Working (for a) Living

It’s been a tough week. Yes, for lots of reasons, but I’m not going to be talking about politics here, nor terrorism, nor the horror and scandal of what happened at the Grenfell Tower in London. No, I’m not discussing those, but suffice to say they help put the worries and troubles of my own little world into perspective. So many others have so much more to worry about than I do.

Having said that, it now seems almost pathetic to state that the reason I’ve found this a tough week has been because it’s been really quiet at work, and I find that difficult to deal with. We all know people who can turn up to work, have one task to complete in the day and then find a multitude of ways to not complete it. That’s not me, I’m afraid, and I’d guess for the majority of FIRE adherents that’s not you either. If I turn up at work at 0900 with one task to do, I’ve usually completed it by 0901 and am looking for the next one. We are the type of people who set goals, take action, push out into the world and make changes in the hope that these will help us attain our ambitions. We’re doers, whether that’s in the world of work or leisure. We fill our days and we’re happiest when we get to the end of the day, pour ourselves a beer, a glass of wine or a cup of tea and reflect on what we’ve managed to achieve in the waking hours.

I reflected on this when one of my recently early-retired golfing buddies mentioned that he’d “Never been busier” since quitting work. He then added, “I’ve just not had time to be bored, not like you were when you were retired.”

Well, I’m sorry, but if I ever did say I was “bored” in my year out, that’s not what I meant. I wish I had been just “bored” because I could have fixed that in a millisecond. There are endless enjoyable ways to fill empty hours – take a walk, read a book, splurge on a Box Set, listen to podcasts, cook, bake, go for a swim, go to the pub, practice your golf…..on and on the list can go. Boredom? Of course there were times when I would admit that I was at a loose end, but it was never a major problem. It could be rectified.

No, filling the hours wasn’t an issue. For me, the problem was filling the hours with things that were, in my mind, constructive. What I was looking for in my retired days was “fulfillment” and, as those days stretched on, that became increasingly hard to find.

It’s funny, because my attitude to this changed over time. In the first month or two of my retirement I was ecstatic about having the ability to take ninety minutes to walk into town from home and reward myself with a nice cup of coffee and a read of the paper in a favourite cafe bar once I’d arrived. I’d listen to podcasts as I walked in and reveled in having the time to think about what I was learning, maybe heading to the library later in the afternoon to find a book on a subject that had whetted my interest. It was fantastic. At first. But, as my diary attests to, nine months in and I was moaning that this self-same activity was a total waste of time and was doing my head in. What was it achieving? How was I growing? What was I contributing? If I was learning things, how was I applying them? Really, what was I doing with my time?

Perhaps this was a legacy of the near thirty years of working life I’d had up to that point. It was never going to be easy to readjust. I thought that in acknowledging this situation I’d find a way to cope with it. The thing was that I expected to come to terms with lazy days over time, that I’d grow to ever more appreciate them and the finer things in life that my career had prevented me from enjoying. But that wasn’t the case. If anything, the feeling that I wasn’t achieving anything concrete with my days began to torment me and I realised that, at the bottom of it, I was missing work.

Was this a bad thing? I came across an interesting TED talk this week, where Mike Rowe laments the way manual work has been demeaned in today’s society. I could argue the same for many white collar jobs too. There’s a cliche that “Nobody on their deathbed ever stated ‘I wish I’d spent more time at the office’”, but in my retirement I found myself thinking that I wished I could spend at least SOME more of my time in the office! “You don’t know what you’ve got ‘til it’s gone” – another cliche that has an element of truth to it, but that’s not the whole truth either.

So yes, I’ve had a quiet week at work and I’ve found it tough, but it has not been as tough as having a quiet week at home. That’s one of the things I discovered in my early retirement and, for the moment, is something that that I’m happy to have rectified through finding a job.

Home Thoughts

It’s the eve of the General Election and it seems to me that there are two groups of voters that all the parties have to attract and woo – the young and the old. I like to tell myself that I’m the squeezed middle, but have to admit that I’m heading toward the latter camp much faster than I’m comfortable with, and thus I know where my sympathies selfishly lie.

That’s not to say I don’t relate to the predicament young people today find themselves in, I just don’t understand why more of them don’t seem to recognise it? Or, if they do, don’t seem to be overtly bothered with the debt ridden future that faces the majority of them.

While the young probably figure that the future will work itself out and live a bit more for the moment, the nearer I approach pensionable age (which I’m taking as 55) the more I find myself pondering the future and trying to work out the detail. What steps do I have to take to fully realise the next two, or hopefully three, decades of life that might be left for me to really enjoy?

For those of you who’ve managed to plough your way through self-improvement tomes, there’s a trick or technique they often encourage you to employ to help you work out your values and what’s important to you in life. What you have to do is vividly imagine your own funeral service and focus on what your close family, friends and possibly colleagues might want to say about you in a eulogy. What would you want them to say?

