We’ve all seen the articles and data on ‘sequence of return risk’ where, depending on how the markets do in the first couple of years of retirement, you can be in great shape, or you can be in a world of hurt.
Go Curry Cracker has spent the time to do the numbers on how things are going for folks that retired right around the time of our two most recent “crashes.” An excellent read!
I know there is a lot of talk about a pending recession in the US. All I can say is, its going to happen sometime, so don’t panic too much. Stick with your plan, and be flexible depending on the market.
A lot of ink has been spilled over the last 10 years on the state of
the United States’ social security program. For those outside the US, this is
the base retirement investment program, which takes 6.2% of someone’s salary,
and another 6.2% of the salary from the employer, and uses this tax to pay for
current retirees. Most folks think they are paying into an “account” for
themselves, but it is actually sort of a giant Ponzi scheme, where current tax money
is used to pay off outstanding bills. For folks in the FI community, Social
Security is a part of the program, but probably not a major part.
Like so many Ponzi schemes, it is predicated on getting more and more
people/taxpayers to pay into it in order to keep it rolling. Unfortunately, the
folks in the US have not been having 3+ kids to help defer this, and the bill
for the “Baby Boomers” is coming due. The taxes taken in are now not enough to
pay current beneficiaries, and so the system is spending up the excess it has built
up over the past decades. Depending on which accounting system you use, the
year it goes “belly up” is around 2032. Unless something is done, benefits will
be cut to 75%, which could be very serious for the ones who most depend on
This happened previously, and the two sides of the political aisle got
together in the 1980s and came up with a series of items (extend retirement
age, tax benefits, etc.) to fix it, at least for the next several decades.
Well, we are fast approaching the time when we need to do something similar,
but both sides of the US political aisle seem to not want to even discuss it.
Probably because it has been called the “third rail” (i.e. the electrical rail
for trains) for politics – to touch it means death.
Which is sad, because the closer we get to the magical date, the more severe the changes that will need to be made in order to keep it solvent. I recently read a report from the Society of Actuaries (an accounting field that specializes in longevity, insurance, etc.) on potential fixes, and what percentage they could go to in fixing the problem.
Raise the retirement age to 70. Life expectancy is longer, but it could be hard on people with physically demanding jobs or who are disabled. +68% of fix
Reduce the cost-of-living-allowance (COLA) by a certain percentage. A congressional commission felt the consumer price index (CPI) was overstated by 1.1%, meaning the COLA was too high. However, these would be cumulative, so as retirees get older, they fall further behind in purchasing power. +37% fix
Reduce benefits by 5% for future retirees: Puts everyone in the same boat, but would hit low income the hardest. +26%
Increase the number of years used to calculate average wage from 35 to 40 years. This would encourage people to work longer, but would hurt folks who work less than 40 years, especially mothers. +24%
Affluence test: Reduce benefits for those whose total retirement income exceeds $50k/year. This preserves the benefits for most, but discourages savings and encourages people to hide assets. It also changes Social Security from a universal, “all in this together” program, to one of need. Would hurt support for program. +75%
Raise payroll taxes from 12.4% to 13.4%. Would not hurt because real wages are going up, but we may also have to increase Medicare payroll tax (it is in even worse shape) so total taxation would be burdensome. +53%
Increase wages to social security tax: Currently capped at , this would make Social Security a worse deal for higher incomes, further eroding universal support
Invest 40% of Social Security Trust Fund in private investments. Could boost returns with less risk to individuals, but this would be 5% of private market. Stock voting and selection could be politicized. +48%
While there does not seem to be one single answer, the best way to do
this is with a series of 3-5 of these, and this will get us over the 2032 “hump.”
All we have to do is have the political will to do it.
That is the problem.
Sorry to be a bit of a bummer, but we all need to be planning on our
financial future, and for those in the US, this is an important part of it.
Memorial Day is a day in the United States that has been set aside to
honor those who died serving in the armed forces of the US. It was originally
established in 1868 for May 30th, to honor those lost in the US
Civil War. In that war, almost 10% of the adult male population died, so there
wasn’t a family in the country that wasn’t touched by the conflict. Often
families lost multiple members, and the need to mourn the dead and honor the
sacrifice was felt by all family members.
The holiday continued from 1868 to 1970 to be celebrated on May 30th,
no matter which day of the week it fell on. In 1971 it was changed to the last
Monday of the month of May, to enable folks to have a 3-day weekend. I’m still
of two minds here, because I tend to believe by making these kind of changes
(President’s weekend, Labor Day weekend) we weaken the actual reason why we are
having the memorial holiday. That is one of the reason I’m glad that US Veteran’s
Day (to celebrate military veterans) still falls on November 11th.
The date marks the end of World War 1 (the great war) which ended at the 11th
hour of the 11th day of the 11th month. Let’s keep it
For many folks, Memorial Day marks the start of summer. Kids look
forward to summer vacation, and many folks start taking holidays and travel.
For many of these folks, stuck in their 9-5 existence, this is the only time
they get to enjoy their free time. For the FIRE community, we’ve reached the
point where we can take time off when we want, any time of the year. We aren’t
tied down to when/if our boss can let us go.
At least that is where I hope to be shortly (13 months!). We spent the
weekend visiting some of Mrs. 39 Months family. Her brother and sister-in-law
both retired about 5 years ago, and true to form, they’ve now started
volunteering at various spots (their daughter works at a museum, and the
helping out there), exploring new interests (the wife has
joined two bands with her oboe) and traveling (her brothers are both
heading to Nepal this fall to hike to Everest base camp & back).
Today, we’re going to be with friends for a “bad movie night” (I’ve written about it before). Good friends and good times.
Hopefully you are enjoying your time this weekend!
