A version of this article was originally published in HumbleDollar.
They say timing is everything.
I should know because I’ve never been very good at it. The Kerr clan motto in Scotland is Sero Sed Serio—“late, but in earnest”—and I’ve been living up to that reputation since I was young.
In high school, my basketball game blossomed at the end of my senior year, just in time to have one good game of double-digit scoring before I graduated. I’ve missed every fashion trend that’s come along (anybody want a unworn pair of bell-bottom jeans?). I didn’t publish my first book until I was sixty-two. And as for investing—well, let’s just say I didn’t buy shares of Apple or Amazon before they took off for the moon.
So when it came to saving for retirement during my working career, I automated the process as much as possible. In addition to making monthly pre-tax payroll contributions to my 401k to take advantage of company matching, I had additional money pulled out of my bank account every month and invested in mutual funds within a taxable account. Over time, the power of dollar-cost averaging made up for my own lack of investing prowess and enabled me to build a decent-sized nest egg.
Alas, my miserable sense of timing came back to bite me when it came to choosing the date of my “retirement” from the corporate world in September of 2021. Back then, all was blue skies in the markets. My portfolio was appropriately diversified for someone of my age—so said my managed advisor at Vanguard. As long as I didn’t change my spending levels or long-term income expectations, he was confident I could leave the workforce early at sixty-one and be able to be fine for the next few years until I started taking Social Security and Medicare.
Then came 2022, soaring interest rates, and the worst year for stock and bond investors in more than a half century. Who could have predicted that in my first year without a steady paycheck, I’d be looking at double-digit losses in both the stock and bond sides of my portfolio? So much for the power of diversification in reducing portfolio risk.
Even worse, right before interest rates took off, I rolled over the 401k account balance from my former employer, which had been invested in small-cap funds, and put the funds mostly into the bond side of my portfolio so as to maintain the targeted 60% stocks/40% bond mix. Needless to say, those funds have gotten hammered in the bond selloff.
Sero Sed Serio.
But here I am, still standing. I haven’t (as yet) had to go back to full-time work or tap into the principal of my retirement accounts. How am I riding out the storm?
For me, four things have been key to staying afloat:
1) Lowering expenses and avoiding debt like the plague.
Proper preparation goes a long way toward making up for lousy timing. For years before I stepped away from the corporate workplace, I was ruthlessly lowering my expenses. I downsized, sold my house, paid off my credit cards, and got rid of all other debt except for a loan on my new Keystone travel trailer.
There’s no way I could have ridden out this storm in the financial markets without going back to work if I had a big mortgage to pay every month. I own, free and clear, my mountain cabin and the land it sits on. My biggest monthly expense is buying my own medical insurance, which isn’t cheap. But I consider that the price of freedom.
Unlike when I was working, I know I can’t buy anything I see or want. I have a budget and I work hard to stick to it. Every potential purchase gets weighed on a scale of what I would have to give up in order to get it. The one exception is with travel. This phase of my life is about experiences and adventures, so if I can afford a trip, I’ll take it. For instance, the weekend before Thanksgiving, I went on a spur-of-the-moment trip to Breckenridge, Colorado to see my son and his fiancée.
2) Having a sizeable emergency fund and Health Savings Account to draw on.
Life is unpredictable. While budgets are great, they can’t take all contingencies into account, especially when you don’t have a steady paycheck coming in.
That’s why, before I stepped away from the corporate world, I made sure I had a decent-sized emergency fund to pull from when I needed it. I tapped into it recently to help my son with a legal problem he was facing. I used the fund to pay for a new set of tires for my truck. Without a rainy-day fund, I would be pulling out the credit card or going to the bank for a loan—and that would spell the end of my freedom.
Along with an emergency fund, before I retired I also made sure I had a health savings account (HAS) fund to draw on for out-of-pocket medical expenses. I built up this fund from pre-tax contributions while I was working and have been pulling from it over the past eighteen months to cover deductibles and co-insurance payments. Having this fund was critical, for instance, in covering the cost of my replacement left hip earlier in the year.
3) Having a side gig to bring in extra income.
Even with all my preparations, I knew going into early retirement that I’d have to continue making money to replenish my emergency fund and pay for travel and other adventures.
Fortunately, I have a skill—writing—that I can make some money at without being chained to a corporation. In addition to writing freelance articles like this one, I’ve launched my own communications business, Boy Blue Communications, to take on selected writing and communications projects for my former employer and other corporate clients.
The beauty of having my own firm is that I can choose the clients and projects I take on and how many hours I want to work. My specialty is high-level financial and executive communications, speechwriting, and client case studies—all areas that interest me and that I can charge a healthy premium for. I enjoy keeping my finger in the corporate world. It helps keep me mentally sharp while bringing in a decent amount of income.
4) Tapping in the power of dividends.
When the market was crashing at the beginning of the pandemic, I took advantage of the situation to pick up a bunch of quality dividend-paying stocks in my taxable savings account.
A few of these stocks, like Exxon, Abbvie, and Blackstone, have more than doubled since I bought them. Only one of them, AT&T, has been a dud. But all of them have continued to pay dividends over the past few years, and a few of them have increased their dividend payouts.
The dividend stream isn’t much—less than five thousand dollars a year—but it has helped me keep my savings account from dwindling and paid for a few trips over the past year and a half.
The market will come back eventually to record highs. In the meantime, I’m holding my ground in the storm while enjoying my newfound freedom to pursue my passions.
Sero Sed Serio!