This just in: Your Choices are not Limited to 100% Saving or 100% Spending
Just like life, finance is not always binary. It can be subtle and delicate, like me. There are many diverse and effective strategies to get to the sunset of your working life and this is ours.
The decision was partially made for us. Here is the background
If you already know this then feel free to skip this part, but our house includes 2 adults over age 50 and a boxer dog named Banjo! and no children. We’ve been married close to 15 years and have worked full time and more our entire lives until Spring of 2017 when Mrs. Smidlap’s office where she had worked for 22 years closed and BAM!, the decision was made for us to go down to my full time income and some side hustles. In a sense it’s like she’s retired in her mid-50’s with not too many years to go before we can collect one social security check in order to supplement my income if I continue working at my not-too-bad J.O.B. That’s how the decision was partly made for us.
It didn’t make too much sense to us for her to go and look for another full-time gig in the music industry in Buffalo, NY at this stage of life. I’m now sitting on 5+ weeks/year of paid time off and we really like to enjoy that together with some budget travels to AirbNb’s near the ocean or the Adirondack Mountain Region near Lake Placid or our beloved New Orleans. We made the decision that, unless something very high paying came up that we would just make up the shortfall in income through investing less into retirement accounts and enjoying our combined incomes in the present day.
Investing doesn’t need to be binary. That is you don’t have to be all-in or all-out, just like paid employment
That’s why I call it a glide path to retirement. We already did the hard work and super-saver hustling for the past 25 years or more and that’s how you get into the position to have choices like this. When we were working full time and I was hauling in mandatory overtime dollars hand over fist we saved and invested very aggressively for about 14 years. I rarely spent any extra money that came my way but instead made the choice to throw it all after knocking out some lingering student loans and we even polished off our mortgage about 5 years ago. We own our modest cars and have been 100% debt-free since we finished paying off our house. A strategy like that only works if you have done all the hard and necessary preparation and made the sound choices not to inflate our lifestyles when everything was rosy. It’s not when times are tough that you can really make hay but when everything is coming up roses you can be very well prepared when the rainy day comes like losing a job in ’17. Besides, it’s not like we lived like paupers and ate from dumpsters when we were in full-throttle saving mode. We basically just bought anything we wanted, which, fortunately for us, isn’t excessive. Check out this classic about “wants money vs. needs money” from last year.
I promise I’m getting to the philosophy and strategy part
When we first experienced the lost income/retirement I thought we would just continue investing the same amount in various retirement and tax-advantaged account like we had always done. Then, when we noticed a little lifestyle hit, came the epiphany: There is no rule we need to max everything and sacrifice our quality of life in the present when we essentially had already won the game. I realized those saving levels were just habits and we had been doing it so long that it felt unnatural to do otherwise. It took a couple of less than ideal side hustles that Mrs. Smidlap tried for us to realize the sacrifice was too great and the reward not nearly enough. I wrote Not All Time Is Created Equal which all about what times of the week/year were most important and valuable to us. One part-time job included too many Saturdays and an adjunct college instruction gig ended up messing up our September Adirondack vacation week. The juice didn’t turn out to be worth the squeeze. We are still funding my 401k at the same level but have shifted some of it into a Roth 401k now that our tax bracket is lower. I’ll take 10% tax in the present for tax-free gains any time. I funded one Roth IRA fully with income last year and converted some taxable shares to the other Roth as I can’t resist tax free gains in retirement. I’m funny that way. I also increased our cash allocation last fall to between 15 and 20% of the total portfolio, enough to cover 4-5 years of living expenses as if we were already retired. Like I implied before, once we won the game, why are we still playing?
The final part of the philosophical approach is just like days of the week and weeks of the year not all being created equal. All years are not going to be created equal in my eyes. The most important year is the one that is happening right now in the present. Tomorrow is never promised. I don’t mean that to be all doomy and gloomy but have seen enough to know it’s true. Do you think you’ll be healthier or less healthy in 10 or 20 years in order to enjoy a huge heap of saving more than you can today? Notice I’m not saying we’re stopping on the investing train completely and we’ll likely fill up one full Roth IRA contribution and continue funding my 401k this year. I’m still working and don’t mind it much, which is a win in my book. Five weeks off is plenty as travel is starting to wear on my nerves (especially air travel) as I get older and ever more curmudgeonly. Also notice that we’re not cashing in any investment chips to fund our lives, either. We’re just reducing the amount we invest and enjoying that income this year!, like right freaking now! Mrs. Smidlap has been extra choosy about the schedule and pay rate of various side hustles and if the right ones don’t come up we might invest even less or even zero without selling the significant investments we already own. That’s my glide path plan to make the transition from saving and investing to retirement and cashing out. I would rather take the small risk and make sure we’re maxing our enjoyment of today (within reason) versus hoarding a shit-ton of money for when we’re in adult diapers and gumming our food. This might run counter to all the FIRE dogma and I’m glad for that. You gotta decide what’s right for your circumstance and think for yourself about this stuff. We’ll be here throttling down the airplane of full time work and hopefully gliding ‘er in for a smooth landing.
We sold all this in the past two weeks on eBay for about $350 total. Who needs some of our
junk treasures? I’ll give you a great deal!
Also, I would like to thank Ms. Liz for her thoughts on retirement plans in this post. If you’re near retirement check out her site as she has been “peaced out” for a couple of years now. What’s Your Plan?