“All In”

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.

I like to play poker.  Two or three times per week, I’ll play online against 8 other people in a 1-table tournament.  I like these kind of tournaments because I know exactly how long they’ll take (around 45 minutes) and I can play for $2, which is about as much money as I really feel like risking on my mediocre skills.  I have read several books, and unless I get good cards (which are less than 5% of cards dealt) I basically sit and fold hands for the first 20 minutes of the game, hoping that other people knock each other out.

The problem arises that eventually, I have to make a play because if I haven’t won any hands my chip count is getting low.  If my chip count is low enough, I basically have to “gamble” (statistically) on a hand…..pushing “All In”.

To me, retirement is similar to this poker move – instead of 20 minutes of playing poker, it’s a 15 year intricate financial plan that comes down to an exit date.  The problem of course with the retirement plan, is that I won’t find out if I “won” the retirement game 10 seconds later, it will be more like 20 years down the road when I find out my plan wasn’t as successful as I thought when I was in my 30’s.  The problem at age 65 is if my plan isn’t working, my skills are no longer usable in the workforce, which would probably significantly reduce my ability to play catch-up.

I think that whether you retire at 35 or 75, everyone is hoping whatever their retirement savings level is at, that they have enough to last until they die (kind of morbid, but it’s the truth).  My wife and I both understand the risks (that we may end up broke in our 80s), but are also willing to accept the risk in order to be able to do the things we want to do in the extra 40+ hours per week we are currently working for employers.

The final decision on retirement or even poker comes down to risk tolerance.  In both, I know what the end result could be (a zero balance before I’m done playing) – but I also know the gains that can be made – winning some money in poker and a significant period of free time after retirement.  As long as the odds seem safe to me, I’ll gamble on either.

Do you see your retirement as a gamble?  How do you reconcile the risk of possibly running out of money when you are unable to make more (without freaking out)?

7 thoughts on ““All In””

  1. Dave, the main problem I see with your comparison to poker is that poker is a zero-sum game while retirement planning is not. With poker or any other type of gambling, you are competing with others for a piece of a fixed pie; for you to win, other(s) must lose. Not so with your retirement money.

    I have created an early retirement plan that, according to a reliable retirement income planning software, gives me close to a 100% chance of not running out of money by age 92. And this is done without having to “win” any money at the expense of others, as in poker.

  2. Well the good news is retirement isn’t really that big of a gamble. You can take a little comfort in knowing that you don’t really have to wait until the end to find out whether you won or not. When you retire, you get to see each year how you are doing, so you’ll have plenty of time to make adjustments if it looks like you’re going to run out of money before the game is over.

  3. I can live on CPP & Social Security if I have to because my expenses are very low… so if my TFSA and IRA run dry, I will still be okay. No worries here.

  4. I also plan to hedge my decision by learning a few new careers. If my skills are diversified across tech, law, accounting, fitness and finance then I will be much more likely to be able to make myself useful to others.

    Establishing cash streams off of assets (like real estate) and businesses (even if small) can make a HUGE difference in the long run.

    I refuse to rely on any government since I’m at the mercy of others taking away my promised benefits. Instead, I consider a 20% buffer above financial independence at a 3% withdrawal rate along with skill diversification to be a reasonable amount of certainty for my temperament.

  5. I do not take chances and the only time I gamble is in the lottery pool at work.

    I want my retirement to be laid out in a nice, neat, boring, package that lasts until the day after I die.

    My maternal grandmother did not have enough money to live on and relied on her 2 daughters (my mother and aunt) to help meet the basic expenses. My goal is to never be a financial burden on my sons.

    I am very late to the retirement game but I will make it eventually.

  6. @ deegee – about every 3 months I play around with firecalc to run and re-run my calculations.

    @ Bill – not sure what you mean here – provided I’m in reasonable health, a high-deductible insurance plan along with Canadian health-care should reasonably cover my wife and myself.

    @ Greg – I agree on not relying on any government support…I have counted this as a “nice to have” rather than counting it in my calculations.

    @ Jane – Are you thinking of annuities to provide support? This would provide significantly low risk, and some (I believe) adjust for inflation, reducing risk further.

    I too have no desire to depend on anyone (including taxpayers) to support me in old-age, which makes retirement planning pre-exit from work all the more important.

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