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.
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I am so happy to hear that you won't be a 101-year old bag lady... But the downside is that your dad is worried that he is going to have to take care of you when you get so old!
Posted by: Sara | November 21, 2009 at 07:14 AM
Um, Syd, if you had put your money into an FDIC bank account, wouldn't you have had the same result: you'd have the same money this year as last year, only you would have made a bit of interest, not felt poorer or decimated for one second, or had to lower your standard of living by spending less (more frugal)?
I'm just saying.
Maybe you are back to square one, but who's to say you won't go back down 50% in the near or far future due to Wall Street?
Who needs such angst?
Posted by: morrison | November 21, 2009 at 09:22 AM
Morrison: Indeed, that would have been the case . . .
Posted by: Retired Syd | November 21, 2009 at 10:09 AM
Here's My Story. Or..The Miracle of Compound Interest.
25 years ago we went down Mexico way to what they now call the Mayan Riviera. We got our $25 hotel, ate peanut butter sandwiches in the car, snuck into the all inclusive resorts and peeked through the windows as they ate lobster & champagen. But we snorkeled with the best resort goers in the free ocean. In Other Words...we saved our money.
Last week we traveled down to the beautiful Xcaret resort, marched right up to the front desk and check in. We had a blast both times!
Posted by: Sara | November 21, 2009 at 12:20 PM
Or you can call it another silver lining to the recession, I know for a fact that you barely paid any more for that all-inclusive trip than you did 25 years ago (after adjusting for inflation, of course . . .)
Posted by: Retired Syd | November 22, 2009 at 05:49 PM
When a man retires and time is no longer a matter of urgent importance, his colleagues generally present him with a watch.
Posted by: r4i | December 03, 2009 at 07:45 PM