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In retirement at least, financial security would ensure enough guaranteed income to meet your fixed, monthly expenses.
Guaranteed income can consist of Social Security, a pension, and if not sufficient, one or more fixed, lifetime immediate annuities. You could also consider a ladder of individual bonds held to maturity, but if you’re still kicking after you’ve reached the last rung, that source of income disappears.
If you’re confident you can meet your monthly expenses without regard for what the stock market is doing, that should go a long way towards feeling financially secure.
What do I need? Two things. Both quite simple and straightforward, really.
I’m reminded of the Chinese proverb: “Be careful what you wish for. It might come true.”
Single-payer healthcare coverage with low or no monthly payments sounds good. But if we use Britain’s National Health Service as an example, the quality of the health care you receive will likely disappoint. If the government squeezes the health care industry to keep costs down, what will happen to innovation giving us new medicines and treatments for serious diseases?
Being able to buy more Social Security violates the structure of the program which depends on contributions from current workers. The private insurance industry stopped offering CPI-indexed annuities because they aren’t profitable. If government offered such a product, you would likely see your taxes rise significantly to pay for it. It’s doubtful you would find yourself ahead financially.
Just a little bit more. No matter how much money you have, everything we be so much better if you had just a little bit more.
A printing press.
Some lucky ones are fortunate to go through life without a hitch – the car always runs, the job is good, boss is good, co-workers are good, health is good, kids are good, marriage is good, house is in the right neighborhood and never has problems, investments always growing, and everybody loves you.
Many are less fortunate, less “lucky”, and have to struggle with life.
Frequently both types are in the same family.
Or you could be born in a third world country with no advantages.
Income should be 20% higher than expenses, and zero debt. Hum? . . Yes, the math seems to work.
Feeling that both I and my close relatives are in a good position to be self-supporting and to help each other out in dire emergencies is what I need to feel financially secure. Health, education, employment, and savings all play a role in that feeling.
In my twenties, I obtained a decent job with a stable employer. I made a deal with my parents to pay them rent for a year, so I could start paying down student loans and save for furniture and deposits on apartment and utilities. My father became seriously ill. My mother couldn’t work because my father needed care. My brother was struggling to establish a legal practice. My parents had a mortgage; my parents and my brother had car payments; my brother and I had student loans. Our combined savings was less than $5,000. I went from feeling somewhat financially secure with my new job to constantly worried about money during the year it took to get my father’s health stabilized and get him approved for disability.
Twenty years later, when my mother needed to move to assisted living, I was only slightly concerned about money. She had no debt, social security, and a tiny pension. My brother and I discussed our family budgets, figured out where we could cut back, and were able to pay for assisted living without being in a hurry to sell our mother’s house.
That’s financial security, when I can support myself, prepare for retirement and emergencies, be able to help out family in a dire emergency without much stress, and know that my nearest family are also self-supporting and preparing for retirement and emergencies.
I wouldn’t mind a couple of million dollars, but I don’t need it to feel financially secure.
A steady, low-risk full time job with benefits is probably the biggest thing. Since leaving my 9-5 six months ago, my net worth has grown nicely and I have a good self-employment income, but I feel less secure now than at any time in the last several years.
Also, since I’m 33yo, there is just so much time left in life and a wide range of possible outcomes. If I were generally healthy, married, owning a house at age 70 with Social Security on the doorstep, I’d probably feel more secure since I’m closer to the end and know that SS will provide a nice annuity. Kind of morbid, but that’s how I see risk right now.
And I like Rick’s response below!
I wish I knew. If most people looked at my income, my assets and my lack of debt I suspect they would say you are totally secure. But I don’t feel that way and probably never will. I’m always looking for what if’s that could derail the status quo. Have I accounted for every possible contingency? I try.
I think this changes as you grow older.