Jonathan Clements's Blog, page 352

Right Turn

MY HUSBAND is the consumer every company should fear. In my last post, I detailed his multi-month research that preceded our recent car purchase. This time, he decided to investigate auto insurance.

The Gecko���s promise to save 15% had hit a nerve. A savings of 15% on a $2,500 annual insurance bill for two cars would be worth the effort. But, of course, being the thorough person that he is, my husband had to check out every other insurance company on the planet.

What an eye-opening experience.

He started by getting online quotes. Then he called and asked for a hard copy confirmation. The initial online quotes looked amazing until he delved into the details. The coverage was minimal. When he asked the companies to replicate our current coverage, the quotes doubled.

Upon further inquiry, he found out it was partly due to a claim. That made sense. But what claim? We couldn���t think of any accidents or traffic tickets.

This is where it gets interesting.

The agent said there is a clearinghouse that tracks insurance claims. The Comprehensive Loss Underwriting Exchange, or CLUE, looks at ���incidents��� on your report. We had three claims.

In two instances, we had needed to jump start an antique car we own. These were incorrectly labelled as towing calls. My husband explained to the agent that we had a separate policy for the antique car and were not asking him to include it in the quote. It didn���t seem to matter.

The other claim was for a damaged windshield on a car we had since sold. We decided that, since we had insurance, we should put in the claim. Isn���t that why you have insurance? It turns out that, while the claim may not negatively affect your premium with your present insurer, it could add to the cost if you get a new policy.

After all the wrangling, we did change insurance companies. It was worth it. Here are five things we learned:

Get quotes regularly from other insurers. Even if yearly increases are small, they add up���and you could do better.
Keep the clearinghouse in mind if you plan to change policies. A new insurer may ding you for claims within the last five years or so. If the damage to your car isn���t too extensive, consider paying out of pocket.
Make sure the insurance quote you request is for the same coverage you currently have. That way, you can make an apples-to-apples comparison.
Newer cars have more safety features���and that can result in lower insurance premiums, even though you���re now driving a newer, more expensive car.
Don���t opt for the insurance company���s roadside assistance if you already have coverage through another source, such as AAA or your credit card.

How did we do? We have a new policy with an insurance company that���s saving us $1,300 a year. An added bonus: Unlike our old insurance company, the new insurer lets us pay by credit card, so we���re collecting points.

Sonja Haggert’s previous articles were Getting Used and��Check’s in the Mail. She’s the author of Invest, Reinvest, Rest. You can learn more at SonjaHaggert.com.

HumbleDollar makes money in three ways: We accept�� donations, ��run advertisements served up by Google AdSense and participate in�� Amazon ‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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Are We There Yet?

SAVING, investing and planning for retirement is like running a marathon. It requires dedication, discipline and endurance.

But there���s also a crucial difference.

When you cross the finish line in a marathon, you know the race is over. But when you quit the workforce, it���s much harder to figure out whether you���ve successfully reached retirement.��Why? A happy and prosperous retirement is about money, but it���s also about so much more than money.��Here are 15 signs that a wonderful retirement likely lies ahead:

You don���t need an online calculator to tell you that you have enough money, because it���s so obvious you can do the math yourself.
Your Social Security benefit will cover your fixed living expenses���and you can afford to wait until age 70, so you get a larger check.
Your Social Security and required minimum distributions from retirement accounts will together cover all your expenses, discretionary and nondiscretionary.
You don���t pay attention to the stock market���s daily movements, because you���re confident you have enough, pretty much no matter what happens.
You decide to get a part-time job not because you have to, but because you want to.
You have a spouse or significant other who does little things, like straighten your shirt or hold your hand, to let you know that he or she will be there for you to the very end.
Your adult children visit you not to borrow money or drop off the grandkids, but to say ���hello��� and ask how you���re doing and if you need anything.
You wake up in the morning thinking it���s Thursday and you need to rush to meet Diane and Stan for breakfast. But a few seconds later, you realize it���s only Wednesday and you have a lunch engagement with Cindy and Steve.
You turn 65 and enroll in a Medicare prescription drug plan. You opt for the lower tier, less expensive plan, because you don���t take medication on a daily basis.
Your medical costs primarily consist of the Medicare and supplemental insurance premiums you pay each month.
You���re aware of how long-term care can adversely affect your life and your financial future. But you feel confident about your physical health, because you eat your salad and your grilled fish after another energetic workout at the gym.
You say to yourself: ���I can���t believe I���m xx years old. I don���t feel it.���
With more time on your hands, you discover new things about yourself���like a new talent you didn���t know you had.
You stop and look at the sunrise and sunset, because you now have time to notice such things���and you want to enjoy them to the fullest.
You have a reason to get up in the morning and a feeling of contentment when you lie down at night.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. His previous articles include Healthy and Wealthy,��After You��and��Improving With Age. ��Follow Dennis on Twitter��@DMFrie.