I’ve played with this technique over the years, but I’m a bit like Woody Allen when it comes to my own death – I’ve no intention of being there when it actually happens. And, on the occasional time when I have actually had a serious attempt at imagining this situation, I can’t say I found any blinding insights. I didn’t imagine anyone getting up and saying, “He had a fantastic house that we all envied, with that red Ferrari parked in front of it. And wow, I see he’s still wearing that Rolex Oyster there, lying in the casket.” (Actually I can’t imagine anyone picturing that at their own funeral, except maybe Piers Morgan.) What most of us probably think about are people extolling our social connections, the deep friendships we had, the importance we placed on being close to our loved ones.

Another thing I don’t imagine many people thinking about is their funeral taking place on some distant shore. I have a few friends who are currently enjoying the expat life in Hong Kong, Dubai, Spain, the Philippines and so on. I’m sure none of them have any intention of dying in these countries though, because all of them, when I’ve asked, are imagining retirement to a serene Scottish shore, or a rose covered English cottage with the village pub a stone’s throw away. Where, of course, everybody knows your name. Which begs the question of why they left in the first place, but we all know the answer to that, don’t we? Unless they’re running away from something, it’s usually money, or an improved life they think money can buy, that they’re running toward. Fair enough, I say, I’ve been tempted to do the same myself over the years – but I’ve never imagined anything but my own retirement here in Britain.

It strikes me that the young know and appreciate the value of friendships and community every bit as much as the old. I don’t think you ever forge as strong bonds with anyone as you did when you were young. If you’re lucky, and work at it, you’ll keep those friendships with you for a lifetime and you’ll always feel your heart warm a little bit when you walk the streets of your old home town.

So, given that the young and old seem to have a surer sense of what’s important to them, it’s a bit sad that the election focuses so much on the monetary side of life – tuition fees, tax bombs, the cost of social care, whether or not you’ll receive a free bus pass. Yes, those things are important, but when they exclude everything else then we all end up poorer because of it.

Taking Account

I see that some celebrities have been struggling with FIRE this week. Ryan Giggs was quoted as saying, “Retirement is a big problem. I lost the energy I had and I needed other projects. People say “You have earned your money”. But money has nothing to do with it. You have still got a life to live.”

Then up stepped poor old Fred Goodwin, Billy No Mates. Well, he has one mate, who admitted to the press this week that Fred’s enforced retirement was leaving him “intellectually under-occupied”. (It seems to me that Fred didn’t do too well either when he was intellectually over-occupied at RBS.)

I mentally file away such comments. Having just returned from three weeks holiday to work, I walked into my dull little office while the sun beamed down outside to find the same pile of problems, issues and unresolved small conflicts that had been there when I left. Nobody, as ever, had tackled any of them in my absence, booting them into the long grass for my return. Deep sigh. But, as I pulled a chair up to my desk and turned on my PC, I mused, “You know, I could walk into the boss’s office right now and tell him I was off. Like right now, today. What could he do about it?” With that thought in mind, I was more able to face the day ahead. I was choosing to do this job, and I can thank FIRE for that.

Work versus Retirement. It’s all in the mind. Psychologically, you have to be ready for both. I thought I was ready for retirement and that I’d had my fill of the office, but that turned out not to be the case. It was a shock to me when I quit the workplace when I found that I could be on a bigger downer facing an empty day at home than I’d ever been at work, but it was a fact. This was largely because when I had an empty day in my “retirement” I’d give myself a hard time about it, feeling that I was failing, that I was doing nothing constructive, that I was fading from view, becoming inconsequential and achieving nothing. It really wasn’t fun. Work can be a lot of things, or at least the type of work I do can be, but the days are very seldom “empty”. And I always end the day feeling that I’ve accomplished something, even if it was just turning up. A lot of people don’t even achieve that.

Another psychological facet of work versus retirement is the financial one. I refrain from going into detail about my finances on this blog, but I will state that my retirement financial goal was to have the same net monthly income in retirement that I’d had when I was at my “peak” earning power. I felt if I could manage that, I’d be sorted. When I hit fifty and found my career at an end, a substantial “good leaver” package from my firm helped me achieve the goal I’d set myself. Or at least that’s what my spreadsheet forecasts indicated. Given that I no longer had to salt away a big part of my salary toward my retirement goal, my net income in not working was exactly the same as the net income I had previously received in pay. Nice one.

But in realising this goal, I had now to actually realise it. Every month I had to cash in investments equal to the amount my firm used to pay me. I didn’t have to “pay myself” this way, but that was the way I preferred to do it. At first, I got a big kick out of doing this, but it soon wore off. In fact, I came to dread “pay day”.  I’m just not a spender, I’m a saver, and the retirement role reversal was just so hard to take. I felt I was the type of person who didn’t reduce savings, I built them up! It was actually nothing to do with the amount of money that I had to withdraw because I felt I was “safe enough” in that regard. It was more the action of making the withdrawal with no proactive plan for the cash other than paying living expenses which was an existential shock to me.

