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"Financial Security"
Old 04-15-2015, 11:57 AM   #1
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"Financial Security"

Term we hear often. Some people lament/position to retire and have misgivings around "Financial Security". Brought up this question in my mind:

Are you more financially secure before retirement or after?

Of course it depends on a) you job/career/company/employ-ability and b) your portfolio and how it is invested.

So there is always the risk of losing your job, and there is always the risk of your portfolio tanking, but what do you think the relative risks are?

For me, high tech corporate life has been good, but it has become less and less secure in my situation. I just hope no bombs drop in the next 22 months.

A well invested portfolio (size assumed to be sufficient for lifestyle) should be relatively secure, but never 100% unless you mattress bank. I think I will be more financially secure in retirement....... and I'll get to do what I want to do....

Thoughts?
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Old 04-15-2015, 12:04 PM   #2
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Definition from Wikipedia:
Financial security may refer to:

Economic security, the condition of having the resources to support a standard of living now and in the foreseeable future
Security (finance), a financial negotiable instrument
Early in life, usually one has limited financial resources but much human capital. After retirement, one has little human capital but (hopefully) more financial resources. Whether those resources will be sufficient to fulfill the above definition or not depends on many factors, which have been debated endlessly here over the years. The only certainties are death and taxes.
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Old 04-15-2015, 12:08 PM   #3
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I think you would always be more secure to not retire if you are primarily depending upon an investment portfolio. If your portfolio goes down by 90%, you can just keep working. If you are fired, you find another job without the gap in employment and possible deterioration in skills. If portfolio not massacred like that, you could draw on it to enhance your standard of living.

Obviously, the utmost in security is not my primary concern (Nor is it for anyone on this forum, I suppose!). "Good enough given the models and our ability to shift our spending choices" will suffice. :-)
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Old 04-15-2015, 01:02 PM   #4
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Originally Posted by doneat58 View Post

A well invested portfolio (size assumed to be sufficient for lifestyle) should be relatively secure, but never 100% unless you mattress bank. I think I will be more financially secure in retirement....... and I'll get to do what I want to do....

Thoughts?
A mattress bank is not 100% secure. If you literally mean hiding cash at home, you run the risk of theft or fire. If you are mean putting it in no-risk, very little return investments, you still risk high inflation eroding its value.

As far as your overall question goes, it would seem to me that the most secure point is just before you retire, because you (hopefully) have all you need to retire without a job, yet you still have a job bringing in more income, if you chose to keep working and sock away more. Once you retire, you've lost that income source. Before that point, you probably had a little less saved.

You could also argue that if you reach very old age and still have a good nest egg that more than meets any foreseeable future expenses that you are more secure, because you've most likely survived just about any unexpected events that would ruin your plan. If you're 100 and still have $1M your probably more secure than age 55 with $2.5M.
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Old 04-15-2015, 01:07 PM   #5
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I'd also add that trying for absolute financial security leads to one more year (of working), year after year. Don't stress about it (if that was your point). Once I was confident in my expense estimates for retirement, and had a reasonable buffer over what Firecalc and other tools told me was a safe amount to retire on, I felt secure. Certainly I can come up with a few scenarios where my plan fails, but those are unlikely enough to not lose sleep over.
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Old 04-15-2015, 01:38 PM   #6
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May date is locked, in part due to a lump sum pension payout that my employer will give me, one that decays quickly if I stay on. That and I am very happy with my numbers, had them blessed by a competent adviser (AND my wife!). No stress here.

But I found it interesting that often the talk is about the (in)security post retirement, what will the market do, etc. when I think there is often as much risk when we are employed. Individual case dependent of course.

I can see your points about those "moments in time" and relative security then as well.
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Old 04-15-2015, 01:57 PM   #7
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There are probably too many unknowables to answer doneat58's question about "before vs after" retirement security. I paid the price to increase my chances of security "after." I chose a megacorp which offered a pension and and a good 401(k). True enough, they futzed with the pension AND the 401(k) over the years, making each one less valuable upon retirement. Still, with those two "legs" of the milking stool (er, retirement plan) more or less under control, plus decent SS waiting in the wings, I'm voting for (for me) AFTER. Still, so many things can change or go wrong. For instance, megacorp is changing (for the worse) retirement medical insurance. Still, I'll have insurance - just pay more of it myself (again).

