No early retirement for these families

[Nords]

That's certainly true, and it's also amplified by paradox: to a large degree, the people who can most afford to take risks with their money tend to be the same people who don't need to.

I still haven't found the answer to that paradox, but I doubt it lies in I bonds or buried coffee cans.

 

[MichaelB]

That's certainly true, and it's also amplified by paradox: to a large degree, the people who can most afford to take risks with their money tend to be the same people who don't need to.

Well, when you live beneath your means, no matter what the amount, you (almost) always have enough no matter what. They can afford to take the risk because they don't take it when they don't need to. Not so much a paradox, more like the outcome of frugal behavior.

 

[freebeer]

Dex,

I was trying to imply that the risks these people incurred by their speculative business investments were relatively modest, to the point that some would scorn to even call them "risks". Every day people venture their lives in order to get to the United States - penniless, homeless, and jobless. In Darfur, among other places, people are starving, and are in danger of murder or rape when the go to fetch water. Mr. Villareal is an American with what appears to be a very nice house, $200 shoes, and who does not look to be in any danger of starvation. I don't criticize him, just point out that his situation would be envied, not pitied, by the majority of people around this planet. As such, to say that the decisions that led him to this were incompehensible, destructive, or a symptom of psychosis - well that just seems like a stretch. He was not frugal, clearly. Maybe even foolish. But our economy is based on starry eyed entrepreneurs, as much if not more than on frugal people. Robert Browning wrote that "a man's reach should exceed his grasp"... which means we should expect to find a lot of people lying at the base of the tree with their butts hurting ;-).

 

[Bikerdude]

Dex,

I was trying to imply that the risks these people incurred by their speculative business investments were relatively modest, to the point that some would scorn to even call them "risks". Every day people venture their lives in order to get to the United States - penniless, homeless, and jobless. In Darfur, among other places, people are starving, and are in danger of murder or rape when the go to fetch water. Mr. Villareal is an American with what appears to be a very nice house, $200 shoes, and who does not look to be in any danger of starvation. I don't criticize him, just point out that his situation would be envied, not pitied, by the majority of people around this planet. As such, to say that the decisions that led him to this were incompehensible, destructive, or a symptom of psychosis - well that just seems like a stretch. He was not frugal, clearly. Maybe even foolish. But our economy is based on starry eyed entrepreneurs, as much if not more than on frugal people. Robert Browning wrote that "a man's reach should exceed his grasp"... which means we should expect to find a lot of people lying at the base of the tree with their butts hurting ;-).

I think the issue I have is that the article was written to elicit sympathy for the people who have had their retirement plans altered by the current economy. The choice of subjects left me less than sympathetic. And maybe, in reality, the subjects do not want any.

 

[calmloki]

Starting a business has many of the same rules of thumb as investing (and gambling, for that matter): don't put more money into it than you are willing and able to lose.

So Kipling wasn't really thinking of investors?

"If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss";

Or maybe If is good poetry but poor investment advice.

 

[dex]

Dex,

I was trying to imply that the risks these people incurred by their speculative business investments were relatively modest, to the point that some would scorn to even call them "risks". .

Txs - I understand your point now - and agree.

 

[ziggy29]

Well, when you live beneath your means, no matter what the amount, you (almost) always have enough no matter what. They can afford to take the risk because they don't take it when they don't need to. Not so much a paradox, more like the outcome of frugal behavior.

I don't know. It is a paradox in some sense. Plenty of people who don't NEED to take the risk do so anyway, largely because they are willing to accept the risk of loss knowing that if their "bets" were wiped out, they'd still be okay. Maybe they have millions in non-risky stuff. Maybe they calculated that the combination of a COLA'd pension and SS would be more than enough to live on. But the point is this: they have the *ability* to assume the risk if they were up to it, but unlike most of us middle-class 401K-dependent schmucks, they don't NEED to take the risk if they'd rather not.

 

[Lsbcal]

It's a jungle out there. No really, it is! I mean it. If you don't find a way to take care of yourself, the world will pass you by. It's not easy but it's a (quality of) life or death situation.

Retirement planning is a serious challenge with much of your life on the line. Put all your intelligence, judgment, creativity, and hard work into it and maybe, just maybe, it will pay off.

But what if you don't have much in the way of intelligence, judgment, or creativity? What if your luck doesn't hold out? What if you don't believe in yourself and give up before you start? You may have to work until you die. It's a jungle out there ...

My Uncle Bob died at 83. He was not a planner and lived in Reno during the last years of his life. He liked to gamble a bit and had a modest apartment there with a little Schnauzer dog. He never had a big paying job and worked most of his life as a printer (there was also a failed business venture in there). He got along great. I think this was because he was not critical of others and just accepted you as a decent person. Also his alcoholic wife died early enough that he could enjoy his old age. Everybody liked him because he was so non-critical. People did not feel like they had to be great successes in his eyes to be a friend. Again, he was not a planner and yet he had a decent life.

Now his nephew is a big planner, is critical of himself and others, and is always worried about money even though he has probably a hundred times more then his uncle ever had. He's trying to figure out how to be more like his uncle nowadays .