Do you enjoy the articles by Dennis and HumbleDollar’s other writers? Please support our work with a�� donation .

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Mercedes and Me

MY FATHER was a car salesman. For the last 20 years of his career, he sold Mercedes and he was good at it. He even won a sales contest that included a trip to Germany to tour the factory.

Unfortunately, selling Mercedes does not mean you can afford one. But he did get to drive them. As a kid, I was also hooked. When I was 17, I was allowed to drive a 190SL in the local July 4th parade. Once, I even drove a 300SL. I was definitely hooked.

When I graduated high school in 1961, I promised my father that one day I would own a Mercedes. Looking back, I think my quest was more about being financially successful than the car itself. My father often told stories about the people who bought cars from him���doctors, a baseball player, owners of famous restaurants. Often, people paid cash. One story was particularly motivating. It was about a fellow who bought a 300SL for $11,000 in 1953. He reached into his top shirt pocket and pulled out the cash. That���s about $104,000 in 2019 money. Perhaps it���s telling that I still remember that story.

While I never really lost my desire for a Mercedes, life intervened, including four children, 16 years of college bills and saving for retirement. Around 1994, as my youngest entered college, my Mercedes yearnings began stirring. Was there light at the end of the college tunnel?

I opened a savings account and dubbed it my Mercedes fund.

Twenty years later, I had enough money���or close enough. In 2014, I bought a E350 for cash, more money than the cost of all my previous cars combined. At age 71, I fulfilled a dream and a promise. Two days after picking up the car, I fulfilled another promise. My wife and I took off across the U.S. so I could show her the national parks she���d always wanted to see���and I got to drive my Mercedes on the open roads of the west. I won���t admit to the speed I reached once, because my wife may read this and she was asleep at the time. I put 10,000 miles on the car in a few short weeks.

Just before the trip, when I drove the car off the lot, I welled up for a minute. Still, I didn���t feel the degree of satisfaction or pleasure I thought I would. It was, after all, just a car���which was now worth less than I���d paid. What I realized was that it wasn���t about the car, but about keeping a promise, about setting and achieving a goal, and about proving to myself I could do it.

That didn���t last long. I looked around and saw people half my age in better models. Did they pay for them? The salesman told me that, in his experience, over 70% of the cars are leased. If you lease a car, are you making a good financial decision���or is it that you really can���t afford the car and it���s more of a keeping-up-with-the-Joneses decision?

It���s the same with other spending, too. What���s the point of expensive trappings that can���t be paid for in full and that divert money from truly important financial goals? It���s like cheating on a test. You get an A, but you learn nothing and accomplish nothing.

My dream car is now five years older, and so am I. I���m getting those Mercedes stirrings again. What to do, what to do? Should a really old man take a chunk from the kids��� inheritance?

Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Leaves Me Cold,��Sharing the Wealth��and��Matter of Degree.��Follow Dick on Twitter��@QuinnsComments.

Do you enjoy��reading the articles by Dick and HumbleDollar’s other writers? Please support our work with a��donation.

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A Rich Life

I AM FRUGAL and I feel fortunate to be so. Indeed, among all the financial skills I���ve learned, frugality stands out as the most powerful. But at the same time, I also feel affluent. This might seem like a contradiction, but the mindset of frugality and the feeling of affluence strike me as two sides of the same coin.

