How many are simply lucky?

[TromboneAl]

We've had this conversation a few times:

DW: We sure are lucky to be in our situation.
Me: We are in this situation because we are smart.
DW: We're lucky to be smart.

 

[HBH]

Lucky? Maybe some, but......

Similar to Kumquat, except my options went from $.19 to $40.

I started with computers in 1969, and the lucky part was that I really enjoyed the work that I did.

I can remember around 1970 when I was 23 I was the systems programmer working with an IBM 360/40. I was in the computer room at 1am because I was installing a new operating system and other software.

I thought to myself, here I am, with a multi-million dollar toy all to myself, installing and playing with all of this new software, having the time of my life, and THEY'RE PAYING ME FOR THIS?

The point is that no matter what you do, if you enjoy it to that level, then you're REALLY lucky. If it pays as well as my job did, that's an extra bonus.

I got my stock options because I took a chance in the late 1980's and went with a start-up software company.

Lucky? Well, I wouldn't have had that opportunity if I hadn't had all of the experience and work ethics from the years before. I was refered by a person I had worked with.

After a few years I took a chance by excersizing those options and later, when the company went public, I realized a 16000% increase.

Lucky? When I exercized those options I used most of my retirement money. The company was still private and doing well, but was far from a sure thing.

I sold the stock as soon as the company went public, just before the tech-bust in 2000.

Lucky? Just before I started selling, I calculated that if I sold then, IT WAS ENOUGH! I really thought the stock would keep going up, but I was willing to take the chance of forgoing that possibility of even more profit to guarantee my gain and diversify.

The common thread is that I took a chance. Doesn't that pretty much go along with the standard risk/reward concept?

HBH

 

[scrinch]

Thank you Master Blaster. If you hadn't changed the scale I would have. Lies, damned lies, and charts!

 

[grumpy]

I don't think luck was much of a factor in my case. I joined the federal workforce right after college. A big factor in my decision was the great benefits including excellent health insurance and Cola'd pension at age 55. It was my intention to retire at 55 from day one. We lived below our means. Bought a small house in one of the less upscale areas around D.C. Got our kids into great "magnet" schools in a county with mostly lousy public schools. Sent both kids through college and daughter through grad school. Drove cars til they died (DW drove her VW bug for 17 yrs.) and always paid cash. Never any debt except mortgage (paid off two years before I retired via extra principal payments). Max'd out contributions to tax deferred accounts (403B, TSP, IRA's). Used lowest cost investment vehicles (DRIPS, Vanguard, T.R. Price). Never got sucked into the dot.com craze so our portfolio survived Oct. '97 with a minimum of damage. I did financial management for a living. If I could keep the Hubble Telescope project solvent through a 40% budget cut, I could keep the family finances on track to early retirement. DW stayed home with the kids for 9 years and then went back to teaching. Her last four years before retirement were half-time. I had run the numbers and we could afford for her to downshift at that point.

Now we are in a new (paid off) house in a wonderful resort type 55 or better community and are loving our lives. I still tweak our investments just to keep my hand in but even if the market fell 50% we would see little impact on our life style as our SWR is quite low and only goes to pay the extras like travel and luxury items.

Did things break the right way for us? Yes, but we also have had our share of bad breaks but careful and conservative planning let us achieve our goal anyway. LIfe is full of choices. While our friends were buying the big houses and fancy cars we were sticking to our plan. They are still working and will be for many more years. They also seem happy with their lives but that is not the way we chose to do it.

I guess my conclusion is that bad luck can certainly derail ER plans, it doesn't require good luck to achieve ER, just careful planning, determination and making the right choices.

Grumpy

 

[jrwooden]

As someone once said:

No amount of planning will ever replace dumb luck

Or if you prefer:

Luck: what happens when opportunity meets planning

Jim

 

[youbet]

Thanks for posting the chart...... an excellent reminder.  Since I was primarily a DCA and buy and hold guy over that time period, things worked out.  I got "lucky."

Trying to understand what things will be like going forward, the unknown, is the root of many of our discussions on this board regarding SWR.  Will the future operate within the boundaries drawn by history?  Or will things rise to new highs or fall to new lows?  Will 4% continue to be a reasonable number?  IMHO, it's a crap shoot.

