Every five years or so, I’ll do thorough retirement planning over a period of a few weeks. I’m back at it again.
Suze Orman’s toxic, uninformed commentary. In the earliest days of thinking about retirement in detail, which was around the time I got my first professional job, a majority of my advice came from Suze Orman. Why? Mostly because she was on TV all the time and we didn’t have a lot of alternatives. YouTube didn’t even exist back then.
After listening to her, I’d feel a sense of hopelessness when thinking about retirement. If you took her advice seriously, you’d have had to save your entire paycheck just to pull out a meager retirement at 75. Her rules of thumb on the required amount of savings and net worth to buy anything other than the necessities were terrifying. Since I didn’t have any money, and there was no hope I’d do a lot of saving beyond my work retirement account, I blocked retirement out of my mind for years.
[Added nine months later: I recently had a 2012 segment from her show come up on YouTube. They were 44 with a good net worth spread across their home and retirement accounts. Their goal was to retire in 2030 at 62. I did some quick calculations and they seemed to be in good shape - an obvious A. Figured that she’d give them a B- or C with her trademark negative take she used to keep the viewers watching. Well, she gave them an F. She said they were only on track for $558k by 2030, which would generate barely any income in retirement.
How wrong was she? If they had put that money in the S&P 500, they’d have over $1 million today, five years before their proposed retirement date. Her low return assumption was insane. And where did the low income generation come from? She assumed a 3% withdrawal rate. The 4% rule is considered conservative, and 3.5% is considered rock-solid for a 50-year retirement. She had no justification for her assumptions about either expected returns or the withdrawal rate.
Watching this with a better understanding of all this stuff makes me upset. How many Gen Xers nearing retirement today don’t have enough saved because they watched her show and decided they’d never be able to retire, so they just didn’t bother saving. Her extreme negative take on everything put her in a position of being an authority. Thankfully I gave up on Suze Orman long before 2012.]
This came to an end once I realized that Suze Orman was completely and utterly full of crap. I pulled out a spreadsheet and did some calculations of my own and it was clear that there was no logical basis for the claims she made about savings. Even more important, I started to see people retire, including my parents, and they had financial situations nothing like the Suze Orman rules, yet they were doing just fine. Looking at my own expenses, my projected Social Security payments, the rate I was accumulating savings, and historical stock returns, retirement at 65 while maintaining my existing lifestyle would actually be easy. And that was using a 3% rule of thumb for withdrawals before hearing of the 4% rule.
Retirement YouTube. The big change since my last deep dive has been the explosion of retirement content on YouTube. There’s a lot of good advice on there (and, obviously, some bad advice too). [Added nine months later: After writing this post, I realized a lot of the retirement content is interesting viewing, so I still watch it. It’s reality TV where ordinary people provide details about their retired lives.]
What I like about retirement YouTube is the many channels by people that have actually retired. Others are run by financial planners that talk about actual cases and educate us about their profession. People can and do retire with less than a million dollars saved. These videos pass the sniff test, because they’re consistent with the numbers I’ve seen for actual retirees like my parents.
[Added nine months later: I checked my YouTube history, and here are the first videos I watched, in order. On October 13, I was laid off at 56 and what I did next showed up in my feed. I remember watching it to find out what they did, and to my surprise, she retired. On October 24, YouTube recommended I Retired EARLY – Here’s My Numbers and My Plan. The title looked interesting, so I clicked it. One of the recommendations to that video was I’m 61 Years Old with $500k. Can I Retire?. It sounded absurd, so I watched it to have a laugh, but it actually made sense if you were willing to work with such low expenses. I looked differently at retirement after watching that video. Two days later, I watched 5 SIGNS YOU’RE FINANCIALLY ABLE TO RETIRE, and the day after that One year retired. The good and the not so good. These videos got me thinking that I should plan to retire before 73.]
Non-financial retirement advice. I want to close with a couple pieces of non-financial retirement advice I got. I don’t remember where they came from, and anyway, I’ve modified them. One of my biggest concerns was “what would I do if I retire?” I associated retirement with sitting in front of the TV all day, where leaving the house to buy groceries was the highlight, so I viewed 70 as early retirement. Why would someone full of energy voluntarily sit in front of the TV when they could continue a fruitful career as a professor? I probably got that idea because it was what I saw from other people that had retired, including my parents (my father had serious health issues throughout retirement).
Two thought experiments set me straight.
Prompt 1: If you cut back to 50% of your working hours, how would it change how you spend your time? You get half of your working hours to spend doing whatever you want. It can be work-related or anything else.
It was enjoyable thinking about such a scenario once I thought about having large blocks of time to work on the things that are important to me. I’d be able to work on the goals that motivated me to get into this profession in the first place. The only problem when I finished the exercise was that my list of things to do was way too long for the available hours! I had more stuff on this list than on my current todo list.
Prompt 2: What would you not be doing this week if you were retired?
This was a more realistic exercise because I was able to use my real-world task list for the current week and choose which tasks I would not be doing. It had to be practical. I still had to pay my bills, for instance, so I couldn’t cross stuff like that off my list. By only removing things I had to do right now but didn’t want to do, and allowing that space to be taken up with the things on my list that I enjoyed doing, it was clear I’d be overscheduled even as a fully retired person.
Prompt 2a: I later came up with my own variant to make this even clearer. I use a weekly note to record the things I’m working on. When I put things in the note, I categorize them as things I’d do in retirement or not do. Making this kind of list clarifies what a typical week will actually look like. There’s just SO MUCH STUFF on there that boredom is not a relevant concern.
[Added nine months later: I’ve done these exercises multiple times since this post was first written.]
Now, back to reality. I still have a long time until retirement. These exercises are purely academic at this stage. On a practical note, I have shortened my expected retirement age after doing them.