Retirement and the Golden Mean

December 26, 2019

And a happy Boxing Day to all.

This blog is largely non-financial.  That’s because I don’t have any particular expertise in money management.  I’m not a CPA, MBA or CFA.  I know a little bit about stocks and bonds but I also know when I’m in over my head.

But I enjoy reading about, talking about and thinking about money.  We have CNBC on all morning and we are always reviewing our financial picture.

I regularly read two blogs that have a financial focus.  They embody what I would call the two extremes of personal financial management.  One is what I would call “get more” and the other is what I would call “spend less”.

These two blogs — Financial Samurai and Mr. Money Mustache — have big readership numbers.  They aren’t aimed at retirees per se but at people seeking to retire early, the so-called Financial Independence/Retire Early or FIRE movement.

Both are interesting and well-written, recording the activities of smart, thoughtful people.  But I find both a bit extreme.

Financial Samurai scares me to death.  The author is always telling me that I don’t have nearly enough money to live on, that I should have $5 million in my 401k account at my age, that I should only be taking four percent or even three percent per year out of my savings each year.  The author recently wrote on the CNBC website that he was going back to work because trying to raise a family in the Bay Area on the investment income from a $5 million nest egg was too difficult.

Well, OK.  We used to live in the New York area and left because it was too expensive.  I understand the high cost of living in some places.  But $5 million?  Really?

Then there’s Mr. Money Mustache (or MMM as its fervent fans call it).  It’s all about the joys of simplicity, frugality and living in harmony with the earth.  The author makes his own pizzas, walks or rides an old bicycle around Longmont, Colorado, and only washes his towels once a month (ugh).

Ironically, MMM is now as rich as Croesus, generating more than $400,000 per year from advertising and referrals and having sold his blog for something like $6 million.

There is great information and a lot of entertaining material in both blogs, but I think most retirees and near-retirees should be aiming for what I would call the Golden Mean in retirement, somewhere far from these extremes.

That means having enough money to cover basic needs.  Ideally, you should have a paid-off mortgage, Social Security income and some savings.  Most retired couples in most parts of the country spend about $4 to $5000 per month after tax on basic living expenses.

After that, it’s a matter of personal preference.  Do you belong to a country club?  Do you want to bicycle in Laos and Vietnam?  Or are you happy taking walks and camping out in a state park?  Do you want to drive a Mercedes or will a 10 year old Honda do just fine?

I honestly don’t think that activities at the high end or at the low end make much difference in terms of ultimate happiness. I know people who spend their days walking their dog, working in their garden, going to church, checking books out of the library, cooking delicious meals, and playing with their grandchildren, who are as happy as can be.  I know other people who drive Porsches, take vacations involving blasting birds out of the sky in Argentina,  and belong to fancy clubs they never use.  Some seem happy, some not.

People who don’t have the bare minimum, however, are rarely happy.  There is just too much stress involved.  Also, one of the joys of getting older and needing less is the ability to help others, either within the family or through contributions of time, skill and money.  If you can’t take care of your own needs you will not be in a position to help others.

One other caveat:  If you have become accustomed to life at the high end, it will not be fun if you have to get used to living at the lower end of the scale.  Prepare accordingly.





One thought on “Retirement and the Golden Mean

  1. 4-5000 per month with a paid off mortgage? Unless you’re paying your own medical insurance and/or car payments I can’t see how one would need this much. I’m budgeting 4000 per month until I hit SS age but I’ve paid off everything and will be getting my health insurance from my wife who is not retiring for 10 more years. I plan to do a lot with that money.


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