My original back-up plan was to w*rk beyond when I was technically FI. That way, I'm hoping I covered the bases pretty well to insure security "after." I guess we'll see. Ask me in 20 years (if I'm still here) since YMMV.
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Old 04-15-2015, 02:13 PM   #8
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Hard to explain, but the "age factor" is important to the "sense" of financial security. It's much easier to project needs when the lifetime horizon is 10 years, rather than 30 or 40 years. In our case, being able to look at a selldown of assets if necessary, and with the expectation that changes in government policy will be gradual.

If looking at averages, to determine what the future may bring, a look at the DJIA chart over a 30 or 40 year span, can indicate the possible volatility. Two milion dollars in value might have been halved in 2008/2009. Firecalc offers a hi/low average computation, but watching a drop of more than 50% in a year is a point in time reality. A good friend saw a $700K loss in his portfolio during the year after he retired back in 2009. Yes, he recovered and then some, but it was a lesson learned.
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Old 04-15-2015, 02:21 PM   #9
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Well I would plan for what I see in a 30-40 year DJIA average and not what was seen in 2008-2009 timeframe which is a highly unlikely event (I'm sure there are great threads on that here!). And regardless, my go to-buffer would always be to adjust COL downward should things drop beyond my expectations. As I told my wife, "I'll live in a van down by the river before I go back to work!!"
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Old 04-15-2015, 03:09 PM   #10
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Some of us are fortunate to have retired shortly after 2009 and have reaped more gain in the intervening years than we have spent, leading to a healthy increase in net worth after expenses. As we know this cannot continue forever, we have not increased our expenditures to match 4% of portfolio
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Old 04-15-2015, 03:23 PM   #11
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Are you more financially secure before retirement or after?
Definitely after. At this point all I have to do to keep the pension coming is have a pulse. Before retiring there were a lot of things that could have put a stop to that happening, like getting sick or injured.
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Old 04-15-2015, 03:28 PM   #12
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Quote:
Originally Posted by doneat58 View Post
Term we hear often. Some people lament/position to retire and have misgivings around "Financial Security". Brought up this question in my mind:

Are you more financially secure before retirement or after?

Of course it depends on a) you job/career/company/employ-ability and b) your portfolio and how it is invested.

So there is always the risk of losing your job, and there is always the risk of your portfolio tanking, but what do you think the relative risks are?

For me, high tech corporate life has been good, but it has become less and less secure in my situation. I just hope no bombs drop in the next 22 months.

A well invested portfolio (size assumed to be sufficient for lifestyle) should be relatively secure, but never 100% unless you mattress bank. I think I will be more financially secure in retirement....... and I'll get to do what I want to do....

Thoughts?
I think that a lot of people "feel" financially secure when they have a job. But if they stop to consider that most jobs can disappear at any time, they get a better feel for their true financial security - which might be pretty thin! In other words - most of the time it is an illusion.
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Old 04-15-2015, 04:15 PM   #13
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Are you more financially secure before retirement or after?
As I approached the end of my working years I had most of my FIRE portfolio in place, 30+ years of SS paid in, pension and retiree healthcare credits earned and I had a regular paycheck plus MegaCorp benefits coming in. When I stopped working, I had only the FIRE portfolio, retiree healthcare and the promise of a future pension and SS check. So....... I guess I'd have to say I felt more financially secure before retirement than after. OTOH, despite a few moments of concern during the Great Recession, retirement has not been a financially insecure period for me.
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Old 04-15-2015, 05:04 PM   #14
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I am in a good, not great, position. I have a lifetime pension and paid medical. It's a happy feeling to have that pension in my account every month. At 62 (I'm 55) I will take my SS though because of my pension I will only get a portion of it. I'm still struggling though as my spending habits are not reflecting what my income is now. So after a year of retirement I am figuring it all out. I see what I need to do to feel more secure - have more savings, don't spend like a drunken sailor - getting there.
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Old 04-15-2015, 07:19 PM   #15
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....Are you more financially secure before retirement or after?....
My human capital has declined with 3 years out of the work force.... if I had to go back to work I probably could but for less than half of what I was making when I retired but I had a hugely sweet deal in my last job.