Frugality is often associated with being cheap. Frequently, ���affluent��� is used interchangeably with ���wealthy.��� I beg to differ. Frugality is about avoiding spending on things that have little value, while affluence is about having things that truly matter. I believe it���s possible to strike a balance, so you���re frugal and affluent at the same time.

My family���s frugality is evident in our spending. When I compare our average household expenses to those in the same income decile, our numbers are much lower. In fact, our annual expenses are closest to the income group that���s two deciles below ours.

Meanwhile, we rank in the top quartile for household income in our city, and yet the value of our single-family home is below the city median. All but one of the cars we���ve ever owned, including the two we bought in the past year, were purchased preowned. We use them for as long as they’re safe and comfortable to drive. We are frugal.

But we are affluent, too, in the sense that money has never constrained us from having and doing the things we care about. We vacation a lot, often abroad and never on a shoestring. Each of us freely pursues our interests, despite some being somewhat expensive. My lovely wife has a fascination with luxury German-built sport sedans and SUVs, while I���m a minivan person. We own one of each.

We have both been able to take long, unpaid time off from work to care for our ailing parents, without worrying about the financial impact. We strive to be generous with those we care about. Most important, we earned our financial independence a few years ago, so my wife and I now have the freedom to retire early or scale back our work. This is what our frugality has bought us.

While frugality is a struggle for many, it came naturally to me. Growing up in a middle class, single-earner family, the good habits of budgeting and responsible spending were ingrained in me. After I finished my education and started living on my own, I religiously followed the ���save first��� mantra and fought every urge to be extravagant. While my self-discipline was great for my financial future, it also led to occasional feelings of being deprived. I was frugal, but I didn���t yet feel affluent.

To prepare for new management responsibilities at work, I was compelled to learn new skills and get broader exposure to business problems. Three key insights from this training came in handy for my personal life. First, the 80/20 rule helped me to relax my self-imposed tight spending rules. I discovered that by increasing my spending just a little, I was able to boost my satisfaction with life significantly. The feeling of deprivation was gone.

Second, the ���do more with less��� paradigm helped me to focus on my family���s top priorities. I identified our most important financial goals and channeled most of our money there. Third, the KISS���keep it simple, stupid���philosophy helped me unclutter our finances and put our money management on autopilot. All these lessons transformed me from being overly cautious about spending to a more balanced lifestyle. Today, we are affluent because we are frugal.

Like that idea? Try benchmarking your income and expenses using survey data. If your annual expenses are the same or higher than your income group, the chances are you can reduce your spending without any perceptible impact on your lifestyle. Track your expenses, ruthlessly reducing or eliminating spending that has little meaningful value. This will help you spend more on things you find truly rewarding. It doesn���t take a supersized income, financial windfalls, unsustainable self-deprivation, extraordinary luck or investment genius to become affluent. Even if you have none of these, but you have frugality, financial success is all but inevitable.

A software engineer by profession, Sanjib Saha is transitioning to early retirement. His previous article was Cost of Living. Self-taught in investment and financial planning, Sanjib is passionate about raising financial literacy and��enjoys helping others with their finances.��Earlier this year, he passed the Series 65 licensing exam as a non-industry candidate.��

Do you enjoy articles by Sanjib and HumbleDollar’s other contributors? Please support our work with a donation.

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Taking Your Lumps

I���M ONE��OF THOSE lucky folks whose employer had a traditional defined benefit pension plan. I worked in the aerospace industry, starting with GE in the 1980s. Various mergers led to us to become part of Lockheed Martin. Through these multiple sales and mergers, our benefits and pension plan stayed largely the same, though���to be honest���I didn���t pay a lot of attention in my early years and was only vaguely aware of the details. This lack of interest, however, changed dramatically later in my career.

After 26 years of service, my division was sold to a private equity firm. Lockheed and the firm that bought us were able to come to an agreement that kept our pension intact and active. Four years after the divestiture, however, our traditional defined benefit pension was frozen and replaced with a cash balance plan. At that time, a lump sum option was added, but its calculation was confusing and not consistently applied across all retirement scenarios. I realized the time had arrived to become much more familiar with the pension���s design and its various options. It was during this research that I became acquainted with a wonderful word: superannuated.

