Of all the things to get worked up about, personal finance articles should probably not be on the list. But this article made me angry. [Update 11/4/08: that link is now dead, and the article seems to be missing from Laura Rowley's page. Fortunately, I took screen shots. Email me if you want them.]
There are what I think of as "inspirational personal finance stories." Various magazines and blogs publish them. Like feel good movies, they tell us about a regular person, working an ordinary 9 to 5 job, being able to retire early through a frugal lifestyle. We like reading these stories because they give us hope and motivation. Retiring early is possible, they show us. It just takes some hard work, planning, and discipline. If this person did it, I can probably do it too.
Maybe I'm angry because that's how I expected "Meet the 29-Year-Old Retiree" to go. The first paragraph sets it up thus: Madison left her job back in February. When asked what she does for a living, she feels uncomfortable explaining "how she managed to stash away enough to retire from her full-time job at age 29."
My interest is piqued. How did Madison save all that money?
Well, she's been investing in index funds for a while, and started her IRA when she was 16. Madison also tries to find the best deals she can when she buys things.
Hey, that's pretty good. What else did she do?
She bought a condo with an adjustable rate mortgage and had the good luck to sell it when the housing market peaked.
Ok, but that's not exactly saving is it? That sounds more like speculating with other people's money.
So how did she retire?
In February and March Madison sold some of her stocks, getting two to three years worth of her expenses in cash. The rest of her money is in stocks.
So she's able to live off that cash?
Yeah. She's also getting some extra money from blogging three times a week and doing credit card arbitrage. She also writes for About.com.
Blogging on a consistent basis can be kind of hard. Isn't it at least like a part time job? And is she, like, an employee of About.com?
Ok...So she has enough money to meet all her living expenses?
Of course! Madison is able to stay at home and take care of her kids (except when the part time nanny is necessary). Her husband's job takes care of a big expense, health insurance. He tried out retirement while he was on paternity leave, but he prefers to work.
She has a spouse who works?
Maybe I should have mentioned the husband's job sooner. But Madison is retired.
So let me get this straight. Madison quit her full time job, and now supplements her income by blogging and writing for About.com. Her husband further supplements the household income by working full time. They meet their expenses with this income and by drawing down on 2% of their savings. Besides the two to three year money, everything is in stocks.
Yes! That's how Madison retired.
What happens in three, five, ten, fifteen years if stocks stay flat or go down like Japan's did when they had a credit crisis?
Madison is retired!
She's 29 now. Let's say Madison lives until she's 80. Will her money last her another 51 years? She has kids. Will she be able to pay their education expenses? Although her husband works, they're taking out 2% of savings. What happens when he "retires" (i.e., blogs and writes for About.com)?
I wish Madison all the best. But I find the article about her infuriating because she hasn't retired, and, unless she's lucky, it seems that sooner or later she will have to find a full time job.
I think I'd be happier with an article that went like this: Meet Joe. He retired at 25 after he won the $50 million lotto jackpot. While not very inspirational, we can say that Joe is retired. That is, he doesn't have to work for a living another day in his life.
Laura Rowley's piece also makes me angry because it doesn't tell us about something that we all can do. "Meet the retiree" articles are supposed to show us how regular people can save enough to retire on with as little risk as possible. The most risk we should be taking is investing in the stock market (and credit card arbitrage if we're organized enough).
If you don't agree, consider whether it is appropriate to write a saving for retirement article about someone who borrowed money, went to Vegas, and won a couple of rounds at the poker table. Does it help anyone? It should rather be about all the people who tried this and are now deep in debt. It should be an article about what not to do. Madison made money by borrowing and gambling on housing prices going up. If she had worse timing, she might've been one of the millions of people about to lose their homes.
I'm happy for Madison. All the power to her. But don't make her a role model, or an example of "a throwback to the post-Depression era, when socking money away for the future was both a core value and a way of life." Don't say she's part of "a new generation of savers as the golden era of leveraged living comes to a crashing halt."
I'm 26. I'm a retiree too--for the weekend.