 

[Walt34]

I am not a psycologist, but I would almost have to label it some sort of mental psycosis. To be that disconnected from cause and effect completely baffles me.

I have several relatives who are like this. One is a notorious shopaholic who sent pictures of her foot-high ceramic chicken, hates her menial job, but who three years ago was critical of us because we elected not to join her on a cruise that would have cost $2k. Another lives on SS but is $180k in debt, facing foreclosure, and when last heard from was applying for food stamps.

When I declined to bail her out (she has a long history of fiscal mismanagement, and doing so would merely forestall the inevitable) her comment was "Well, when one door closes another opens". She simply does not make the connection between her own actions and the consequences.

I will never understand these people.

 

[ikubak]

I think we're narrowing in on the source of the problem-- he's afraid to retire before his office clothes wear out.

But if he's going to fix Social Security and Medicare with his payroll contributions, then I can't complain.

Come to think of it, I don't buy $200 shoes like I used to either....oh wait, I never have bought a $200 pair.

The media is always going to find those riches to rags stories in a time like this. They aren't going to interview me. I'm not news worthy. Not much has changed except for losing $100,000 or so of net worth and the wife's sales job producing 20K to 25K less per year. Those numbers might seriously damage some folks living on the edge, and that's the kind of story the media wants during tough times. It's had very little effect on us since we were already living off a fraction of our income.

 

[TargaDave]

I couldn't agree more. But we have to remember that people who frequent this board are more likely than most to have taken control of their own financial situations in order to actively engineer their retirement.

True but people who frequent this board also tend to be the exact opposite of your typical entreprenuer. Lot's of gov-corp slave types working in one niche their entire career, and becoming fixated on early retirement.

You could make a case that most companies in the world, and our whole standard of living for that matter, is based on entreprenuers risking their personal wealth on starting new businesses. Many fail but enough suceed to fuel the economic growth that allows us the opportunity to retire early in the first place.

 

[Lsbcal]

True but people who frequent this board also tend to be the exact opposite of your typical entreprenuer. Lot's of gov-corp slave types working in one niche their entire career, and becoming fixated on early retirement.
....

This has my vote for stupid statement of the week.

 

[Khan]

True but people who frequent this board also tend to be the exact opposite of your typical entreprenuer. Lot's of gov-corp slave types working in one niche their entire career, and becoming fixated on early retirement.

You could make a case that most companies in the world, and our whole standard of living for that matter, is based on entreprenuers risking their personal wealth on starting new businesses. Many fail but enough suceed to fuel the economic growth that allows us the opportunity to retire early in the first place.

Strange that people on an early retirement board would be fixated on early retirement.

 

[Helen]

This has my vote for stupid statement of the week.

Actually, TargetDave's quote fits me perfectly.

 

[SarahW]

Ditto.

 

[jdw_fire]

I don't know. It is a paradox in some sense. Plenty of people who don't NEED to take the risk do so anyway, largely because they are willing to accept the risk of loss knowing that if their "bets" were wiped out, they'd still be okay. Maybe they have millions in non-risky stuff. Maybe they calculated that the combination of a COLA'd pension and SS would be more than enough to live on. But the point is this: they have the *ability* to assume the risk if they were up to it, but unlike most of us middle-class 401K-dependent schmucks, they don't NEED to take the risk if they'd rather not.

i dont see the paradox at all, by statements made earlier about "not risking more (be it in business, hi risk investing or gambling) then you can afford to lose" by definition only people who dont need the result of the risk can afford to take it. that makes it an axiom not a paradox.

 

[Westernskies]

True but people who frequent this board also tend to be the exact opposite of your typical entreprenuer. Lot's of gov-corp slave types working in one niche their entire career, and becoming fixated on early retirement.

Hey, if the shoe fits, wear it (but, remember; don't spend $200 for them)

 

[W2R]

That's certainly true, and it's also amplified by paradox: to a large degree, the people who can most afford to take risks with their money tend to be the same people who don't need to.

I can see Ziggy's point and I think it is a good one. At least, I can relate to it in my own attitudes at various stages in my life.

I have always been very risk-averse by nature, but from late 2003 through 2006 I was 55-58 years old and way, way behind in my retirement preparation (due to circumstances that are irrelevant to this post), and 100% in equities. It was an all-or-nothing bet, and felt almost like putting all my money on red at the casino. Luckily we had a bull market during that time, and I "won", at least enough that I was able to envision actually retiring. Once that was the case, I pulled back to a more conservative asset allocation.

So, when I could not afford to lose I bet the farm even though I couldn't afford it. I NEEDED to take these risks even though I did not have the ability to withstand losses, should they have occurred.

When I could better afford it my asset allocation was more conservative because even though I could afford some losses, I didn't NEED to take those risks.

 

[Zoocat]

I can see Ziggy's point and I think it is a good one. At least, I can relate to it in my own attitudes at various stages in my life.

