So it's when I hear things like "no one can KNOW [beyond a few years]" it automatically gets my defenses up, because I can see people using such statements to keep working longer than they need to out of fear of the unknown.
DH and I have been wondering why on earth more people don't retire earlier... do you think this is it? Just fear of the unknown? I know so many people who are unhappy in their jobs and yet they just keep working. And buying stuff.... which makes me think they buy stuff trying to make themselves feel better because they're so miserable working and it's just a terrible spiral. I'm so thankful we are not in that loop!
Ooh, I can answer that one from the U.S. military perspective. People may have one or more of these attitudes:
1. Servicemembers (and their families) don't save enough. (Only about half of the servicemembers have even signed up for the TSP, let alone contribute regularly.) They feel that they have job security: it's much easier to live in base housing (or on your BAH), spend all your pay & allowances, and not worry about "layoffs". (Yeah, I know, the drawdown is changing that attitude.) They feel that when the time comes to leave the military then they'll have a few years to save up, make the transition, and find a job. They'll start saving tomorrow.
2. A combination of fatalism and ignorance. "Why save for retirement? I could be killed tomorrow, and besides nobody can save enough for retirement in today's economy. I'll just work until I die." These people might not even try to save.
3. Obstinacy. "I'm not going to compromise my quality of life just to be able to sit on the porch and rust. Dammit, I've worked too hard and sacrificed too much. Life is too short to drink cheap wine. I'll hit it big at work here soon with that certification/promotion/bonus and then I'll be able to put aside the money we need for retirement."
4. Military inferiority complex. We're regularly admonished that we're barely capable of performing at our current rank, let alone getting promoted. It's a vicious world out there and we don't have the skills to make it in the corporate world. Unemployment is high, pay is low, civilians don't understand what we did or what we can do. It's just easier to sign up for another military obligation and then hope that a defense contractor knows what a retired E-7 (or O-5) is worth.
5. More obstinacy. "I want to see whether I can hack it in the corporate world. I'm going to climb the ladder for a few more years and show these people what a military veteran can do."
6. Commitment to service. Most U.S. military veterans still want to have a mission, be part of a team, and take care of people. This is generally a very good thing, but in some cases it causes them to help others at the expense of helping themselves. They feel that they'll be working forever for a cause that they love, and they never see a reason to save more.
A separate issue, very common among everyone (not just military) is the desire to squeeze out every last percentage point of the SWR and the success rate. 4%/80% just isn't good enough, even though all of us would be thrilled to encounter a blackjack table with an 80% chance of paying off. Instead we want 3% or 2.9347986%: because you just don't know how long you'll live or whether future returns will equal the last 80 years or <insert reasonable-sounding caveat here>. We want a 100.00000% success rate because we don't want to worry for the rest of our lives that we'll be bag ladies (with cats). And clearly the only 100% successful retirement is based on building enough passive income (interest, dividends, rent checks) to never need to touch the principal. Although maybe we should make that principal a little larger, "just in case". Maybe Just One More Year.
Hell, even Joe Dominguez retired early on a portfolio of U.S. Treasuries. Paul & Vicki Terhorst started their early retirement on 100% CDs. They wanted to avoid risk of principal and portfolio failure.
But even today people still don't know enough about the analysis and simulations behind the SWR and the success rate, and they're using the wrong tactics to avoid failure. Most people don't even know that the Trinity Study assumed high investment expense ratios, fixed (inflation-adjusted) spending, and no Social Security. At the very least, a variable spending rate (perhaps with a declining rate later in life) and an annuity will fill all the gaps which we so obsessively worry about. Reducing your expense ratios from 1% to 0.25% might be all that's needed.
As humans, our behavioral financial psychology makes us take loss aversion to extremes. It's not good enough to have a 4/5 chance of our money lasting longer than we do. We'll literally reduce our life expectancy in the pursuit of guarantees by using up all of our human capital chasing paychecks instead of letting our investments do the work.
I got an e-mail the other day from a guy who I've known since 1966, in first grade. (We went our own directions after high school but have re-united on Facebook.) Here's what he says:
Unlike you I decided to make my government retirement my primary means of retirement, with O-6 as my goal and 30 years. What I didn't count on is the impact that stress and a sedentary life would yield. Ironically I ended up as a flag/general officer (with an obligation to stay four more years ) but with emerging health problems that may be unresolvable. Sort of dampens the retirement plan. I'm thinking my major focus will be on health and an exit plan maybe in two years if I can swing it.
BTW I tell your story to my daughters. At the end of the day life is about, well, enjoying life. Sitting behind a computer at the beck and call of my bosses is not my idea of the stress-free life I was hoping to achieve.
Please feel free to let your readers/subscribers know that rank does not equal quality of life. Quality of life is the absence of insane stressors and enjoying life while you have health to do so. While I'm fairly certain I could retire and be an executive or administrator, I think retiring and teaching kayak lessons is more my speed.
Career comes with a price tag. It impacts family. From relationships to uprooting everyone to go to the new duty station. Family is very important. Some guys strike a good balance. Tours and late nights at the office can result in bad outcomes. I managed to get out of the tail spin... I think I might retire for good once this is over. At least take a six month mental health deployment.
Well thanks for listening/reading I need to get back to the computer monitor.