You know that feeling when you put your hand in the pocket of a coat you haven't worn since last winter, and you pull out a 20-dollar bill? That's how I've been feeling lately. It doesn't make any sense, it was 20 dollars you already had, you just didn't know you'd misplaced it. You're really no richer than you were before you put that coat on, but you feel richer.
A little over a year ago, I was feeling poor. The nest egg that I had retired with had been decimated, and it was looking like all my masterful retirement calculations were not worth the computer paper they were printed on. Our retirement portfolio had fallen by 24% in the first eight months of my retirement. This meant that the stash we had retired with would no longer take us through the ripe old age of 95 as I had originally planned. Rather than take up an unhealthy lifestyle of smoking, drinking (more), and a skydiving hobby, we took the less thrilling approach of trimming the budget.
A person retiring in her 40's needs to save something in the neighborhood of 33 times her annual spending to get safely through her golden years. When our perfectly-sized nest egg shrunk to the not-so-perfect size of 28 times our budget, we joined the ranks of agile retirees. The shrinkage made us feel poor, and the reverse-wealth effect caused us to spend less. By the time that we finished our first year of retirement, we had cut spending so well, our shrunken nest egg was back on track to carry us through to our mid-90's again. And since, as it turns out, happiness is cheaper in retirement, we've spent even less in this second year of retirement than we did in the first.
We've watched in amazement as the stock market has made its steady march upward this year. We now have a nest egg of exactly what we had a year ago, except that instead of depressing me, that feels like a huge windfall. The spreadsheet now says we can live to 101, and I feel like I just found a twenty in my pocket.