How Early Retirement Prepared Us for the Pandemic

In August of 2019, my family and I underwent a dramatic transformation in the way we were living. I stopped going to work. We moved from Minnesota to Michigan into a much smaller home.

Since then, we’ve spent a lot more time together than ever before. We spent 2 months each in Mexico and Spain where we hardly knew anyone and didn’t understand much of the language. At least we had each other.

We thought we’d come home and resume a more social existence seeing family, getting together with neighbors, and making friends in our new community. Instead, we had to abide by a stay-at-home order for months. 

How Early Retirement Prepared Us for the Pandemic

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The pandemic caused by this novel coronavirus wreaked all kinds of havoc on both the global economy and the finances of individual households.

The Pandemic and the Economy

In three weeks, over 15 million people in the U.S. alone filed for unemployment. Stock markets dropped my more than 30% and inexplicably bounced about half of the way back in short order. The price of oil futures went negative.

Production and consumption of goods and services dropped way down, and they haven’t come back fully as restrictions are gradually lifted. Earnings suffered, businesses shuttered, and jobs were lost.

I wasn’t about to leave a lucrative career as an anesthesiologist without having a nearly bulletproof plan. That plan consists of two main components: oversaving and continued earnings.

Our Financial Preparation for the Pandemic

To achieve a 97% success rate as an early retiree, based on past returns of U.S. stocks and bonds, one would need to save 25x anticipated annual spending for a 4% withdrawal rate. A more conservative approach would be saving 30x.

Oversaving

The other component to the plan that keeps us immune from sequence of returns risk (retirement failure due to terrible market returns) is an income stream.

Continued Earnings

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