 

[laurence]

It's an interesting thought. Of course we are all lucky to not be born in the Darfor region of the Sudan running from the "Dark Horsemen". But all around me at work are high income white males with educated parents who sent them to good University who got good degrees (Engineering, Finance, IT, CS) at these good Universities, and 90% say things like, "I'm goind to work until I'm 70." "I can't retire, what are you crazy?" and "Aw, income doesn't matter, whenever you get more, you always manage to spend more."

So yes, we got a "free ride" up to a certian point, but we do deserve some credit for taking advantage of all those, "advantages".

 

[laurence]

Thanks for posting the chart...... an excellent reminder. Since I was primarily a DCA and buy and hold guy over that time period, things worked out. I got "lucky."

Trying to understand what things will be like going forward, the unknown, is the root of many of our discussions on this board regarding SWR. Will the future operate within the boundaries drawn by history? Or will things rise to new highs or fall to new lows? Will 4% continue to be a reasonable number? IMHO, it's a crap shoot.

In a way it's a crap shoot, but remember, that number survived retiring a month before the '29 stock market crash, and all the other horrible bear markets out there. If we have something worse than the great depression, you'll be worried about more than your withdrawal rate!

 

[Eagle43]

I was lucky that I joined the military in 1960 and stayed 21 years.  That brought a pension and medical insurance.  I was lucky that I joined MegaCorp in 1981 and stayed 22 years.  That brought another pension, and they had/have a very nice 401k (which I was lucky or smart enough to use).  I am/was smart to LBYM.  Now, if I'm really lucky, I will outlive all those supervisors and corporate climbers and carpe diem while I'm doing it.  

 

[astromeria]

Most startups are not brilliant, lucky, or obviously smart choices. My husband worked at 3 startups: 1 of them went under, 1 of them is coasting, and the 1 where he made significant dough was one of the most miserable jobs he ever had--worse than the loser startups. I was smart & hard-working enough to impress a director of engineering and doc architect so when they went to a startup, they recruited me. Couldn't've been the bonus the architect got for my hire--nah. I took a pay cut to go there--very wise of me. Anyhow, several friends went to startups about the same time I did (late 90s), and very few made any money from their equally smart decisions.

I think drive has more to do with financial success than hard work or brains. I've seen hard workers laid off while (relative) slackers kept their jobs. I've seen smart workers ostracized while yes-men got rewarded. But people with strong drive to achieve their goals are not often thwarted over the long haul.

 

[youbet]

that number survived retiring a month before the '29 stock market crash

Indeed it did Laurence.  And I have no issue with your outlook for the future, it's as good as any other, and certainly as accurate.  Just remember that the '29 crash era was not the worse time to retire.  The worse time was the early 70's.  And the new "worse time" could be sometime in the immediate future.  Or, the new best time could be in the immediate future.

The rate of change in how the world operates is accelerating.  Our economy, lifestyle and well being could change as much in the next two or three decades as it did in aggregate since our country was founded.  So I try to keep my eyes open for things to possibly operate outside of the historically conventional bounds we're all accustomed to.

Having said that, I'm definitely not postponing my ER which will begin in six weeks.   But I am operating with the assumption that I'll likely see things change dramatically, perhaps outside of historical bounds, even though my life expectancy is under three decades.

 

[laurence]

right, I'm completely open to the idea that "things will be different this time", but after accepting that and realizing it wouldn't change my plan, I've excluded it from my thinking. So if you are still planning on retiring in six weeks and are just planning on keeping your eyes open, we're on the same page.

 

[roadkill]

I'm glad you had the disiplne to do it.  I probably could have done it alone (nothing like the teaching of depression age parents),  but DW..........   If you are my age, I hope you enjoy the next 58 years.

Thanks! Part of the disipline came from the fact that I grew up on a farm and did not have a lot of extras as a kid. My parents had to make the money last. Once I entered professional life, the frugality came with me.  Took some effort to get DW on board early on, but it worked out quite well.

