a great time, but you’re scared to death while doing it. Nice to know I’m not the only person who goes through this experience.

  4. Andrew says:

    A very relevant topic for me. I am thinking of pulling the plug at 41 and definitely the thought of not having enough is concerning. My ERS plan requires downsizing housing and moving to another more affordable area outside toronto. That adds a different set of concerns as I have not concluded where yet and whether the location needs to factor in additional contingency plans like availability of work if needed. The unknowns certainly throw a dampener on what should be a very excitable undertaking.

  5. Tim Stobbs says:

    @beth – I agree with deegee a bit. You just put together a fund for the unusual and don’t try to cover everything, but rather enough to cover a fair bit of it. You never get to do everything in life, so when to use that fund will be a trade off, but that happens. In my case, I’m just putting in a bit of excess cash flow for things and the planning to do some work for the first few years to add to the slush fund.

    @veronica – You are welcome. Fear and excitement often go hand in hand, we just don’t mention the fear as much. So I’m trying to be honest about my mental state as I go trough the transition. Good for you trying out new places during your sabbaticals. Excellent idea to get used to the fear.

    @Andrew – Yes it sounds like the number of unknowns is a bit of an issue. Have you considered giving yourself some flexibility by renting in your new location. That should allow you to switch to another location easier if you do feel the need. Good luck!

    Tim

  6. Norman says:

    i am also thinking about pulling the plug soon. Like you I have many fears. Just generally, am I making a mistake by doing this???

    Also things you take for granted now, like insurance coverage thru work, ability to apply for credit if needed (it would be easier with a job of course), or just simply other things that may not be as easy to do without consistent income.
    Have you thought about what this could include?

    Then sometimes I think there will probably never be the ‘right’ time to pull the plug do might as well do it.
    It’s a tug of war….

  7. Tim Stobbs says:

    Norman – Oh, I totally understand that particular thought. It is easy to consider the entire thing a potential mistake, but also keep it mind it may be the best decision in your life as well. You won’t know until you do it.

    As to your other points. Life insurance is typically for income replacement, since your are FI you may not need it. With me only being semi-retired, I do plan to carry a small policy, but that is through my local engineer association, which I plan to keep my membership in for the first few years as a hedge in case I have to go back to work.

    With credit, we already took care of that after the mortgage was paid off. We had a mortgage plan that allowed use to have a secure line of credit, so after paying off the mortgage balance we took out a $100,000 line of credit secured by the house. We may never need it but it does become handy if you want to spread out an large expense like a new car over a few years of cash flow. So yes, I suggest you line this up before you leave work.

    As to the ‘right’ time. It doesn’t really exist. You just pick a time. Sometimes something bad happens like a death in the family that causes you to think life is too short and leave then or some other catalyst, but there may not be one other than you decide you want the time more the the money.

    Good luck on what ever you choose.

    Tim

  8. I am in a hybrid situation where I still need to make some money, but I gave up the regular job 10 years ago. Lately I’ve been making more than I need, and saving it not spending it, so I’m getting closer to not needing to make any at all. I’m looking forward to this but I’m sure I will still have some income streams and keep looking for more. You get in the habit of that too. You just have to watch out that you are not spending more on training for new work/hobbies than you are making.

    Regarding the question, “what if I fail at writing fiction.” Writing fiction is something that you learn through doing. It’s not a succeed/fail thing. You will gradually improve over years. So if you decide from the outset, are you willing to give it those years? Minimum 2-3 hours a day, 5-6 days a week, for some years? Then you will not be downhearted when you finish your first draft of your first book in 2 months and it is not an instant bestseller. I mean, maybe it will be and that would be great :) but that is not most writers’ experience – and they can still become great writers.

  9. Paul N says:

    Your one comment is the one that concerns me the most :

    “How exactly will I take the money out of the investment accounts to live on? Monthly, every quarter or yearly? Which accounts do I use first? How do I keep our income tax to a minimum?”

    I think most of us that follow bloggers such as yourself are on paths to crate that nest egg. However what I think is complex, is maximizing what you keep. This is the one point where a true financial planner adept at tax strategies becomes worthwhile. This might be the point where i would consider a fee only planner to suggest a professional transition plan.

    We have paid a lot of taxes in our lifetimes. No need to pay more due to ignorance of tax laws and legal loopholes. If you decide to research and write on this subject in the future I would be quite interested in reading those posts… From what I have heard on some financial shows, many retirees leave large amounts of money on the table simply by doing a few things wrong leading up to, and going into retirement.

  10. Tim Stobbs says:

    @Megan – Thanks for the advice regarding spending too much on training. I’ll keep that in mind. As to your comment on writing, I know what you mean. I’m been writing as a sideline for years, and you do see an improvement as you write more. I heard somewhere that you need to write around 500,000 words to get decent and not to get too hung up on your early works.

    @Paul N – Oh, it’s complex. Which is why I’m still working out the exact details. I have the general plan in my head, but I want to run various options to confirm what works best. Not a bad idea to get an professional opinion on the investments and the tax issues. Thanks.

  11. Norman says:

    Tim, I was actually referring more to dental & health insurance and maybe travel insurance. I think if you are FI enough to retire, you wont need life insurance.

    I have a credit line already. I was referring to applying for new credit cards that may be enticing.

  12. scott says:

    Worst case scenario, if you run out of funds you can downsize your house (as you mentioned in a previous post) It’s not necessarily a bad thing to run out of money at 65 for us frugal folks. Imagine, No OAS clawback, get CCP AND GIS. Those amounts would pretty much maintain your lifestyle. I highly doubt those benefits would be pulled, if anything there is talk about them improving (Ontario is adding its own Pension on top of what’s already in place)

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