Been traveling down to be with my mother this weekend. She just
recently (3 months ago) lost her husband of 47 years (my stepfather) so I
wanted to be down there to support and show her my love. Like most people, a
major part of who I am is based on her teaching and modeling as I grew up.
She supported my efforts growing up (sports, Boy Scouts, etc.). She
provided a safe home, and after my parent’s divorce, she was the rock that
helped all of us make it through. It was due to her that I was able to follow
my military interest (she got me into West Point with a lot of effort) and
while there, I met the future Mrs. 39 Months. After 33 years of marriage, we
are still going strong.
It was a good weekend, and with one of my brothers, we worked on a
variety of small tasks around the house that she needed done. She stated that
she doesn’t really want “things” anymore for Mother’s Day, birthdays, etc. She
would just like our help and to be able to see us. We got her car cleaned up,
planted some flowers in a bed that she wanted, and generally cleaned out some
leftover items and took them to Charity.
We also discussed her finances and how she was doing. Like most
children of the Depression in the US, she was an avid saver and has a lot of
money in her own right. In addition, she has an annuity from my stepfather, as
well as a partial pension from my stepfather. She is also reviewing whether to
take his Social Security or keep her own (as you know, she is eligible to take
the one that is larger). She is the executor of the estate for my stepfather
and is in contact with his three children, who will inherit the estate. A lot
of details to go through, all while she is dealing with her own issues.
I hope you all had a great Mother’s Day, and made sure to share your
I was listening to one of my FIRE/Finance podcasts this week, and they
discussed an interesting test or quiz you should consider as you prepare for
early retirement. A lot of us who have caught the FIRE bug dream about our time
post-FI, and do a lot of thinking/considering/planning for what we will do,
what our day will be like, and how we will occupy our time. For many of us, it
is the fuel which keeps us going as we accumulate the resources to be
Yet a lot of folks who are in the community have not been able to get
their significant other as “pumped” as we are in reference to this, and often
discussions do not go very far. A lot of our spouses just aren’t that turned on
by finances, Roth conversions, and travel hacking. I know, because I have
constantly tried to involve Mrs. 39 Months in our finances, but she resists.
The best I can get her to do is look at our net worth statement at the
beginning of each year and file it away.
So the podcast suggested you ask your significant other a simple
question, one that they probably could wrap their heads around and provide
feedback on. The question for your partner was “describe a typical day for
yourself post-retirement.” From this, you should be able to tell a lot about
the sort of life you may lead, some potential budgetary points, and how
compatible your plans are with your partner.
Well, for Mrs. 39 Months, I got this:
“Wake up late”
“Spend time in morning to meditate and
“Time to take walks outside”
“Time on my arts & crafts (she plays
the dulcimer and makes leather shoes and jewelry)
For a little background, Mrs. 39 Months worked for a company for 18
years, where her hours were 10am – 6pm. She had time for a relaxing morning,
and she enjoyed it. Eventually the company was bought and moved, and she didn’t
like the commute, so she left. Now she has to head to work at 8am, and she
doesn’t enjoy the earlier mornings, and how it affects her schedule. Thus, her desire
for a more leisurely morning.
It also shows that she doesn’t have a desire for a lot of
money-intensive actions in our retirement. We can probably maintain our current
lifestyle (though I’ll probably bump up the numbers for travel in our budget).
This will help me plan better and keep on track.
So I’m glad I asked, and I hope this will help spark a continued
interest by her in our retirement plans.
I hope you folks are communicating well as you progress!
Its called “They shall not grow old” and it was created by Peter Jackson (Lord of the Rings, The Hobbit, etc.) and the British War Museum to mark the end of World War I.
World War I really was the turning point of the modern world. What Peter Jackson did was take the footage from the British Museum (the old, grainy black & white, silent movies) and digitize it/clean it up so it can be viewed today. He then colorized it and added sound effects/voices so that it is just as good as movies made today.
All the voices are from actual WWI veterans, recordings the BBC had from years ago.
Its a monumental task, and it makes a gripping movie. At the end, Peter Jackson spends about 25 minutes going through all the technology that was used to make it happen – and a great & funny story about how the closing song for the credits was made.
All the reviews are 5 stars on Rotten Tomatoes, and I can’t recommend it enough. It had a short run (one weekend) back in December, but it is back in the US for another short run. Go see it!
As I spoken about before, I’m an engineer in the supply chain field. My primary role is to design warehouse operations and equipment, so that the operation can operate as efficiently as possible and be successful. In order to do this, I need to continue to learn new methods of work, as well as work to better understand existing equipment and work methods.
As part of that, I took a trip the first half of this week to a racking manufacturer in Wisconsin. This company takes spools of steel in long runs and bends them into rectangular tubes (after which they weld them). From there they either punch holes at regular intervals (for uprights) or weld hangers on the end of these rectangular lengths (for horizontal beams).
Once this is done, the run them through an oven to burn off the impurities, let it cool a bit, and then powder coat/paint them prior to running them through an oven again (to set the paint). Once that is done, they stack them up and prepare them for shipment.
These are the storage systems that we are all used to seeing in the big box stores, Ikea, and many retail establishments. They can be setup to hold cases below and full pallets of merchandise above. Depending on how you want to set it up, they can be very complicated, or very simple.
The operation we visited had two sides, one that had been in operation for 30 years, and one recent addition with more modern equipment (5 years). What was fascinating was that the basic processes were the same, but the more modern operation had only 40% of the workers. A lot more of the work (especially the welding) was being done by robots and more of the product movement was done by overhead conveyors and automation.
As an engineer, watching this manufacturing operation, where raw materials come in and finished goods go out, is thrilling for an engineer. I could tour sites like this all day.
So what do you do to keep yourself “up to date” in your profession?