Now that I’ve returned to work, I tell myself I’m spending every penny I earn because I deliberately don’t save any of my current salary, even the bit that I could afford to. I’m not depleting my investments, but I’m not adding to them either. I’m a lot more comfortable with this situation. I feel it’s a bit of a halfway house between the sublime (saving a load of my cash) and the ridiculous (spending a load of my cash).

I still have days at work when I ask myself if I’m ready to retire again? But the intellectual and social stimulation work brings, plus the cream on the cake of being financially compensated for it means that I’m just not ready for the retired life yet. When will I be? No idea. But I’ll let you know when it happens.

Minority Report

Over the last few weeks I’ve been delving back into the blogs, articles and podcasts posted by the FIRE community which I always find interesting, full of good advice and, occasionally, inspirational. But, after a month of it, I’m beginning to wonder if all that can be said about the subject has already been said? As ever, you can make anything over-complicated and repeat basic tenets in a million different ways, but it seems to me that FIRE boils down to a few simple concepts: avoiding debt, spending less than you earn (and the more you earn, the better) and investing regularly into passive Index Tracking funds over a longish term – so add to that the fact that the earlier you start, the better. Pretty soon it feels that it’s all rather obvious, common sense and hardly news to anyone.

Sometimes I have to pause and tell myself that no, hardly anyone is talking about FIRE and the subject is still a minority report. The evidence isn’t hard to find. List ten well-known blogs about FIRE – well, you could probably do that without too much difficulty. List ten well known UK blogs about FIRE and that’s a bit more of a challenge, although most of us on these sites could have a good go at it. I’m well aware, however, that I’m preaching to the converted here in the blogosphere – you’re reading this, no doubt, because you’re interested in financial matters and connected affairs.

What signs are there that the wider world is interested? A small test could be to go to the library and try to borrow five books on FIRE. Not Amazon, where you could easily find five books focused on the subject of the sex lives of Patagonian grasshoppers, but the local library. There will be a few books available that are devoted to investing and general money matters, but investing or being astute with money are not the same thing as Financial Independence, although they’re strongly connected.

As far as books on Early Retirement go, I’ve never found any at the local library. Sure, you’ll find a few books on retirement in general, but pretty much all I’ve seen are aimed at pensioners.  

What other sources do we have in the mass market that are talking about FIRE? At the weekend, I always have a good two hours reading the Sunday Times and have done this for years. After browsing the main paper I turn to the supplements, and my second choice of reading is always the Money section. I often wonder how many people do likewise, because when I visit the gym (where they stock free daily newspapers in their cafe) it’s generally the Money section that’s available to read, sitting unopened and unloved on the rack while just about everything else is either missing or well-thumbed.

For a few years now I’ve looked forward to reading something about FIRE within the Money pages, but it’s yet to happen. I wonder why not? To me, it’s an interesting and appealing concept and I know I’m not alone in this. It touches on loads of the subjects that are featured regularly in the Money section – pensions, investments, property, taxes and so on – but as yet FIRE doesn’t seem to have a mainstream market even within the broader financial community.

This may be changing. I recently wrote about our guru, Mr Money Moustache, being profiled in the New Yorker and he’s recently been interviewed in the much downloaded Tim Ferriss podcast. I’ve also seen him being interviewed on American TV, so if the FIRE movement is going to have a Buffett-like figurehead and cheerleader then it looks like he’ll be the one. Which is great, but I’m not so sure that the coverage will necessarily be as focused on the subjects that most of us are likely to hope it will be. TV is much more interested in image over message and style over content. Nobody will really care about how MMM reached his goal, they’ll be more focused on what it means in terms of what he has got – how big is his house? What’s he got in the bank? What does his wife look like? Does he have a big flat screen TV?

Recently, like some other UK bloggers, I’ve been approached by a UK TV company who seem to be interested in making a pilot about Early Retirement. I doubt I’ll participate, but I would be interested in seeing the output of the show, and I would hope they’d focus on the simple principles that underpin FIRE which I outlined in the first paragraph. It’s about clearing debt, spending less than you earn, saving hard and investing simply but astutely. Even I’d admit that these aren’t very sexy or appealing concepts. They look like hard work and they are hard work, done over a long term. There’s no quick wins, instant celebrity, millions to be made overnight. Nothing that TV really likes. I’d hope it would be a positive show, but I fear it could be a “Look at this guy, living on lentils and knitting his own socks in an effort to retire at thirty five”. (Either that or “Matched Betting Ruined My Early Retirement Dream”)

In fact, thinking about it, I’m not sure I’d want FIRE to become mainstream. Would I want to be bombarded by adverts in the Money section promising to help me retire at forty? Would I want to see Mr Money Moustache torn to shreds in some sort of “You’re alright Jack” expose that unpicks the financial underpinning and background to his story? Would I want the Daily Mail to reveal how FIRE is just an upper middle class dream that’s basically impossible for anyone earning the UK average wage these days?

