What If the (Almost) Worst Happens?

Lots of folks have taken the Road Less Traveled Challenge! Check out the links to their posts… and maybe do your own!

I don’t think of myself as a worrier, but I am definitely a “hope for the best, plan for the worst” kind of person. Planning for the worst has just always been wired into me. I wrote a will when I was 22, despite having no assets and a negative net worth… and you know I got weird looks at work when I asked coworkers to sign as witnesses. (Note to self: maybe just ask friends next time.) I’m the dork who has not only put together an emergency plan for natural disasters (ready.gov has a great guide on how to do one, if you’re inspired), but who also has well stocked “go bags” strategically located around the house and in our cars. And I’m only comfortable with our early retirement plan because we have about a dozen contingencies in place to cover us in case things don’t go as we hope they do — those include everything from renting out our house to earn more income to tapping into our 401(k)s early, which we hope we never need to do.

But I’ve recently realized that I tend to focus on worst case scenarios in my planning, and think less about the sub-worst level stuff. Like I’ll have a detailed plan for what we do if our house burns down (fire season has begun in the mountain west — this is not a far-fetched scenario), but spend less time thinking about what happens if we need to, say, spend half of our annual budget on a major home repair. Or I’ll think about what happens if one or both of us dies — admittedly a prospect that is less terrifying now that we know we’ll get to leave behind a big bequest (anyone else find this to be true as well?) — but not think as much about what happens if one of us should get seriously injured or become chronically ill.

For his part, Mr. ONL tends to be in the “we can handle anything, and we’ll figure it out” camp, which is reassuring, but also doesn’t replace the desire to plan plan plan for someone wired with the planning compulsion. So today we’re taking on some of these tough questions, as we like to do, rather than brushing them away with the “it’ll be fine, we’ll find a way” answer.

One of my favorite things about planning for early retirement is that it almost forces you to be optimistic. In ensuring that your money will last long enough, you assume that you’ll live a really long time. You let yourself dream big — maybe bigger than most people dream — because there’s now an actual possibility that you might really do some of this stuff you’ve been thinking about. And you optimize your finances in a way that makes it impossible not to be stoked a lot of the time. That’s why we think that the journey to early retirement is worth something huge even if we never actually achieve ER, because there’s So Much to be happy about.

But early retirement doesn’t replace the randomness of life. Bad things big and small can still happen, and while we feel as prepared as we can be for the big bad stuff, it’s the medium bad stuff that we’re now thinking about. The stuff that isn’t a game ender, but could be a game changer.

Related post: Planning for a Long Life and Planning for the Worst // Our Estate Planning Approach

Our Almost Worst

While we can’t anticipate everything  — not because I haven’t tried! — these are the “almost worst” scenarios that would most drastically impact our early retirement plans.

Mobility-Limiting Injury or Disability — Starting with the one that would  be most life-altering for us, given our plans to pursue a constant stream of outdoorsy passions in retirement. As I shared early on in the blog, I have a major disability in the family which I may still get, though every passing symptom-free year is a very good thing, and I’m only a few years away from being in the clear. And all the activities we do — skiing, climbing, cycling, etc. — come with risk of injuries. We are extremely conservative when it comes to risk-taking, and we try not to make dumb decisions, but there’s no way to erase that risk completely. So let’s say one of us loses the ability to do all the outdoorsy stuff — what then? I think Mr. ONL would take it harder than I would, since most of his life goals are now built around outdoor pursuits, whereas I have tons I want to do that requires zero mobility (reading, writing and studying languages are top of that list). So some life goal realignment might need to happen. And we’d almost certainly move — our two-story house would become highly impractical, and honestly, we’d probably leave the mountains if we couldn’t ski much anymore. No need to put up with the cold winters if we’re not able to get out there and enjoy them! There’s a beach town we especially love, and that would be the first place we’d explore as a new home.

Chronic Illness — We both have autoimmune disease in the family, and I already have one of them, so this is not a far-fetched scenario either. On one hand, being early retired would make it a lot easier to have a chronic illness, since we wouldn’t have to worry about how it’s impacting our work. But we would have to be extra diligent that we’ve got excellent health coverage — right now that would be through the ACA, but if the ACA goes away or changes significantly, we could find ourselves going the expat route to get better care abroad. Or we could foresee the possibility that the healthy one of us goes back to work in some capacity to get great health insurance in the U.S. Depending on what the health condition would be, we might also find ourselves needing to move. We’re lucky that our mountain town has a hospital, but we’re clear-eyed about the limitations of rural health care. So that’s yet another motivator behind our focus on prioritizing our health: so we can stay put where we live now!

Almost-Major Financial Setback — It’s hard to know what kind of setback this could be — major and sustained market crash? major home repair not covered by insurance? — but this is one area where we feel like we’ll have options. We plan to maintain an emergency fund in cash in retirement, just like we have now, and we’ll have that long list of contingency options (selling our house, selling the rental, going into bare bones budget mode, liquidating part of our 401ks, etc.). And, of course, to reduce the likelihood of something like this even becoming a setback in the first place, we plan to stay heavily insured throughout our retirement, and are glad we recently added an umbrella policy to provide additional liability coverage.

Family Member Needs Major Care — We thank our lucky stars every day that three out of our four parents have military pensions, and so we don’t ever need to worry about them not having an income. But there’s still one parent on shaky financial ground, and of course extended family could need help of some sort. Though we’ve already helped pay for a small portion of care for an elderly relative, purchased our rental property to rent to  a relative, and made a personal loan to another, we’ve decided we don’t want to have any more financial entanglements with family. So we’ll be first in line for moral support and in-person help, but we’ll be assessing financial help differently in the future. Of course, we feel strongly that money is worthless if you don’t use it to help those most important to you, so this one could be more of a play-it-by-ear situation.

Divorce — We’ve taken to saying to each other — jokingly, but not really — “If you want to divorce me, you have to do it before we retire.” Because the truth is that divorce post-retirement would put us both in a financially unsustainable position. And while we could probably figure out a way to go back to work if we were only a year or two into retirement, every passing year thereafter would make it exponentially harder to recreate an income that would put us each, separately, back on the FIRE path. Fortunately, we don’t plan to get divorced! And we feel strongly that our marriage is our most important asset. But if it happened in spite of our best intentions and attempts to fix things? This one stumps us more than all the others, because it would be disorienting on every level. We’d have to sell the house, split up our assets (no prenup, so close to 50/50), and then hope that we’d each get enough out of it to keep living something like an early retired lifestyle, though in a lower cost of living place than where we live now. Honestly, we’d probably each end up moving in with a parent, at least for a while, and after regrouping a bit, would face the challenge of trying to find work despite having a big employment gap and being behind on skills because of that gap. Knocking on some very wooden wood in hopes that this one never comes to pass. Fortunately, this is the one we have the most control over, and we’re committed to keeping our marriage 90 percent awesome, and always working on the stuff that’s not awesome.

What’s Your Almost Worst?

I’ve talked to several folks about this recently, and have realized that while we all tend to have similar definitions of worst case scenario, “almost worst” is a lot more varied and personal. What is your almost worst? And have you thought about how you’ll change your plans if those medium bad things happen? Let us know in the comments.