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Why Early Retirees Shouldn't Worry Too Much About the Stock Market

By Brian Stoffel - Mar 9, 2021 at 7:30AM

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Looking at it from this perspective changes things entirely.

Deciding to retire early can be a gut-wrenching decision. On one hand, you have the freedom, the possibilities, and the life of your dreams waiting in the wings. On the other, there's the potential to never earn another cent and find yourself beholden to the slings and arrows of the stock market.

But Pete Adeney, better known as Mr. Money Mustache, believes we're making far too big a deal out of this black-and-white thinking. Retirement planning, he argues, should be looked at in more realistic terms that include shades of gray.

In this Feb. 23 video from Motley Fool Live with former Motley Fool contributor and frequent guest Morgan Housel, Adeney -- frequently mentioned in connection with the Financial Independence, Retire Early (FIRE) movement -- explains a healthier approach to early retirement and worries about stock market returns.

Morgan Housel: It feels like the FIRE movement has grown most of its life during what has by-and-large been a huge bull market in the stock market. I think the three of us understand the nuance and the historical frequency of bear markets and not when they're going to occur, but that they are going to occur at some point in the future. They are a normal part of market cycles, but I think a lot of people don't fully appreciate that nuance. So I'm curious, you said that you went through 2008 when you were independent.

Peter Adeney: Yeah. A few years into retirement.

Morgan Housel: What do you think it would be like if we had another 2008, another three-year period where the market just lost itself? What would that do for people who have taken the plunge toward financial independence in the last decade?

Peter Adeney: Yeah. Well, it might take a little counseling. I mean, I will still be there for them, writing blog articles as always. To be honest, it will be interesting because I haven't had any real stock market crashes or economic conditions to write about since long ago.

I mean, when I first started my blog in 2011, for a while, the stock market was kind of slow at that time, and it still hadn't even exceeded the levels of the 2000 bubble at that point or maybe just barely. My sister wrote a comment saying like, "How can you be retired and depending on stock returns when there really aren't any?" I wrote this blog article called, Dude, where's my seven percent investment return? and I explained how the part of the cycle we are in, this is normal. You have a huge drop, you have some doldrums, and then at some point, you get a crazy spike that makes up for everything else, and then it'll volatile average all out again. Just to make sure you're invested for that spike.

Now, we've had that and we've had our savings bumped up by a big multiple. So even when it drops back down, you can pretty much just average through that whole time period, and then we'll look like good stock market returns.

I think the real thing, as you often write about too, is just make sure you zoom out on your graph -- just roll the mouse wheel back and look at the long-term perspective and then these crashes aren't such a big deal because it doesn't really affect you. You have a whole bunch of money in retirement accounts. Then the next day you log in and that number is smaller. While you're still only spending a $100 a week on groceries and you're being reasonable with your lifestyle. It's not like you were planning to withdraw that whole million dollars, which is now only $500,000 or whatever overnight. It really makes no difference. You have to understand how little of an effect that causes if you're just making tiny withdrawals.

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