 

[MJ]

As someone once said:
No amount of planning will ever replace dumb luck
Or if you prefer:
Luck: what happens when opportunity meets planning
Jim

I agree. For me, a lot of what has happened to me was luck (or meant to be) mixed with a bit of moxie.
I join the legit workforce in my late 20's and didn't have any retirement plans. I went from being a classically trained musician making very little money to a self taught commercial photographer again making little money. I was looking for photography jobs in the NYT and happened to notice billions and billions of stars computer jobs. Being cheap frugal, I probably would have never paid for an expensive computer course but "luck" would have it , I found a FREE 3 month intensive computer course in Spanish Harlem listed in my unemployment claims office. The course was sponsored by IBM and other top computer corporations and the rest of my "luck" was history.

 

[2B]

I think the comments up to this point pretty much sum it up for all of us.  

Fate or random chance put us in a place with opportunity.  Some of us had more "opportunity" than others but we all know people that grew up with the same opportunities that will work until the day they die (not by choice).

For some of us that was the ability to make a decent income and save.  Some of us received windfalls from employers or in selling a business.  All of us benefited by the "luck" of the 1982 - 2001 bull market.  

However, all of us know people that made more than we do/did, received more in stock options than we did or sold their business for more than ours.  They were around during the same bull market.  Many of these people are dead broke or worse because they spent it all.

Make intelligent choices and you too can be "lucky."

 

[haha]

Also note that with the exception of a few "bumps" that the gains are nearly linear over time.

I guess a lot  can be hidden by the term "nearly linear", because this chart is not. There are easily differentiated time segments with more or less linear slopes, but the slopes of the line drawn through given segments will vary drastically from slopes of other segments.

Ha

 

[MasterBlaster]

Thanks for stating the obvious...

What I meant was that there is a pattern to stock market growth that is somewhat consistant over long time periods. So on a log scale plot the {rate of} growth is nearly constant over long time periods and can be plotted in a nearly linear fashion.

Also note from the chart that aparently the market is back to a place where it can (hopefully) grow at it's long term trend. Based on the chart the market appears to be fairly valued.

 

[farmerEd]

It's an interesting thought.  Of course we are all lucky to not be born in the Darfor region of the Sudan running from the "Dark Horsemen".  But all around me at work are high income white males with educated parents who sent them to good University who got good degrees (Engineering, Finance, IT, CS) at these good Universities, and 90% say things like, "I'm goind to work until I'm 70." "I can't retire, what are you crazy?" and "Aw, income doesn't matter, whenever you get more, you always manage to spend more."

So yes, we got a "free ride" up to a certian point, but we do deserve some credit for taking advantage of all those, "advantages".

yes, hard work helps...and the harder you work, the more luck you seem to get...BUT, lets not forget however, the being born in America(or another 'advanced' nation), being born white, being born male, being born healthy in mind and body and being born with either college educated parents or parents that understood the importance of education for their kids are all things that are pure dumb luck and you can't take any credit for yourself.

Being born with some or all of those things, imo, get you at least to second or third base right off the bat...

There are plenty of people who started out in the batters box and thru hard work managed to hit a double or even a triple, and STILL aren't as far ahead as those that made it to "home" -after being born on third base.

Its those people, those that were born on third, hit a single and think they managed a home run and then spend the rest of their lives looking down their noses at all those slobs that are "only" on 1st 2nd or 3rd base that bug me the most.


So everyone should enjoy their good fortune...but don't let your heads get to big 

 

[razztazz]

I have to agree with Nords that the harder a person works the luckier they become. That's what happened in our case. kz

That's what happened in "our" case? Unless it is absolute certainty to happen to everyone in every conceivable and inconceivable circumstance no matter what... all you're saying is it's nothing but luck.

Someone else said " I belive it was planning and hard work "in that"... in other words he redefined pure luck on the fly just to rationalize his statement and personal
position.

How about all the smart people who plan and work hard? Harder than you? Then something bad happens and they get wiped out? Then tehey will be called stupid or lazy or something. You plan and work and it all works out well in the end (luck) and people like to grab credit for controlling the universe.

 

[tiredofwork]

Also note from the chart that aparently the market is back to a place where it can (hopefully) grow at it's long term trend. Based on the chart the market appears to be fairly valued.

By drawing a couple of trend lines it looks to me like being back on long term trend could give the S&P a value somewhere around 1000 at best and under 500 at worst.

 

[haha]

Thanks for stating the obvious...