The Cambridge Dictionary defines superannuated as ���old, and almost no longer suitable for work or use.��� In the pension world, it might be rephrased as ���highly paid employees whose current productivity doesn���t warrant their salary.��� Many pension plans include a design feature to incentivize employees to retire early to help with this problem. Like these other plans, my pension plan had provisions for ���early retirement.���

The plan had two distinct categories of ���early retirement��� that allowed an employee to receive a reduced pension as early as age 55. The first category was for employees with five years in the pension plan who voluntarily left the company before��age 55. An actuarial reduction of approximately 8% per year was applied to the monthly annuity if you took your pension early. For example, employees in this category would receive about 35% of their full pension if they took it at age 55, instead of the 100% they���d receive if they waited until 65.

The second category was for employees who met certain service and age requirements, and therefore were eligible for an ���early retirement supplement.��� How did folks qualify? You needed to be age 55 or older when you left the company and been enrolled in the pension plan for at least five years. Alternatively, you could qualify���even if you were younger than 55���if you���d been with the company for 25 years and were laid off. With the ���early retirement supplement,��� an employee would receive significantly more���75% of his or her full pension amount at age 55 and 100% at age 60.

Why am I bothering you with all this? If you���re covered by a traditional pension plan, there���s a good chance that someday your employer will make you this offer: You can get your promised monthly payment���or you can get a lump sum right away. Many folks jump at the lump sum, which���if you don���t bother to run the numbers���can seem impressively large compared to the monthly pension payment.

I was offered the chance to take a lump sum payout a few years ago, when I retired. The lump sum was calculated at the standard retirement age of 65, and then reduced, depending on how old you currently were. The catch: The lump sum calculation didn���t include the early retirement supplement. To be fair, the plan administrator provided estimates of an employee���s pension, including a comparison of the present value for all the options.

My estimate at age 60 showed that the lump sum was worth about 65% of the present value of the monthly annuity, including the early retirement supplement. In my mind, this large difference made the monthly annuity the clear winner. I was happy to select it and help my employer with its superannuation problem. The lesson: It pays to thoroughly understand the details of your pension plan���and never assume the lump sum is always the better option.

Richard Connor is�� a semi-retired aerospace engineer with a keen interest in finance. Rick enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. His previous articles were Quiet Heroism and��Think Bigger. Follow Rick on Twitter��@RConnor609.

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Passive Stampede?

LAST WEEK, investment manager Michael Burry made waves when he issued an apocalyptic��forecast: Index funds, he said, are in a bubble similar to the housing bubble that ended very badly in 2008. Burry couldn���t say when the crash would come, but noted ominously that, ���the longer it goes on, the worse the crash will be.���

Burry acknowledged that he’s ���100% focused on stock picking,��� so���at first glance���his criticism seems not unlike other active fund managers��� criticisms of index funds, sometimes referred to as “passive investing.” Competitors have been lobbing grenades at indexing since its inception nearly 50 years ago, when one��active manager��called index funds ���un-American.���

But Burry isn���t just any ordinary stock-picker. He���s a cult hero within financial circles. A neurologist by training, Burry left medicine to start a hedge fund and was one of a handful of investors to predict the 2008 crash in mortgage bonds���and to profit from it. In��The Big Short,��his book on the topic, Michael Lewis cast Burry as a central character. In short, Burry is exceptionally talented, with a track record that speaks for itself. It���s no surprise then that last week, when he issued his broadside against index funds, people listened.

In Burry���s view, the growth of index funds presents several dangers. First, they use derivatives, ���the same fundamental concept that resulted in the market meltdowns in 2008.��� He cautioned that index funds could face a liquidity crunch. ���The theater keeps getting more crowded,��� he said, ���but the exit door is the same as it always was.���

That last line was the one that really got people. No one likes the idea of being stuck, especially when it comes to one���s finances. And no one likes the idea of getting caught in a stampede.

While I disagree with Burry���s doomsday forecast, I���d like to discuss a broader issue here. My peers��Allan Roth��and��Ben Carlson��have done, I think, the best job of responding to Burry���s comments point by point. Vanguard Group also addresses some of Burry���s criticisms in��this paper. I recommend reading what they have to say.

