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These are not the four pillars you’ll find in most personal finance books. Nobody’s selling a course called “How Stupidity Made Me Rich”. But they’re the answer to how I retired at 58 with a pension portfolio that’s pretty decent. I think that honesty is worth more than another article about discipline and vision.
Let me start with the luck, because it’s important to be clear about what I mean. I don’t mean timing the market or backing the right stock. I mean a random afternoon at work and a pension salesman who happened to cross my path. He asked if I was interested, I said maybe, and he left me a brochure.
At the time my dad was in his fifties, dealing with health issues but unable to stop working because he had to. Watching that, I think subconsciously. I didn’t want to be in that position. I picked the brochure up a few weeks later and called the salesman.
At that visit he convinced me to open a retirement account. Then he asked me what age I wanted to retire. I had absolutely no idea, so I picked 55. It sounded reasonable, far enough away to feel abstract but close enough to seem ambitious, and I chose it the way you pick a number on a spinning wheel.
That’s the stupidity, and I mean it affectionately toward my younger self. I was 20 and didn’t fully grasp the scale of what I was agreeing to. But that 55 number mattered. Because of it, he recommended I set aside at least 15% of my wages and automate it to rise with inflation every year.
The automation did its background work. Every month, without my involvement or enthusiasm, money moved. I got married. We had a family.
There were months when that pension contribution felt like a punishment. I meant to call and reduce it but never quite got around to it. The paperwork, the hold music, the general busyness of life with small children meant inertia made the decision for me. Inertia, it would seem, was the smartest financial advisor I never hired.
At 31 I started my own business. For 27 years the pension ran in the background, largely ignored, while I focused on payroll, clients, and the worries of being responsible for other people’s livelihoods. I sold the business at 58 and walked away with a decent lump sum. Meanwhile, the boring infrastructure a 20-year-old had accidentally assembled had been compounding the whole time.
Admittedly, I retired three years past my youthful self’s 55 target. Not bad for a guess made by someone who couldn’t have told you what compound interest was.
I’m obviously not trying to dress this up as a strategy, because it wasn’t. But buried inside the accident are a few things that actually matter. Start early even if you don’t know what you’re doing. Automate so your future self can’t interfere, and sometimes the best financial decision you make is the one you never get around to undoing.
The salesman moved on years ago and I never thanked him. In truth, I can’t even remember his name. But I hope during the rest of his career, he asked many more 20-year-olds what age they’d like to retire.
start early, invest 15-20% of gross income in VTI and you are a retiree with millions
Congrats Mark on your fine achievement. The key of course is to start saving early and often. You must be very disciplined. Well done. For me, I also started early savings, but eased into my retirement over 25 years. Like what I did, and retired fully at age 79. Different strokes for different folks.
William, because we’re all unique, it’s no surprise that a cookie-cutter retirement playbook doesn’t exist. As you say: different strokes for different folks.
Thanks for sharing Mark. So much in life we benefit from is only apparent much later. Those of us in our 60s and early 70s have a great deal to be grateful for. Starting around 1982 or so, the stock market has been one heck of a tailwind for those saving for retirement. Folks starting a regular investment program in the early 80s, and sticking with it, have done remarkably well by investing in equities. The WWII generation, which my Dad was a part of, had mostly defined benefit plans. It was a good thing they did because inflation wrecked stocks from the late 1960’s till the early 80s, right before they retired. If they had to rely on 401Ks to retire then, well, good luck. The 401K came about in 1980 and as it grew to replace the defined benefit plans, and with boomers being such a large cohort, lots and lots of dough piled into the market from the early 80s to the present. This ‘passive bid” now plays a huge role explaining the inflows into equities. Will a time come when the boomers must cash in and shift to income producing investments? Will our kids and grandkids have this same tailwind boomers have had for over 40 years? My gut tells me they won’t have it so easy and I’ve had many discussions with my children about preparing for this future.
Patrick, in hindsight, we’ve had an amazing investment journey these last 40 years — though for large stretches, it certainly didn’t feel that way at the time. It’s always easy to construct a positive narrative after the fact. What I’m more hopeful about is that when today’s generation looks back over their own investment timeframe, human ingenuity will have written a similar story. And if nothing else, the unprecedented intergenerational wealth transfer on the horizon should give them a solid foundation to build on.
And I also was referred to listen to a radio show where Burton malkiel was the guest. I bought his book and learned index investing; how has that worked over the last 50 yrs. NO ONE BEATS IT!!!! no one
my uncle a cpa referred me to a pension administrator to set up a defined benefit and profit sharing plan in 1975. Fortunately I was smart enough to rebuff their advice to use some of the contributions to buy life insurance. By being forced to make yearly contributions it created enough assets to allow me to retire comfortably earlier than the norm. Invest early and often and let compounding do its magic. Not rocket science
Kenneth, as you say, it’s not rocket science — though I think having the excess means to do so is a harder ask than it used to be.
My brother says “if you are lucky enough, you don’t need to be smart”.
Sometimes what we call luck is, in reality, good preparation meeting opportunity.
Stupidity. I had the West Coast franchise. Definitely should not have married her. Should have known she didn’t love me. She wanted a house. I bought a big one just above a California beach, way more than I could afford. Stupid.
Luck. She wasn’t legally in the country, so the house was mine alone. And so when she walked out six days after getting her citizenship, she couldn’t make me sell it. When I finally did so nine years later to move to an Oregon beach with my second wife, it had doubled in value. That’s what truly launched us.
Automation. When I got sick, I hastened to simplify our finances as much as possible. Never mind stocks, bonds, funds, she didn’t know any of that stuff. I explain robo-funds to her, she got it, and I shoved our IRA’s into Betterment and Wealthfront. Nobody talks about robos on this board, but they’ve been fantastic for us and comfortable for her.