What I meant was that there is a pattern to stock market growth that is somewhat consistant over long time periods. So on a log scale plot the {rate of} growth is nearly constant over long time periods and can be plotted in a nearly linear fashion.

Also note from the chart that aparently the market is back to a place where it can (hopefully) grow at it's long term trend. Based on the chart the market appears to be fairly valued.

Apparently it wasn't obvious to you, because of your meaningless and erroneous summary of what is contained in the plot.

Ha

 

[2B]

How about all the smart people who plan and work hard? Harder than you? Then something bad happens and they get wiped out? Then tehey will be called stupid or lazy or something. You plan and work and it all works out well in the end (luck) and people like to grab credit for controlling the universe.

You're missing the point. "Bad things happen to good people." We might walk under someone washing windows on a highrise just when the whole scaffold collapses. We might be working in the World Trade Center when..... Hopefully, you get the point.

Life isn't fair but it's equitable. We are born. Some have birth defects. Some are born into poor families. Some get run over by the garbage truck. There's a certain amount of random chance but there's also a certain amount of personal discovery and enlightenment.

My father was not well off financially but had 5 children (my mother helped). I did well in school. Doing well with a poor father got me a great scholarship (wasn't I lucky!). I did well in college and got a good job (again lucky!). I saved money, lived below my means and now I'm just about at FIRE (WOW -- how lucky can I get!!!!!). I could have been killed in the car wreck I had my senior year in high school.

There were a lot of kids in my high school that had fathers that didn't make much money. None of them were killed in car wrecks before graduation. I didn't load up on dot.coms in 1999 but some of them might have done just that.

You do what you can with what you have and suddenly success is called "luck." Everything doesn't always work out but it's not just buying the right lottery ticket either.

 

[maddythebeagle]

Everything doesn't always work out but it's not just buying the right lottery ticket either.

Speaking of that and the earlier discussion of a lot of folks with good means with professional jobs but still not saving and playing the lottery to win. I believe some of the success from people on this board is being able to wade through the bullshit. Everyone is inundated with so much noise (buy this and invest in that). Sometimes I believe that our success is also a good helping of cynicism.

 

[brewer12345]

Speaking of that and the earlier discussion of a lot of folks with good means with professional jobs but still not saving and playing the lottery to win. I believe some of the success from people on this board is being able to wade through the bull****. Everyone is inundated with so much noise (buy this and invest in that). Sometimes I believe that our success is also a good helping of cynicism.

Heheh, either that, or we were just lucky to listen to the right bullshit.

 

[bearkeley]

I'm not lucky.  I planned all along to be born in America to father who was a child in the great depression and a real estate agent mother who dragged me all over the place looking a houses when I was a kid.

I knew when I was 25 and bought my first house for $90,000 that 14 years later it would be worth $500,000.  Its not luck that I happened to meet my wife during the biggest bull market in the history of real estate.  I knew that when we sold my wife's condo and used the gains to buy 3 more houses that those houses would all double in value in three years.  That's not luck its brilliance.  

Look most of us have been lucky, many have been extremely lucky but at the same time we have taken steps that have allowed our luck to be transformed into good fortune.  While we got lucky in realesteate my wife and I have both been maxing out or 401k and IRA options and unsuccessfully in vesting in other areas.  Unfortunately we were not old enough to have large portfolios during the big bull market in stocks .  And quite frankly I think those of you who did suck .

I was making $22,000 a year when I bought this house.  I literally ate peanut butter and jelly sandwiches for lunch and spagettis for dinner seven days a week until I saved enough money for the down payment.  

Was I lucky that I decide to drive a 15 year old car instead of a new one so I had no other payments on my credit?  Unlike most of my friends who bought new cars as soon as they got a "real" job after college.  Was it also luck that I worked full time while in college so I had no student loans.  

Was it luck that my boss was willing to write the loan officer a letter stating that I would be getting a grade increase in 45 days bring my income to $27,000

So yea we have been extremely lucky but we have also taken steps that allowed the luck find us.  

I have a friend who started with the Government the same day I did at the same job.  We were both broke at the time.  I bought a house he bought a truck.

We are both now GS 14s he and his wife just bought their first house 2 years ago.  They have a huge payment, big credit card bills, and two car payments and don't save any money or max out their TSPs.  Something tells me he is not giving Luck a chance to find him.