No, I think I like it as it is at the moment, where the people interested in the subject are interested in it for the right reasons. After all, isn’t it true that the best clubs are the more exclusive ones, the best bands were always better before they became popular, the best books are seldom bestsellers and the best films are either indie, arthouse or foreign? The mainstream ruins everything, doesn’t it, so maybe we should keep FIRE to ourselves?

 

 

Maggie, Maggie, Maggie

A couple of times this week I’ve read the same statistic, that a young person leaving University to begin a career that pays enough to allow them to start repaying their student loan is going to be taxed at 41% from Day One they cross the earnings threshold of £18.5k.  Simply put, it’s 20% basic income tax, 12% National Insurance and 9% student loan repayment.

It seems that Jeremy Corbyn has twigged to this, and thrown the abolition of tuition fees in the ring as a potential vote winner, and this will certainly appeal to a lot of people. But my question is: where are all the young people protesting about this phenomenal tax burden they’re going to have to carry? Ye Gods, when I was at University, every single time our student grants were threatened we were out on the streets, stopping traffic, chanting “Maggie, Maggie, Maggie, Out, Out, Out” and occupying the library until it was clearly time for a deserved pint or six down the Mandela Bar (i.e after about twenty minutes of sitting in the library cafe.)

To me, it’s absolutely incredible what has happened in terms of the cost of education with, as far as I can see, hardly a peep from the general public or the students themselves. Okay, maybe it’s killed off the Liberal Democrats in the short term, but the fact that Clegg felt he could renege on his promise to end tuition fees as quickly as he did just shows the complete disdain and disconnection many politicians have for ordinary people. Clegg and his ilk are from a background where thirty thousand pounds of debt is play money. Surely most people spend around that amount each year on holidays?

But, after a short vent of middle class fury against Clegg taking them for a ride, it seems that everyone has accepted that we’ll just have to get on with it. When you think about it, if your degree does help you gain a decent career, then actually the loan system is fantastic value for money. Isn’t it?

Well, maybe. But when you take the 9% repayment, lump in a further 32% of taxes, then add whatever you’re going to have to put by for a pension – and you’re absolutely going to have to put by for a pension, unless you’re insane – well, if I was a youth today, I’d be damn angry about it. Especially if I read blogs like mine where Baby Boomers in their fifties ponder early retirement and the most tax efficient ways to drawdown their pensions while wondering if they can be bothered taking two long haul holidays a year? A Baby Boomer, that is, like me who was given a fantastic free education, who took out a mortgage as soon as he started working (required deposit, fifteen hundred quid and a 95% loan) and sat back to watch property rocket over his working lifetime. Nice work, if you can get it. Which you no longer can.

The repayment burden of student loans is one thing, but the underlying message that debt is necessary, and maybe even a good thing, is even more outrageous. Debt is the one thing that everyone should be trying to minimise and avoid. Instead, what we have is a system that’s telling us that debt is fine, it’s manageable, it’s a fact of life and it’s nothing to be frightened of. Your Student Loan debt, it’s just like a mortgage really – which, dear student, you’re never actually going to have, unless the bank of mum and dad step in. As far as I am aware, your outstanding student loan debt will be taken into account whenever you’ve finally scraped enough together to put down a deposit on a property. In your forties. When most half decent “starter” homes are going to be coming in at around two hundred grand. Good luck with that. (They’re probably already more expensive than that in London.)

Corbyn will probably win a few votes in promising to abolish tuition fees, but I doubt it will make much of a difference to the election result. Why should I get angry about though? It’s not my problem. I’m alright Jack. I think. But I see Theresa May is starting to muck around with pension commitments. She better watch out. We are Thatcher’s Children in more ways than one. There really is no such thing as society, except the Baby Boomer’s pensioner one, and these days we don’t protest on our feet, we do it at the ballot box with a pen.

 

Le Triple Lock


I see that one of the carrots being dangled by Marine Le Pen before the French electorate is a retirement age of 60. Meanwhile, here in Blighty, we are looking at ending the “Triple Lock” on pensions as the Tories realise that even the Oldies probably won’t vote for Corbyn under (m)any circumstances. Time to fill your boots, raid the pension pots of the great British public while kicking the more thorny problem of how to tax Google, Facebook, Starbucks, the banks et al into touch. It would make you puke. The paucity of original thought and ideas in Government is breathtaking. It’s a never ending retread of the same paths where the outcome is always that Joe Public will pay. Meanwhile a pint of milk or a gallon of petrol costs the same for Philip Green as it does for my old mum. This is what we voted for. Or rather, this is what we voted for?