The broader issue, in my view, is our propensity as human to buy into narratives like Burry���s. As Jonathan Gottschall wrote in��The Storytelling Animal, ���We are, as a species, addicted to story. Even when the body goes to sleep, the mind stays awake all night, telling itself stories.���

Writing in��Thinking, Fast and Slow, Daniel Kahneman says that, ���The confidence that individuals have in their beliefs depends mostly on the quality of the story they can tell about what they see, even if they see little.��� In his experiments, Kahneman has proved that most people prefer stories and intuition over facts and data.

This, in fact, is how people accomplish memory feats like reciting thousands of��digits of pi. No one can remember all those numbers, but they can remember stories. They build mental images, and associate numbers with stories, as they walk through those landscapes in their mind.

In short, a story is a potent tool. And the more sensational the story, the better. Data is hard, but stories are easy.

In reading Burry���s warning about index funds, I���m not sure most readers would follow his logic. After all, it���s a complicated topic and most people don���t have ready access to the same data. But his image of the stampede at the movie theater? Everyone can understand that. Indeed, that���s why I think his comments got so much attention.

Stories aren���t necessarily all bad. But as an investor, it���s important to discern fact from fairy tale. Here are some tips:

Determine if the story is even true. Especially today, with the ability to manipulate images and even video, your first step should be factchecking everything you hear.
Even if the story is true, ask yourself whether it���s conclusive or just one data point. Anyone who has ever taken a statistics class knows that there are always outliers. Make sure that the narrative you���re hearing isn���t the dramatic story of one extremely unlikely case.
If the narrative involves a forecast, ask yourself whether there are alternative narratives that also fit the same facts. That���s what I recommend in the case of Burry���s warning. I���m confident that his opinion is based on facts, but I also think those same facts could lead to a different conclusion.
Beware of recency bias. Our minds are programmed to extrapolate. If the market has been going up in recent days, we���re more likely to believe that it will continue, and vice versa. Beware of stories that seem to fit neatly into current trends.
Ignore credentials. By its own��admission, even the Nobel committee isn���t perfect. Remember Ted Kaczynski? He has a diploma from Harvard. Don���t accept everything people say just because they seem smart or sound good.
Diversify. Suppose Burry is right. I don���t think he is, but no one can say with 100% certainty that he���s wrong. Fortunately, there���s an easy solution: diversification. If you own cash and bonds, they���ll help you weather any stock market disruption. In fact, regardless of Burry���s warning, I���d always recommend diversifying like this.

Adam M. Grossman���s previous articles��include Adding Value,��Three Risks��and��Room to Disagree . Adam is the founder of�� Mayport Wealth Management , a fixed-fee financial planning firm in Boston. He���s an advocate of evidence-based investing and is on a mission to lower the cost of investment advice for consumers. Follow Adam on Twitter�� @AdamMGrossman .

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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User’s Manual

I���VE TAKEN to telling folks that HumbleDollar is the site for folks who are striving to be rational about money���but who are acutely aware that they���re human.

Figuring out what���s rational is relatively easy. We should save diligently, diversify broadly, invest in stocks if we have a long time horizon, favor index funds, take on debt cautiously, only insure against major financial risks, avoid buying a house that���s larger than we really need and, once retired, worry less about dying young and more about living longer than we ever imagined. Yes, we can quibble about the details. Still, the broad outlines of a rational financial life are pretty clear.

But then there���s the human side. When I say ���human,��� I don���t mean individual quirks. I like to spend my money on travel and eating out, and don���t care much about the car I drive. For you, the priorities may be different.

Rather, by ���human,��� I mean the ways we stray from the rational financial life. We have a fun money account, where we trade individual stocks, even though we know it���s a loser���s game. We claim Social Security as soon as we���re eligible, because we can���t stand the idea that we���ll die young and get nothing back from the system. We go to the shopping mall and end up spending far more than we planned, thanks to a slew of impulse purchases.

