Are We Stuck in the Accumulation Phase?

According to traditional thinking, the arc of our wealth should be in a Bell shaped curve. At the lowly beginnings, money is but a far off dream, a goal. Rocketed by a strong W2, luck, and a good investing plan, the graph of our accounts begins to trend upward. Somewhere in mid to late life (for the traditional retiree) or earlier (for the FIRE enthusiast), the apex is reached. In other words, our fortunes should level out well before death. If only to avoid being the richest remains in the cemetery, we should slide down the decumulation portion of the curve. While this path is quite common for your average retiree, it seems like this concept is somewhat lost in our early retirement cohort. Although we talk the talk, do we walk the walk? Are we stuck in the accumulation phase?

First some definitions from investopedia

Accumulation Phase: The period of time when an investor builds up the value of their investment through savings.

Decumulation Phase: also referred to as de-accumulation, is the process of deploying your savings to fund your lifestyle in retirement. It’s essentially the opposite of accumulation or the process of building wealth during your working years.

Hedging Bets

Some would say that early retirement is a risky gamble. They point to sequence of returns risk, a bloated market, and uncertainties in healthcare funding. These naysayers say that the future is unknowable and giving up a sole source of income, at any age, is pure folly. It takes a certain amount of bravado to take this uncertain leap.

Interestingly, it would be a stretch to characterize FIRE enthusiasts, as a group, as risk tolerant. When it comes to economics, most of us are fairly conservative. We save a boatload. We generally pick and choose carefully where we park our money. The amount of spreadsheeting that takes place in this community is so great that it can be described as nothing short of laughable.

In fact, financial independence as a theory is a rather risk averse idea. It’s not the daring, bold action of the adventurous. It’s the humdrum, meticulous plotting of the account manager.

Watching our finances fall down the bell curve may be both rational and a well thought out proposition in the decumulation stage. It’s no surprise that careful people like us, very aware of the unknown nature of the future, however, don’t like it one bit. So why not hedge our bets?

Why not get stuck in the accumulation phase?

This Is How We Do it

I don’t think any of us plan to get stuck in the accumulation phase. We just naturally end up covering our losses.

Look no further than the blogosphere. Can anyone name a single FIRE enthusiast who posts financial reports and year after year shows a decrease in net worth?

I’m not judging here. I include myself also. Whether it is blog income, a passion project, or an occasional consulting gig, somehow, net worth only goes up.

I fully realize that the stock market is playing a major role. But let’s explore a simple question. If the market crashes, how many W2 independent folks will somehow find a way to cover their costs and withdraw a minimum from savings?

I know that looking at financial bloggers is a small subsection of retired people, but almost every FIRE person I know outside of the internet is much the same.

We just don’t like being on the other side of the Bell curve.

Judge Not Lest Ye Be Judged

Whether right or wrong, this is where we are as a community. I personally imagine that I will have a side hustle, real estate holding, or consulting job for as long as I am able. I will be the first to admit that I plan to never fall off the curve.

Why?

It’s not because I want to leave a big inheritance. I highly doubt I will ever need to use all the money building up in my bank account. It basically comes down to a few reasons:

I enjoy working

I enjoy making money

My fear of running out is more bothersome than the work it takes to generate a bit of revenue

I like interacting with other people, and work is an easy way to socialize

So yes, I am stuck in the accumulation phase.

And I expect to be here for awhile.