The current FIRE (Financial Independence, Retire Early) movement is a constant source of inspiration for me. Years before I had ever even heard of FIRE, I had decided I would retire at 55. Now, according to the widget that sits on my phone’s desktop, I have 3,471 days left before hitting The Number. But I keep noticing a feeling of resistance every time I check the estimates. The numerical math works, but the mental and emotional math doesn’t.
I am internally divided. Part of me wants to declare FIRE today, get a part time job doing something I love, and enjoy the rest of my life. The other part fights FIRE, whispering warnings and what-if scenarios in my ear. It is convinced The Number is far too low and my final decade will be spent in a state of destitution.
Enter, Stage Right – Excuses
This worried nay-sayer voice is so obnoxious, I am convinced it is trying to win the argument just by being the loudest rather than the most reasonable. But maybe it has a point and isn’t just trying to paralyze me into inaction. Among its many concerns are the following:
- College expenses for two kids. It’s a long story, but we pay for 50% of education expenses until the kids turn 25. The part of me that has done the math has made reasonable assumptions of 4-year in-state colleges, and knows we’ve socked away enough in 529s. The worried part thinks both of the kids will get Ivy League doctorates with no scholarships. I haven’t done the math yet on that scenario, but the worrier is certain it will delay retirement indefinitely.
- Medical. We’ve always had reasonably priced High Deductible Health Plans (HDHPs) through our employers. I have no concept of what insurance actually costs if we were to buy it on our own, and don’t know whether to budget $300 or $3,000 a month for healthcare expenses. My worrier is sure it’ll be on the higher end, and also that we will also both encounter catastrophic illnesses 2 years into retirement.
- What if the math is wrong? As many times as I’ve nudged The Number higher, there is still a fear of running out of money. The fear also says that will happen late enough in life that we will have lost all earning potential. The worried voice wants to work another 10 or 15 years just to be safe.
So what is the plan here? Just let my two inner factions fight it out until no one wins and I retire at 72? No thanks. Luckily, it looks like there is hope.
A Tale of Two Brains
What actually seems to be happening here is a balancing act between my rational brain in the prefrontal cortex, and my emotional brain in the limbic system. Warning: the information that follows here is my oversimplified, non-scientific understanding of whats going on. It’s “Better By One”, not “Better By One PhD”.
Brains! BRAINS!– zombies
The prefrontal cortex is the part of our brains that is thought to be responsible for complex thought, decision making, and the ability to take actions towards goals. The limbic system is thought to be responsible for our emotions – including anxiety and worry. It is home to our fight-or-flight response, and is primed to look for danger. So we just slice out the limbic system and we’re good to go? Not quite. First of all, there doesn’t seem to be consensus yet on exactly what makes up the limbic system, so we’d likely have just as much luck with a melon baller as with a scalpel. Second, we need these two parts of the brain to work together to make the best decisions.
The trick seems to be using our rational brain to temper the emotional brain. I know this is possible because I realized I regularly do this in my job.
When tackling difficult, amorphous projects at work, I can quiet the fears and uncertainties by focusing on what is immediately in front of me. If something is not within my control at that moment, it doesn’t get my attention. If I were to instead stand back and stare at my Everest as a whole, I become convinced it is too much to take on and I want to quit before even starting.
I’m not saying to ignore that the mountain exists – we still need a vision of where we want to go. A picture of Everest still needs to live in our minds. But we can’t worry about the summit if we haven’t even figured out how we’re getting to base camp.
What happens if I apply this same technique to quiet down the worried, limbic voice that is trying to derail my quest for financial independence? I’m thinking it would look something like this:
- Recognize when emotions are trying to hijack your brain. This may involve improving emotional intelligence (sometimes called EQ or emotional quotient). The better we are at accurately identifying and labeling our emotions, the better we can be at managing them.
- Seek clarity. When what-if scenarios are ambiguous, seek out facts. Are these valid concerns or statistically slim possibilities?
- Accept it or change it. Are the concerns are valid? Is the data gathered actionable? If you can do something, do it. If you can’t do anything, you need to accept it and move on.
Putting Theory to Practice
How does this apply to my earlier worry list?
- College. According to data from the National Center for Education Statistics, only 37% of people have a bachelor’s or higher by the age of 29. Their data for my state also show nearly 80% of students are choosing an in-state school for their bachelor’s. Also, the kids themselves have already been talking about going to local colleges. More evidence my limbic system is wasting my attention.
- Medical. The 2019 Fidelity Retiree Health Care Cost Estimate estimates a couple retiring at 65 needs $285,000 in after-tax dollars for health care expenses over a 20 year retirement. Thats $1,187.50 a month. I also went over to Healthcare.gov to get some more data for standalone insurance costs. In my zip code for 2019, a couple earning $50,000 a year would pay between $180-880 per month for health insurance thanks to a hefty income-based discount. If that couple were to retire on $80,000 a year, plans are between $850-1600. I’m in one of those “top 10” highest cost of living areas in the country, so your results may be lower. These costs are a valid concern, so I need to move on to how to mitigate it.
- Taking full advantage of Health Savings Accounts (HSAs) now can provide years of tax-free money to spend on medical expenses later. HSAs are available to those with HDHPs, and allow you to deposit pre-tax money, enjoy tax-free growth, and make tax-free withdrawals for medical expenses. I personally enjoy my HSA account with Lively. Its really a trifecta of tax-advantaged accounts, I’ve dug deeper into it here: The “HSA IRA” – An Overlooked Retirement Option.
- Another obvious way to help with insurance costs is to keep part-time employment that offers health care benefits. Our plan was never to stop working entirely, just to downshift to something else with more enjoyment and freedom, and hopefully some benefits.
- And of course, there is improving my health today. How I eat, move, and take care of myself will have lasting positive impacts in the years to come, and can help reduce the need for medical intervention. I’ve especially taken up interest in Blue Zones research, where they look for health and longevity clues from the longest-living cultures. Their article Power 9: Reverse Engineering Longevity is a good place to start getting familiar with their ideas. I eat well, but I don’t move enough – something I keep thinking I’ll do once I reach FIRE. That thinking needs to stop. The sooner I start, the better things will be. Thanks for the nudge, limbic system.
An ounce of prevention is worth a pound of cureBenjamin Franklin
- What if the math is wrong? This is where I need to learn to trust my rational brain. I’ve done the math, I’ve done the homework, I’ve run hundreds of scenarios. If anything, The Number is a little high, but maybe thats my rational brain throwing a bone to my emotional brain. It’s not the enemy, after all.
Staying on FIRE
There’s something comforting about being able to put a label on things that bother me. If I can identify it, I can try to do something about. It no longer exists as a vague, looming shadow.
In practice, I’m happy to have these internal doubts. Especially knowing that my rational brain can talk my emotional brain back from the ledge. These two parts act as bumper rails, keeping the bowling ball rolling towards the pins and not the gutter. The balancing act means I can keep from doing anything too dangerous, and also keeps me from doing nothing at all.
I’ll be keeping my rational brain in the driver’s seat on this path to FIRE. My emotional brain can make suggestions from the back seat, but is not allowed to take the wheel.