Hey ho. Enough of politics. Retiring at 60 for everyone though, is that a good idea? I’m not sold on it. I think we need to be thinking more about how people’s lives after 60 can be more worthwhile and can be seen in a more positive, fulfilling way than merely putting the feet up in retirement. Ageism is a massive issue and was something I had a taste of myself when I tried to re-enter the job market in my fifties. When your CV covers more years that the headhunter interviewing you has been on the planet, you can’t help but feel a wee bit uncomfortable. This suddenly dawned on me when I explained a project I’d once led to a young “recruitment consultant” and realised that she was probably four years old when I’d completed it. But, to me, it seemed, and still seems, like recent history. To return to politics for a second, Tony Blair being elected for the first time seems like yesterday, never mind it was twenty years ago. Twenty years ago!!

Deep sigh, there I go, sounding like Grandpa Simpson. It was a lot better in my day, mostly because I was twenty years younger then! Those years have gone by quickly and, based on experience, the next twenty to come will speed by even faster. I always liked the Tony Robbins statement that the only sure things about your future years is that you’re going to live through them, so how do you want them to look? Thoughts like that keep me going to the gym on a regular basis and, to be fair, the pub. I want to be healthy enough to still enjoy a decent pint of ale down my local in my seventies!

The thought also pertains to my work. When I “retired” at fifty, I found I really wasn’t psychologically ready for it. I still wanted to work, to contribute, to be part of a team and to be rewarded for a job well done through a pay packet. After all, that is what I’d known, and on the whole enjoyed, for the best part of thirty years and, when it disappeared, I missed it. I also didn’t choose it, because I lost my job through redundancy, and perhaps that was part of my problem. Now that I have returned to work, however, it often hits me with a start that I only maybe have a good ten years of a career left, if I choose to stay in it (or my company allows me to stay). Ten years? That’s a blink of an eye. For me, part of a job was always trying to progress within it, gain the next rung of the ladder, take on more responsibility and stretch myself. It still is, but I recognise – have to recognise, maybe – that perhaps I should now try to progress in a different way. What I should be looking for is maybe not the next promotion and wage increase, but to gain the next set of skills or network that will help me better when I next face “retirement”. Mentally, I can’t see myself much different in ten years from where I am today. My mum, facing eighty, still maintains that she thinks like a twenty year old, despite all the evidence against it. She still is who she is and will always be who she was. Why will I be any different?

 

 

My post last week was about how people in general are frightened to invest in the stock market while I, daring rebel that I am, have been shelving all my spare cash into equities for years. At the weekend, however, I read through this post by Jim Collins where he talks about the Wealth Accumulation stage of your life versus the Wealth Preservation stage. There’s no doubt that I am in the latter camp but, it struck me, I’m still acting as if I was in the former, because I’m still about 95% invested in equities.

I read what Jim has to say on Wealth Preservation – that basically I should now have about 25% in bonds – and think that he’s right (providing that you keep reallocating to this ratio as the market moves.) The trouble is, equities have been so good to me over the years (I think) that my own personal strategy of “do nothing” always kicks in when I think about making any changes to where I put my money. Leave it be. It ain’t broke, so don’t fix it.

Funnily enough, Jim also backhandedly supports this strategy when he mentions that Fidelity recently did a survey of their most successful investors:

Word is, Fidelity reportedly conducted an internal performance review of accounts held between 2003 and 2013 to find which did the best. The results:

  • First: Dead people
  • Second: People who forgot they had the account

I’m not sure if those dead people were 100% in equities or not, and reading that survey leads me to think, “You know, life’s too short. Why not go and spend some of your damn money while you still can!”, which immediately sees me following The Rhino’s advice to go and take a cold shower and calm down. Spend it? We can’t have that.

Anyway, my other balance against switching equities into bonds is my Defined Benefit pension scheme. God Knows how that’s all invested and, for all I know, He might care about it too. I don’t. I just want it to pay out, solidly, securely and forever, as it said it would. For me, that’s the really passive, conservative part of my investment portfolio that I’m never going to tinker with.

And then there’s the not to be sniffed at State Pension too, which I often forget about. Providing that me and my Darling Other Half both get to draw upon that, it will provide around fourteen grand’s worth of household income every year. That’s actually quite a bit of cash. With those two “bankers” to come (plus my wife’s NHS and Council DB pension schemes too) surely I can afford to “gamble” whatever else I have on the markets?

