For those that voluntarily ERed or in the process, how do you overcome the fear?
I will ER next year, so I suppose I am not quite in the process. Still, my nature is to be a worrier so maybe my answers will help.
I have been thinking about it for a while but I am always worrying about (unable to overcome the fear of)
1. health insurance cost and its escalation, policy termination if excessively used (I am still healthy at 54 but do not know what future might bring).
In my particular case, this will not be an issue since I chose to be a federal employee, which entails a lower salary with higher benefits. I will have lifetime medical.
2. Deprive myself and my wife of the luxuary of splurging on stuff and knowing that the next check is coming in a week to replace that sum of money spent (I am not living check to check - I believe I am FI). Losing the comfor and the security of having a pay check coming weekly is scary to me.
I plan to have a very conservative asset allocation (45:55 stocks:equities), plus I will have a tiny pension and social security check (eventually). I am planning on a 2% SWR instead of the conventional 4%. What I am thinking about doing is moving some money into a different account at the end of each year (enough to create a balance in that account that would amount to 2% of my entire portfolio). Then during the year I will move 1/12th of that into my checking account each month. If I spend less, I will probably only move enough to bring it up to 1/12th and save the excess.
This way I will be effectively paying myself a monthly paycheck, and I will know that I have plenty for the year with which to do that.
3. Running out of money, eventhough using Fidelity retirement planning program, I should be OK. Still have the fear.
Asset allocation is so important here, as is the fact that I know perfectly well that I can LBYM and get by on my pension and SS if I absolutely have to do that. Having my house paid off is a huge help for me in that it keeps me from worrying so much. I know that I have a place to live, and I know that SS & pension will give me enough to pay for utilities and food and more in the low cost-of-living area where I plan to retire.
I have a monthly expenditure goal that is considerably greater than what I have been spending during the past years. Subtracting my COLA'd social security and pension from this expenditure goal, I come to an amount that I need from my portfolio each month and from that figure out what I need each year. Because my AA is so conservative, I plan to begin ER with 45 times my yearly goal expenditures in cash/CDs/MM and TSP G-Fund, which I believe to be as secure as cash and should increase about as fast as the cost of living increases. The function of the equity funds that I have, will be to provide a balanced portfolio that can withstand a lot of stresses, inflation, and so on.
In other words, in my case it is overkill due to a recent windfall, plus tiny pension plus SS plus conservative AA plus a paid off house that will allow me to sleep peacefully in ER.
Well, other than inflation. That worries me a lot despite 45% equities. Also, changes to the tax structure or to SS worry me. But I seriously doubt that many retirees have the degree of overkill that I am planning. If I end up in trouble then things will be pretty grim for most retirees, and in fact for most people in the world.
As I become used to being a retiree, I will gradually ease into spending more. But I understand that the first 10 years are crucial so 2% SWR will ease my mind at the start.
4. Just a little concern about keeping busy, currently reading "how to retire happy, wild, and free".
Perhaps, for those that chose to ER, 100% your choice, can provide me advice of how to overcome my fear. I am assuming that you went through the same feelings during your decision making period.
Thanks in advance.
mP
I haven't read that book, and thanks for mentioning it. I probably should do that! One thing I am NOT worried about in the slightest, is finding plenty to do so that I don't get bored. As much of a worrier as I am, it is surprising to me that I don't worry about that. I am so curious about the universe and everything in it, that it would take me centuries to explore various facets of science, math, philosophy, and other areas of human endeavor that interest me.
I suppose I am in my decision making period but in my case, I am 99.9999% sure (though I must wait until 2009 for my lifetime medical).
Despite all the reassurances and safeguards the board has provided to me about Vanguard, I am still pretty nervous about having everything but my TSP in Vanguard. But at some point, one has to cut loose of these worries. I suppose that if I found a fund that I like in Fidelity, I might open an account over there and move 20% or so to Fidelity just to worry-proof my portfolio a little more. Probably won't, though.
Believe it or not, I actually worry that the management of Vanguard's Wellesley (where I have 30% of my portfolio) will start dropping acid and lose their minds, or just make bad investment choices. But even if they did, I still have the cash/CD/MM/TSP-G-Fund to rely on.
