The other day for no apparent reason I sudden had a shock of fear go down my spine that I didn’t have enough money for my retirement. I worried that I had made a horrible mistake and that I should have worked longer and saved more money before quitting. There was no particularly logical trigger for the feeling of mild panic that passed through me and the feeling left me shortly afterwards. Yet it did make me double check a few numbers to prove to myself (again) that we had enough money for years.
So as I looked at my account balances and faced the fact that I am in fact fine for the next few years then I relaxed back to my usual state of calm. In reality nothing had changed about our situation during this episode, it was merely a bit of doubt stuck in my brain and likely the result of me adjusting to our changing sources of income.
Previously with my old job, I knew there was risks with a job as your major source of income. I knew you could get laid off, shifted to another job, or have a rollback in wages or cut in benefits (I honestly had experienced all of those during my career at some point). Yet I understood those risks because I had been living with them for a long time. So oddly comfortable with those risks.
Now that we are mostly living off our investments I have a different set of risks. We could see a stock market correction, cuts in dividends from companies we own or drops in our bond portion of our investment portfolio. These aren’t new risks but I honestly didn’t pay as much attention to them in the past because with my old job we had other sources of income to cover expense when those events occurred. Now I’m feeling those risks more acutely than in the past.
The reality is you don’t have less risk once you retire. You just changed which risks you are managing. Yet oddly some of the same principles you learned getting to retirement still apply such as it is better to have multiple sources of income (not just investments or just a job). Which is why partly my wife continues to run her daycare from our home and I continue to run my little publishing business. Neither produces much income but it does help balance out the risks of sudden investment swings. Also both businesses give us something to do and provide options for socialization with others. We do them because we like to and less because of the income they produce.
One other things that hit me during my little panic feeling was I asked myself the following question: what is the worst thing that could happen? This is a great question to force yourself to face what you are fearing. And in my case the answer was simple: get a job. Notice the word ‘job’. I don’t have to go back to my old career or employer begging for a job. I can find something, somewhere that I might enjoy a bit and brings in some money. Honestly with our relatively low expenses making even $10 to $15K a year makes a huge difference to balancing out our spending. And if that truly became required it isn’t really the horrible of a fate…hell it’s sort of normal for most people my age (including myself until recently).
In the end, I’ve come to realize these little flares of panic or worry are just me adjusting to my new normal. Nothing on a fundamental level has changed in my situation other than my thoughts and luckily those can be changed rather easily.
So do you think you would have problems living just off your investments? What would you do to help balance your risks?