The State Pension, when I do think about it, does lead to me ask what I think I’m going to be doing with my money at sixty seven years old? For me, that’s about fourteen years away and those fourteen years are going to be, probably, the best I’ll have in terms of health in both body and mind. Shouldn’t I sprinkle some of the sugar of wealth on top of that while I still can? Because I can already see signs that my world is beginning to shrink. I used to happily take two long haul holidays a year. These days I can hardly be arsed taking one. I just can’t be bothered with the hassle of flying ten hours somewhere to be confronted by a McDonalds or KFC, the same traffic jam I just left, adverts for HSBC or Barclays and another bleeding slew of shops selling the same tat that I can buy in Aldi, Lidl, Debenhams etc etc.. As for heading somewhere unsullied and uncommercialised, well, the Scottish Highlands offer that in spades. Am I rushing there every spare weekend? No, so why would Peru or Nepal be better? Seen one mountain, you’ve seen ‘em all. I mean, if that’s how I’m thinking now, how likely is it that when I’m sixty seven I’ll suddenly be jumping on a flight to Auckland just to hear the pilot announce “Welcome to New Zealand. Please adjust your watches back twenty years” which allegedly happened when one of my mates holidayed out there. And, when I asked him how he found it, he replied, “It’s a bit like the Scottish Highlands”.

Given that, maybe I’ll just continue to try and enjoy my life and investing on pretty much the same trajectory as I’m on now. It’s served me well so far and, when you think about it, choosing to “do nothing” is still “doing something”, isn’t it?

Smash the System

As ever, I perused through the Money sections of the magazines over the weekend where they tend to throw out facts and information that, as a FIRE advocate, you feel should be on the front page of the main newspaper. Fascinating fact this week: over 80% of ISA’s held in the UK are held in cash accounts.

Isn’t that just gobsmacking? I mean, given current inflation, a lot of those “Savings” are effectively losing money. Why is it this way, when most of us who are piling our cash into stocks and shares saw our investments grow in mainstream index trackers  by fifteen percent plus (probably) last year?

Is it fear? Are people frightened of losing money if they invest in stocks and shares? I’d like to think that this was the case – this would be an indication that people had at least thought about their savings choices, although they might not have looked into the detail. I’d like to bet if you ask most people about the stock market, however, the main thoughts they’ll have about it are the Great Crash of 1929, the Dot Com boom and bust, or whatever it was that happened in 2008 when Northern Rock almost collapsed, or something. And yes, those were scary stories which, we are told, we’re pretty much guaranteed to see the likes of again in our lifetime. “The value of stocks and shares can go up as well as down”, is a mantra that almost everybody can quote, the equivalent of “Here be dragons” on one of those old maps you see in the movies.

The Movies. They’ve probably got a bit to answer for too. “It’s a Wonderful Life”, “Trading Places”, “Wall Street”, just to name three that spring immediately to my mind that don’t paint a very flattering picture of the stock market. All of those, and probably several more like them, warn that the market isn’t really for people like us. Unless you know what you’re doing in Orange Juice or Pork Belly Futures, steer clear.

The same people who shun the markets because they don’t understand them are often the very same people who’ll happily tell you that investing in the housing market is a safer bet than investing into a pension. At least that’s what the regular “Minor Celebrity Answers 20 Questions on Money Matters” interview attests to in the Sunday Times. Week after week I read someone answering the question of whether to invest in “Property or Pension” by stating definitively “Property”. About one week in ten someone answers “Both” and anyone answering “Pension” is an even rarer occurrence than that.

There’s another factor in the UK that might be keeping people away from the markets, and that’s a subject particular to Britain that I’ve mentioned here before: Class. I was educated in a Scottish mainstream comprehensive and I can honestly say that the thought of entering a career in finance, aside from accountancy, never crossed my tiny mind. Stockbroking, Merchant Banking and Fund Management? I’d never heard of those careers and, if I had, I would have classified them in the same career choice option as I’d have put “Astronaut”. At least I could have named an astronaut. I knew nobody who knew anybody who worked in the City. I wouldn’t even have known that term. If I had, I might have been interested, but the whole subject was so far from our little world that it was never discussed. Or, if it was, it would have been in an Economics class, and who listened in those anyway? Stocks and shares just weren’t for “people like us”, it was as simple as that.

These days we’re supposed to be more of a meritocracy, and lads from a working class background can make a big deal in finance. Blokes like Nick Leeson and Fred Goodwin, for example, where we all learned about their humble origins immediately after they almost wrecked the system. I do wonder what the background to the high earners in the banks look like? How many simply have the right network and connections? How I snorted with derision when I read how the (excellent) author Michael Lewis (Liar’s Poker, The Big Short etc..) broke into a career in the City. He happened to attend a dinner in London where he spent the evening sitting next to the wife of a partner in Goldman Sachs (as you do). She wangled him an interview, no doubt charmed and convinced he was the “right sort”.

To continue on this theme, I recently read an interview with a City investment guru who recounted that old chestnut about knowing when to sell “when my plumber and taxi driver start giving me share tips”. If this happened in New York, you’d shrug and move on, but in London the story smacks of class division – oh yes, when the ignorant masses start dabbling in the markets, it really is time to sell up and head for Saint Kitts.