Inertia. When I got well, I just left most of what we have in the robos because I had no desire to go back to active investing, and because I know when I’m gone she’ll be able to handle them with confidence.
Mike, that sounds like a horrible experience — I’m glad luck won out in the end. Your robo advisor comment got me thinking though, I’m not actually sure what the real difference is between that and a lifestyle fund.
Big vote here for luck and stupidity. One example. When my husband signed up for his pension contribution, he checked the box that specified half each month would be invested in total equities: the other half in a more conservative fund. ( the more popular choice was 100% in the conservative fund). He remembers we discussed the choice. I don’t think that happened. At the time, we were moving half way across country, we had just bought our first house, and our toddler son had spiked a 106 temperature that required a brief hospitalization. Life was too much to consider money!! We never paid any attention to the annual reports we got on the state of that pension. But the compounding was amazing. When my husband retired after 44 years, his monthly pension was considerably more than he ever earned while working— even after guaranteeing a 100% spousal benefit and guaranteed 15 year payout to our estate in the event we the die before that period.
Marilyn, what a perfect storm of luck and stupidity that somehow worked out! I’m curious though — I always assumed defined benefit pensions were the norm back then, but it sounds like your husband had a defined contribution plan. Were those common in his industry at the time?
My husband taught at the U of Wisconsin so his pension is part of the state plan. Since he opted for the 50/50 split, half of his contribution went into defined benefit; half to defined contribution. So I think the second half worked like a 403B— just my guess. This choice wasn’t popular and the state stopped offering the choice a few years after he signed up. He was grandfathered in, so I imagine his contribution total must have roller coastered through 44 years— we didn’t pay any attention. When I started working at UW, defined benefit was the only option, but a few years before we retired, the state opened up the 50% all stock option. My husband could have continued the 50/50 split in retirement. His pension then would have been half based on the core state fund and half on the results of the total stock fund. (With the latter option, beneficiaries take the gain or loss each year; the core fund is more conservatively managed and the results are smoothed over 5 years..) He chose to get out of stock fund about a year before we retired. We weren’t willing to gamble in retirement. But with his pension and mine, we’re very comfortable having pretty close to 100% of our IRAs and Roths in stock.
WI’s pension is fully funded, and not a burden on taxpayers.. There is no COLA, but there is an annual distribution if the fund exceeds its expected costa. In the years we’ve been retired, we’ve received increases every year but one. We could also see decreases— but the 5 year smoothing has so far prevented that from happening.
Mark, I really enjoyed this. We often give ourselves too much credit for the good decisions and not enough credit to the people and chance encounters that quietly changed our lives. That salesman probably had no idea the impact he would have, just as you had no idea that an arbitrary number picked at age 20 would shape your future. It’s a wonderful reminder that while discipline matters, sometimes luck opens the door and inertia wisely keeps us from closing it.
Andrew, I read this quote many years ago, and I’ve never forgotten it: life pivots on moments so small they’re almost accidental, with no fanfare to mark their importance at the time. I can’t remember who said it, but it’s stayed with me ever since. I think it’s appropriate.
Mark, Gemini AI says: “The quote you are looking for comes from the widely praised book The Emperor of All Maladies: A Biography of Cancer by physician and author Siddhartha Mukherjee.”
1PF, thanks for the info! I haven’t read the book myself — I must have come across that quote lifted from it somewhere else.
I read some of this book while I was dealing with my own Emperor, and there were a number of memorable quotes like that, but I never finished it and eventually gave it away.
Having a pension can warp your sense of planning. Before I was 39 I never thought about retirement and since I had a good pension and saw our retirees doing okay I guess back then I didn’t have to.
In 1982 we added a 401k and I signed up and did much as you did and raised the contribution when I received a raise. The balance grew from 1982 until 2010 when I retired and has grown since. I also saved nearly all of my non-cash compensation earned during the last five years or so of working. Now the IRA and brokerage account are just about equal in value.
I like to think that if I didn’t have a pension, I would have saved more and started before age 39, but the early years were not easy with four children and one income, so I don’t know.
As it turned out after 16 years retired my pension and our combined SS is more than enough to cover all our financial needs and the investments keep growing.
I’ve wondered sometimes what my situation would look like today if I’d never crossed paths with that salesman. Would I have started a retirement account at all? And if so, at what age would I have finally got around to it?
My honest guess is that it would have been my thirties — though maybe I’m being a little hard on the younger version of myself.
I love your point about automation, Mark. Paying ourselves first and letting the compounding play out on its own can make us feel like geniuses, right? And that inertia you mentioned can indeed be helpful in situations like the one you described.
DJ, inertia is normally the enemy — it’s why we’re all still paying for that gym membership. But when it came to reducing my retirement contributions, those speed bumps were genuinely a gift in disguise.
My first thought was that what you describe as luck and stupidity was actually very good instincts, but then I thought, nah, it was just stupid luck.
Just kidding, Mark, I’m sticking with you having excellent instincts. Sláinte
Dan, I’d definitely recommend revisiting your second thought and totally ignoring your first idea.
For me, the key to successful investing was not knowledge or skills. It was the discipline to keep plugging away no matter what the latest headlines screamed. Automating your investing is a brilliant strategy as it allows you to ignore the noise. As Munger said: “The first rule of compounding is do not interrupt it”. Good article.
Jack, I’ll be honest — for the first seven or eight years after I opened that retirement account, I didn’t just ignore the noise. I wasn’t even aware there was noise to ignore.
I was no different. I’m wiser now, having learned from a few costly mistakes made in the past. The key thing for me anyway was not to make no mistakes, but rather to learn from them.