I have always been very risk-averse by nature, but from late 2003 through 2006 I was 55-58 years old and way, way behind in my retirement preparation (due to circumstances that are irrelevant to this post), and 100% in equities. It was an all-or-nothing bet, and felt almost like putting all my money on red at the casino. Luckily we had a bull market during that time, and I "won", at least enough that I was able to envision actually retiring. Once that was the case, I pulled back to a more conservative asset allocation.

So, when I could not afford to lose I bet the farm even though I couldn't afford it. I NEEDED to take these risks even though I did not have the ability to withstand losses, should they have occurred.

When I could better afford it my asset allocation was more conservative because even though I could afford some losses, I didn't NEED to take those risks.

All I can say is, Wow. I'm SO GLAD it worked out for you, W2R. I would have been in the same position if my divorce settlement hadn't worked out well, but it would have been in 2004-2008. I might have been one of the people in that article.

 

[Sarah in SC]

True but people who frequent this board also tend to be the exact opposite of your typical entreprenuer. Lot's of gov-corp slave types working in one niche their entire career, and becoming fixated on early retirement.

You could make a case that most companies in the world, and our whole standard of living for that matter, is based on entreprenuers risking their personal wealth on starting new businesses. Many fail but enough suceed to fuel the economic growth that allows us the opportunity to retire early in the first place.

I have never worked for the govt or a big corp. Always entrepreneurs. I know enough about how that works to chose not to be in business for myself but I am quite happy working for those entrepreneurial types.

 

[Khan]

I have never worked for the govt or a big corp. Always entrepreneurs. I know enough about how that works to chose not to be in business for myself but I am quite happy working for those entrepreneurial types.

I worked at a second job for a while (waitress in a pizza place) and watched the idiot running it do everything wrong and run the place into the ground (and that was not just my opinion).

 

[Free To Canoe]

What a Great Thread

So Kipling wasn't really thinking of investors?

"If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss";

Or maybe If is good poetry but poor investment advice.

What a great thread. Much better stories in the thread than the OP story. Always great when you can slip a little Kipling in there.

This made me think of a story of my neighbor's retirement. He was retired nicely. Then he inhereted some money. He decided to try business again. Lost the inheretance and his house (and I assume his ability to retire). I was shocked when I heard what had happened.

Free to canoe

 

[REWahoo]

He was retired nicely. Then he inhereted some money. He decided to try business again. Lost the inheretance and his house (and I assume his ability to retire). I was shocked when I heard what had happened.

Another "senior entrepreneur" with the opportunity to punt...

 

[FIREd]

I guess my wife and I fit in the "corp slaves" category. My In-laws always had grand dreams of striking it rich and after years of slaving at a (well paying) j*b, FIL put it all on the line at the age of 58 and started his own business. It was, according to him, the only way he could make enough money to be able to retire one day (which was not entirely true as I found out later; Between his/her SS and their savings they could have grossed about $60K annual in retirement). His ego ballooned as he met some early success. At the time, he used to make fun of us "corporate drones" and of our "lack of vision, drive and entrepreneurial spirit". Of course, the story does not end well. Broken dreams, divorce, financial losses... When my in-laws divorced in their early 60s, their networth was lower than ours despite FIL working for 40 years at a job paying more than our 2 jobs combined. Sometimes being a corporate slave has its perks.

FIL is back at it again, trying to setup a multi-million dollar company in a midst of a severe recession. He has no capital to contribute to the new venture and depends entirely on other investors' good will, which of course is in short supply right now. But he's still talking a big game... I wish him luck though. I don't want him to become destitute and move permanently in our guest room.

 

[haha]

I guess my wife and I fit in the "corp slaves" category. My In-laws always had grand dreams of striking it rich and after years of slaving at a (well paying) j*b, FIL put it all on the line at the age of 58 and started his own business. It was, according to him, the only way he could make enough money to be able to retire one day (which was not entirely true as I found out later). His ego ballooned as he met some early success. At the time, he used to make fun of us "corporate drones" and of our "lack of vision, drive and entrepreneurial spirit". Of course, the story does not end well. Broken dreams, divorce, financial losses... When my in-laws divorced in their early 60s, their networth was lower than ours despite FIL working for 40 years at a job paying more than our 2 jobs combined. Sometimes being a corporate slave has its perks.

FIL is back at it again, trying to setup a multi-million dollar company in a midst of a severe recession. He has no capital to contribute to the new venture and depends entirely on other investors' good will, which of course is in short supply right now. But he's still talking a big game... I wish him luck though. I don't want him to become destitute and move permanently in our guest room.

In America we sometimes feel that entrepreneurial successes are somehow superior to putting in one’s time in large organization. At the same time, we tend to disparage those whose fail in these endeavors. There is a lot of "I told you so" in some of the posts in this thread.

Likely as not the risk taking urge, or the inability to function smoothly and happily in a more bureaucratic structure is mostly beyond the control of the individual, an accident of genes and perhaps upbringing. Just like the guy who becomes a Navy Seal is a very different guy from the careerist serviceman who always has his eye on advancement and eventual retirement.

Similarly the risk avoidance found in many people who pursue organizational careers is usually not a choice, it's mostly given by their genes.

Ha