OTOH, investment performance has been outstanding in the last 3 years so my nestegg today is 125% of what it was when I retired despite 3 years of withdrawals for living expenses.... no pensions or SS online yet... and spending almost $50k on a new garage/bonus room.

Net, net... probably more financially secure due to favorable sequence of returns (so far).
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Old 04-15-2015, 07:43 PM   #16
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Definitely after. At this point all I have to do to keep the pension coming is have a pulse. Before retiring there were a lot of things that could have put a stop to that happening, like getting sick or injured.
+1, same with me. Before I retired, not only were there the risks you mention, but there was the risk of being transferred to a location that I did not want to go to, which would have meant making a difficult decision (whether to go, or retire early). More than a few folks in our organization ended up being involuntarily transferred to a new location several years before their planned retirement, which was not much fun for them. Most chose to go, but commute home on weekends, making their life a real pain until the time came for retirement. I worried about that happening to me, but fortunately it did not. So I feel much more secure now........the check comes every month, and all I need to do is stay healthy and enjoy my freedom.
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Old 04-15-2015, 07:49 PM   #17
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I definitely feel more financially secure after FI/ER than before while working. Security from a job is very tenuous. One can be be let go at any time for any reason ( particularly working in the private sector) and then it might be very difficult to find another job that pays as well, in the same general location etc etc. Since FI/ER I have many, many companies throughout the world send me regular checks (thru CG/Dividends) in addition to the US Govimint sending me SS. I would say my financial security is much higher now than it ever was while working for a living.
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Old 04-15-2015, 08:35 PM   #18
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Quote:
Originally Posted by doneat58 View Post
Term we hear often. Some people lament/position to retire and have misgivings around "Financial Security". Brought up this question in my mind:

Are you more financially secure before retirement or after?


Thoughts?
I guess I'll answer your question like this. I worried a "lot more" about financial security before I retired. I was making a very good salary the last 10+ years I worked (well into XXX,000) and was always "counting my money" and wondering when I'd have enough to retire.

Once I retired, those worries went away almost overnight. Maybe it was all the years of calculating, planning and savings that had satisfied me once I reached my personal financial goals. Maybe it was because everything was new (house, cars, etc) when I retired and paid off 100%. (except my collectables, they are old, but paid for) Maybe it is because I now invest very conservatively, which I did not do when I worked. Maybe it's becasue I now realize that I won't live anywhere near as long as my financial retirement planning basis was projected for. I had planned for 100. I now hope to make it to 85 or maybe even 90, and that will probably be pushing it. Maybe it's because I'm not spending as much as I had planned, even though I don't intentionally try to live below my means.

I'm not sure why but I don't worry much about money since I retired and trust me, while sometimes things do still keep me up at night, it's not because I worry about money.
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Old 04-16-2015, 05:24 AM   #19
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Originally Posted by doneat58 View Post
Term we hear often. Some people lament/position to retire and have misgivings around "Financial Security". Brought up this question in my mind:

Are you more financially secure before retirement or after?

Of course it depends on a) you job/career/company/employ-ability and b) your portfolio and how it is invested.

So there is always the risk of losing your job, and there is always the risk of your portfolio tanking, but what do you think the relative risks are?

For me, high tech corporate life has been good, but it has become less and less secure in my situation. I just hope no bombs drop in the next 22 months.

A well invested portfolio (size assumed to be sufficient for lifestyle) should be relatively secure, but never 100% unless you mattress bank. I think I will be more financially secure in retirement....... and I'll get to do what I want to do....

Thoughts?
I worry a lot less about finances after ER. Maybe in 20 years I may worry more depending on what has happened. Before ER, I felt I could lose my job at any moment. Never felt secure.
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Old 04-16-2015, 06:37 AM   #20
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For me it was a toss-up but only because DW and I carried large term policies during our working years. Our theory was if one of us died the other should be able to quit work and continue living the lifestyle we had achieved as compensation. (That could also be a big temptation for the wrong person I guess) So the intellectual capital coupled with the insurance backup left us covered as well as could be. Without the insurance backup I think people are less secure during their working years until they have built up an FI sized portfolio/alternate income streams. Once the portfolio is there people are more secure while working since they are better situated to absorb a huge setback (like the 2008 recession).
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