Pondering My Retirement
Witnessing the termination of many friends and former colleagues on LinkedIn is disheartening. Reading their posts and staying informed about the news during the holiday season adds an extra layer of sadness. I recently talked with a friend who lost his job, and rather than return to the workforce, he's heading to Florida to tee it up from the tips, and that's when I started pondering my retirement.
I worked as a branch manager for one of Wall Street's largest brokerage firms early in my career, and during a stretch, senior management fired several branch managers. A colleague told me when you turn fifty, all bets are off, and your career risk rises exponentially. I never forgot his comment, so when I turned fifty, I started my own business, a considerable risk because we had moved into a new home and my daughter was leaving for college. However, I had some case history because my grandfather started his company at the same age while his three daughters were in college. It worked well for him, and so far, it's working well for me and my family.
Retirement is a two-part equation. The first part is financial; the second is emotional. If you have enough money to retire, you can do it when you're ready; it's simple math. If I quit working today, my money must last over forty years if I live to 100, which seems daunting, but I know it's possible because I've run the numbers a thousand times. In addition to longevity risk, I must battle inflation as the cost of items could nearly triple over the next four decades. For example, a Chipotle burrito may cost over $40 in 2065.
If I did retire today, I would continue allocating 75% of my assets to stocks to fight longevity and inflation risk. I'm not concerned with a market correction today but about running out of money tomorrow. Since I started in the investment business, the S&P 500 and Nasdaq have averaged over 10% annually for thirty-four years. The S&P 500 is currently trading at 4,587, and if it continues to generate a 10% return, it could top 207,000 in 40 years! I'm not worried about the stock market. If I bury my money in cash or T-Bills, my purchasing power could decline by 70% - turning $100 into $30 – not enough money to buy a burrito.
I must focus on my emotional state if my finances are in order. Am I ready to retire? What will I do? Will I lose my identity? I'm not concerned with those questions because I have hobbies like reading, hiking, mountain bike riding, traveling, and fly fishing. In fact, I finished three books this past week, including James Michner's Alaska, which I highly recommend. And I can spend hours hiking and fly fishing. I can also sit on the beach for days without moving a muscle, a true gift. I will also volunteer here and abroad. Emotionally, I could retire today.
If I have the funds and am emotionally ready, why not retire and ride off into the sunset? I've pondered it many times, but I still love working and don't have to worry about being terminated. My job is intellectually challenging and constantly changing. I also enjoy the wisdom of my elders, like Warren Buffett, who still works at age 93. Mr. Buffett recently lost his business partner, Charlie Munger, who died at age 99. Mr. Munger is one of my investment idols on my Mount Rushmore of investors, with Warren Buffett, Peter Lynch, and Sir John Tempelton. Mr. Munger's wisdom is priceless. I'm not saying I will work until age 99, but why not if I live to 100?
I'm not ready to retire, but I do ponder it often.
Money isn't everything, but it sure keeps you in touch with your children. ~ J.Paul Getty
December 1, 2023
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor. Prices and yields are for today only and are subject to change without notice. Past performance is not a guarantee of future performance.