Fortunately when I hit my thirties I came across The Motley Fool UK Investment Guide which, for me, deconstructed and poked fun at a lot of this “It’s not for the likes of you” rubbish, and I never looked back. These days I hope that the growing popularity of some of the web based bloggers and investment platforms allows that opportunity for millions more.

 

Retirement Society

In my last post, I talked about the importance of knowing where your money goes and, in the way of these things, I chuckled when I heard a guru of “expenses tracking” – Vicki Robbin, co-author of the classic Your Money or Your Life – being interviewed by the Mad Fientist on his most recent podcast. I almost gave up on listening right through to the end of this interview however because, to be honest, this woman is a verbal Duracell Bunny on amphetamines. She just won’t shut up! The Fientist was lucky to get two dozen words in edgeways as the ideas, stories, recollections and events of Vicki’s life just poured forth like a torrent. It didn’t help that when the Fientist did actually lever a question in, she’d answer, “You know, that’s such a GREAT question”, an American cliche in interviews that’s becoming so common (like beginning sentences with the word “So”) that it’s almost an insult.

So I stuck with it, and in the end was glad I did, because as the podcast came to a close, Vicki began to talk about some subjects that I’d like to tackle myself in my blog, about some aspects related to retirement finance that you don’t necessarily think about. Or don’t want to think about. Top of the list was a comment she threw out from the welter of information she’s gathered over the years. “Loneliness is expensive”, she stated, and went on to talk about how vital it is to have a developed network of friends and community around you as you grow older. This was in the context of quite a lot of other material about community living and how to develop and look after yourself in retirement once you have the finances covered.

When I had my year out sampling early retirement, this was something that struck me personally quite hard – just how much my community, my network and several of my close friends, were actually all connected to my workplace. When that vanished, well, they didn’t exactly vanish too, they just receded rapidly over the horizon! People I’d spoken to every working day for several years were suddenly out of reach. Clearly I couldn’t call them on a daily basis just to chew the fat, but I made the effort to keep in touch maybe once a fortnight. Which then dropped to maybe once a month. Meanwhile the casual acquaintances at work, whose company I often enjoyed even if in small doses, well, they did vanish, only to be glimpsed occasionally on Linkedin as a reminder of the community I once had.

Okay, this seems obvious now, and I was cognisant of it when I was at work too – my workplace pretty much was my community. But leaving it was something I hadn’t really prepared for, nor was it something I was ready to pragmatically replace. I’m not, and never have been, a great fan of clubs or societies. I never liked the Scouts or the Boys Brigade as a lad, so thoughts of joining a “club” like the Round Table, or the University of the Third Age, or the local Historical Society, really didn’t appeal to me. Even clubs I was a member of, like my local golf club, I’d no interest in getting more involved with. In fact, the guys I do golf with, we all take an almost perverse pride in how little we join in with any of the club’s activities, slagging off our perceived notions of just how small-minded and parochial, if not downright snooty, that culture seems to be.

What other community interests and ventures could I take part in? I tried some voluntary work when I was retired but, ye Gods, after coming from the world of “real work” the way these organisations seemed to do things quickly drove me scatty. They were like how I thought the worst of the public sector might work. Meetings that would drag on and on with nothing really decided, or done. Hours spent discussing the organisation of a coffee morning or a checkout collection at the local village Tesco, while I’d be sitting there thinking “There are seven Tescos in our town, why don’t we do all of them, every day, for a week! Now that would raise some real cash!” When I voiced this opinion, the (elderly) members just looked at me as if I’d gone insane. Soon we’d be back focusing on the more important things, like who was going to organise the tea and coffee for the next meeting? And which biscuits should be bought, given the budget situation.

My wife’s managed to develop a wide circle of friends through her attendance of classes at the gym where I’m a regular member too. But, I don’t know, I find gyms really quite unfriendly and distant places, at least for men. Are blokes slightly embarrassed to be there? Or are the type of men interested in developing their fitness quite insular and introverted? Are we too competitive and proud to be friendly? I really don’t know, but in my experience gym’s are just not overtly sociable places. Perhaps this is the old “How did you find the people in the last village?”* adage, but I don’t think so. There’s more to it than that.

As I write this, I think, “Maybe I’m just becoming a crotchety old git?”, Victor Meldrew over the back. But surely he was such a strong and popular character because he ciphered some hard home truths to people about how they might become if they’re not careful? Victor Meldrew is seriously no role model for retirement but not because he’s ridiculous. It’s because we see in him traits that we can see in ourselves but find difficult to face up to. As you grow older, your tolerance bandwidth shrinks unless you work to enlarge it.

To return to the podcast, Vicki talked about how we’ve put work and money on a pedestal while sacrificing just about everything else before it. We’ve no time, or energy, or inclination to nurture much outside of family – if we actually get to see the family much itself, after the commute and long day at work.  There’s some statistic that about 50% of us don’t even know our neighbours names these days. Arguably that’s a good thing but, if I take out the facetiousness, it clearly isn’t a good thing at all. Especially not for older people.

