One Risk Leads to Another
The risk of running out of money is real and should be taken seriously. Most financial advice is built around that idea for a reason, and any serious financial plan should build ways to navigate it.
But that’s not the risk I’m concerned with here.
You can spend years building a plan that works perfectly on paper and still end up extending your working years well beyond what’s actually required. Or give up experiences, comfort, and flexibility along the way because the plan demanded it.
Most people don’t arrive at an overly cautious plan through a single decision. They arrive through a series of small ones:
Lower withdrawal rate.
A bit of extra cushion in your spending.
More conservative assumptions on returns.
Each one makes the plan feel more secure. And each one moves the target further out.
Taking a conservative approach isn’t a problem. Being conservative in multiple places might be.
When Caution Compounds
Most of these decisions are made independently, and each one has a reason behind it. But when every assumption leans in the same direction, the combined effect can be more than the plan was meant to carry.
The target gets higher. Spending gets tighter in the present. Experiences get delayed.
Plans get pushed to “later” without much thought given to what later actually looks like, or whether health and circumstances will allow for the same things.
I caught myself doing this in my own planning. I’d lowered my withdrawal rate to build in margin, added cushion to my budget estimate, and assumed higher taxes just to be safe.
Each decision had a reason behind it. Together though, the years needed to reach FI had grown more than I’d expected. My response was to increase my annual savings goals and reduce expenses.
I was reshaping the plan I actually wanted in order to fit the one I’d built. It should have been the other way around.
That was a bit of a wake-up call. My priorities hadn’t changed, but I’d layered one cautious assumption on top of another without accounting for where they’d land together.
A lot of us could be over-saving because we’re unsure.
Every Layer Has a Price
A lower withdrawal rate needs more saved to cover the same spending. A larger cushion for expenses raises the annual baseline you’re working from. More conservative assumptions push the entire plan further out.
All of that increases certainty. It also reduces flexibility, both in how long the plan takes and in what it allows along the way.
For me, a lot of it came down to not wanting to get it wrong. I handle most of our financial planning and reaching FI has always been more of a priority for me than for my wife. She’s likely to want to work well into her 60s, and I hoped to have the option to walk away long before then. The last thing I wanted was for my timeline to become her problem, or to cost her something she hadn’t agreed to give up, if I miscalculated.
What I didn’t account for was how each cautious decision made the next one easier to justify. By the time I stepped back and looked at what they added up to, the plan had drifted well past what either of us actually needed.
There’s nothing wrong with building margin into a plan. That said, it’s worth asking how much of it is really required, and whether it’s concentrated in the right places.
If multiple decisions are providing safety, it’s worth asking which one actually needs to carry that weight.
Once It’s Gone, It’s Gone
Financial independence planning is often framed as a problem of not saving enough. The version that gets less attention is the plan that asks for more than it needs to. More time working, more saved, and more given up along the way because the decisions it’s built on were never examined together.
A plan can be adjusted. Assumptions can be revisited. Decisions made with incomplete information can be updated as things become clearer.
What it can’t do is return time that’s already passed.
That’s what I’m revisiting now. Whether the tradeoffs the plan is asking for were actually chosen, or whether they just accumulated, one reasonable decision at a time.
— Brad
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This is meant to help you think through financial decisions and tradeoffs—not tell you exactly what to do. It’s general in nature and not personalized advice (see full disclaimer).