None of this is so terrible���as long as we don���t badly damage our financial future. What if that���s a risk? We need to find a way to rein in our worst instincts. That���s the goal of a new chapter that���s just been added to our online money guide. The chapter discusses seven ways we fall short���and suggests a slew of strategies for doing better. Check out our user���s manual for humans:

We Miswant
We���re Never Satisfied
We���re Social Creatures
We Focus on Today
We���re Overconfident
We Misinterpret
We Hate Losing
Saving More
Investing Better
Boosting Happiness

Follow Jonathan on Twitter�� @ClementsMoney ��and on Facebook .��His most recent articles include Just Asking,��No Worries��and��Pay It Down. Also check out his latest podcast with Peter Mallouk of Creative Planning, where Jonathan sits on the advisory board and��investment committee. Jonathan’s ��two most recent books:��From Here to��Financial��Happiness��and How to Think About Money.

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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Giving Voice

���WE NEED TO TALK.��� How many relationships have ended with those four words? They���re a verbal cue to take the news calmly and move on with life. But I would guess just as many relationships have ended without any words or possibly with harsh words. That���s what happens when we don���t talk about our relationship���or about our financial situation and financial plans.

A few years ago, my wife used those four words after I announced I was reducing our life insurance. I explained that we didn���t need as much coverage as we reached age 60. The reaction from my wife was immediate: ���We need to talk.��� She explained that her mother thought they would have plenty of life insurance, but found they had none thanks to a vanishing premium scheme that left them with no coverage. My wife made clear how important this was to her by saying, ���We need to talk.���

I realized we had not talked. She had no idea why I intended to reduce our life insurance, because I hadn���t shared my plans. This was all on me. As a CPA, I���and I alone���spent a lot of time pondering our financial life. I made the assumptions and decisions, but now realized what was missing. We did indeed need to talk.

The moment was rough, but the talks since have been fantastic. We set up a regular time to discuss issues and make plans. We bought several books to read and discuss together, building a common frame of reference on investing, personal finance and how the world changes from saving to spending when we retire���books such as��The Bogleheads’ Guide to Investing��by Taylor Larimore, Mel Lindauer and Michael LeBoeuf, How to Think About Money��by HumbleDollar’s editor Jonathan Clements and Money for Life by Steve Vernon.

We educated each other about the events and examples that had shaped our views on financial matters, exploring the influences in our life from the time we were kids through 40 years of marriage. We shared articles from the internet, with viewpoints different from our own, and discussed them. We needed to talk and we continue to talk.

Approaching retirement, the discussions have become less about learning, and more about sharing and ���what if��� scenarios. We have talked about paying off the mortgage early, financing a car, buying new investments, when to retire and further reducing our life insurance. The talks have become as much a part of the day as fixing dinner. Incredible as it sounds, these talks have actually brought us closer together. One other result: Our grown children have seen us start and end these financial talks a number of times���and now we see them talking with each other as well.

Mark Eckman is a data-oriented CPA with a focus on employee benefit plans. As he approaches retirement, he’s realizing that saving and investing were just the start���and maybe the easy part. Mark’s priorities: family, food and fun.��

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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Leaves Me Cold

ALTHOUGH it���s only been a few months since I first heard the term, I���m already tired of all the chatter about the financial independence/retire early (FIRE) movement. This so-called movement is so irrelevant that I don���t know why anybody, including me, writes about it���and yet my curmudgeonly instincts compel me to do so.

Don���t characterize me as a movement hater. To each his own. But consider a recent story in MarketWatch about a couple���he���s age 44, she���s 33, plus they have a small child���who plan to retire next year. My reaction: Simply being frugal for the next 45 years isn���t enough. There���s a lot more you need to think about. For instance, if you���re truly retired, what are you going to do, sit on a beach for eight hours a day?

I���m all for frugality. But then I read about FIRE devotees giving up luxury items and it all seems a bit pompous to me. Let me get this straight: You give up stuff to live on a tiny percentage of what you make���but that tiny percentage turns out to be pretty close to what the average American earns in total.

Then there���s the family thing. Are you thinking what I���m thinking? Those FIRE folks aren���t couples with three kids to schlep from soccer to dance class. Often, they aren���t funding 529 plans, because there are no children or they���re planning to make the kids take out loans.