There’s now some interesting data being punted around about how the biggest division in society is between people who leave their home town and those who don’t. People who value community ties before the career path. Guess where the Brexiteers and Remainers sit? Well, forget the cliched politics of the stereotyping that this debate has grown out of, I find it a relief just to read of a way of looking at our society that’s not fixated on class, money, status and the individual. If Brexit sparks a debate about the importance of culture and community outside of the economic factors then that’s a good thing, is it not? As we grow older we need a social and community support network almost more than we need cash. Given that the generation coming up isn’t going to have much of the latter, we need to think an awful lot more about how to nurture the former.

*The Parable of the Two Villages
A man who was traveling came upon a farmer working in his field and asked him what the people in the next village were like. The farmer asked “What were the people like in the last village you visited?” The man responded “They were kind, friendly, generous, great people.” “You’ll find the people in the next village are the same,” said the farmer.

Another man who was traveling to the same village came up to the same farmer somewhat later and asked him what the people in the next village were like. Again the farmer asked “What were the people like in the last village you visited?” The second man responded, “They were rude, unfriendly, dishonest people.” “You’ll find the people in the next village are the same,” said the farmer.

Tales of the Unexpected

 

I read an interesting article recently where a journalist was saying that she’d noticed a growing division amongst her friends, between those who were heading toward their sixties financially comfortable and those who weren’t. It wasn’t that the latter group were heading toward poverty, or anywhere near it (she’d have to head North to have friends like those!) they were just realising they wouldn’t be able to keep up with their very nice middle class lifestyles once they stopped earning. From the skiing week  in Courchevel before the big long haul holiday in the summer, to the odd bottle of half decent red most evenings and the spontaneous weekends away, such middle class dreams often require a salaried funding. When it stops, or radically reduces, these people sometimes find they have been living well beyond their future means in quite a big way.

Those friends of the journalist who were facing a financially restrained future had often had unforeseen events happen to them that subsequently hobbled their plans.  A messy divorce, an illness that didn’t want to wait on NHS for treatment,  a hoped for inheritance being rapidly burnt up in care home expenses or a sudden and unexpected end to employment. Well, such calamities happen, but having a level of spending that they just hadn’t realised they were burning through on a week to week basis is less excusable. No, strike that, it’s just NOT excusable, and most readers of this blog will probably nod in agreement. How can you NOT know what your spending levels are, or where the money goes on a month to month, if not day to day, basis? The people who are going to be caught out are financially in the “Unknown unknowns” zone, and they only have themselves to look at when this realisation dawns. How many are in this situation? Well, when I was talking to a headhunter friend recently he was telling me  how depressing it was to meet with fifty something executives, desperately pleading with him to help find them a job paying “Just fifty or sixty thousand a year, that’s about all I need”. They’ve no idea how difficult it is to find those roles once you’re a certain age. “And Jim”, he went on, “these guys are living literally from pay cheque to pay cheque, you’ve no idea how many of them I see. I tell you, the desperation sets in pretty quick”.

(Believe me, I could write, and will write some day, about the job market for the over fifties. It’s horrible in so many ways that I’m afraid if I start, I might finish myself off!)

I often hear my friends jibing each other about employment in the private sector versus the public one, and there’s an increasing edge to it as we approach pensionable age. This is because the public sector workers often have the iron clad, defined benefit pension pots that will simply never run out until their dying day. The guys who are in private employment generally now have defined contribution schemes (the self-employed blokes, I’m afraid to ask). With a DC plan, it’s beginning to dawn on them, from Day One of  their retirement that pot starts to run out. How to ensure it doesn’t? Buy an annuity? Seriously? Those who have done the calculation often feel their jaws drop at the paucity of the returns. Surely they must get more than that?

I’m lucky, I have an experience of both with a DC and a DB pot. But I still fret about the future. What if my DB company scheme gets into severe difficulty? It’s already carrying a substantial deficit that I’m frankly too scared to look into. What if my self invested DC plan implodes in a market meltdown? Having lived through the internet bubble and the 2008 crisis I’ve seen the latter happen, but in those dismal days I was earning and buying the cheap market month after month, pound cost averaging and keeping my fingers crossed. Once retired, that avenue of earning won’t be open to me, or potentially not in any easy or financially significant way.

With both types of pension to hand, I can be a bit sanguine about the potential financial impact of unexpected events. Other consequences of them, who knows, and I find I really don’t want to dwell on subjects like divorce, bad health, ageing parents and the rest. Old age is not an unexpected event all the same, and at least I did plan a bit for when it arrives, although the older I get that harder it is to define when Old Age is actually going to happen to me. It’s always about twenty years away, isn’t it? So that gives me plenty of time to plan…..