I love the simplicity of FIRE thinking: Save 40% to 70% of your income for several years. The goal: Accumulate enough funds so that 4% of your nest egg equals what you spend each year. Bingo, you���re set for life. That 4% rule is supposed to keep 65-year-olds from running out of money during a 25- or 30-year retirement. But is it enough to keep up with the vicissitudes of life from age 40 onward? In addition, aren���t these dropouts effectively giving up much of their Social Security safety net, even if they do collect some modest benefit based on their relatively short earnings history?

Hey FIRE folks, have you been listening? There���s talk about a wealth tax, free tuition, baby bonds, free childcare and more. We have lots of government debt, that debt is growing rapidly and we still need to fix Social Security. Can you say, ���higher taxes���? I���m thinking that might affect your plan to live off your nest egg for 40 or 50 years.

If you���re living on $40,000 in 2019, do you still want to live on the same inflation-adjusted amount when you���re 70? Is the goal to be mega-frugal forever? I don���t get it.

The FI part of FIRE is just fine. Who can argue against financial independence? Go for it. But dropping out���the RE, or retire early, part���to pursue a dream of leisure, travel and a stress-free life strikes me as childish. But in many cases, it seems retiring doesn���t really mean stopping work. It just means doing something that doesn���t sound like work. Writing a blog, perhaps?

Over half a million Social Security recipients live outside the U.S. Some of the FIRE folks look abroad for the good life, mostly seeking a lower cost of living. If you want to live outside the U.S. because that���s your dream, great. If you must live in a place because your budget dictates it, maybe not so much.

Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Sharing the Wealth,��Matter of Degree��and��Lesson Unlearned.��Follow Dick on Twitter��@QuinnsComments.

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Healthy and Wealthy

I STILL KEEP in touch with three high school buddies. One of them, Brent, isn���t doing well. He has high blood pressure, poor eyesight caused by glaucoma and creaky knees that make it hard to get around, and he���s recovering from heart surgery.

My other friend, Robert, is a diabetic with poor vision, suffers from neuropathy pain in the foot, needs a cane to walk and is on medication for various ailments.

Burt, my third pal, smokes, loves to drink beer, is overweight, doesn���t exercise and sits on the couch most of the day watching sports. Oh, by the way, Burt has no physical ailments and is strong as an ox.

Luckily, all three of my friends are retired. But if they had to go back to work, Burt���the smoker and drinker���would be the only one healthy enough to do so.

We can���t all be lucky like Burt. That���s why we need to see a doctor for regular checkups���and not just because our life may depend upon it. It���s also a good financial decision.

The biggest threats to our retirement portfolio aren���t just poor investment choices, high fees and a brutal bear market. It���s also poor health that prevents us from working and hence saving for our financial goals.

According to the Centers for Disease Control and Prevention (CDC), 61 million adults���equal to 26% of the adult population���live with a disability. Meanwhile, the Bureau of Labor Statistics says that, among those ages 16 to 64, just 30.4% of those with a disability were employed, versus 74% of the population without a disability.

I���m sure you wouldn���t go to Las Vegas and place your retirement money on the roulette wheel���s color red. If you have health insurance, why gamble on your health by not getting an annual physical? Seeing your doctor on a regular basis puts the odds more in your favor, especially when working late in your career is necessary to meet your financial goals.

You can also lower risk by living a healthy lifestyle. According to the CDC, ���Adults living with disabilities are more likely to be obese, smoke, have heart disease and diabetes.��� Improving access to health care would reduce the risk of developing a disability.

Why do companies provide health care for their employees? It isn���t just because it���s part of the compensation package needed to attract employees. It���s also because they know a healthy employee is a productive employee. If you���re healthy, there���s a good chance you will perform at your highest level. That not only helps your employer, but also can create career opportunities for you, leading to better compensation.

Companies are always looking for ways to be more efficient, because it reduces costs, improves quality and creates more profit. That���s one reason businesses are becoming more automated. They know a robot will always show up for work, but Ted or Mary might not.

Try to be like that robot and show up to work every day���by seeing your doctor regularly and embracing a healthy lifestyle. If you do, you���ll enjoy life more and you���ll have a better chance of meeting your financial goals.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. His previous articles include After You, Improving With Age and Summer School. ��Follow Dennis on Twitter��@DMFrie.

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