Article source: Foresight News
Author: Route 2 FI
Translated by: Luffy, Foresight News
If you have unrealized profits that can change your life, listen to me: you need to sell it. This is not just a suggestion; it's a lesson I learned from painful experiences. Early in my career, I hesitated to take profits, and I regretted every moment of indecision. Nominal wealth may fluctuate throughout our trading journey, but the fundamental principles remain unchanged.
One thing I gradually understand is that selling when it's life-changing will give you a benefit that cannot be measured in money: a permanent improvement in your life and the lives of those around you. Imagine being able to click 'sell' and instantly improve your situation. That's wonderful! If you have the opportunity, I strongly recommend you seize it.
I know how tempting it is to wait for the best selling opportunity: believing that if you just hold on a little longer, you can gain more profit. But the fact is: the best timing is just an illusion. The most successful traders I know did not achieve their current success by perfectly timing every peak; they achieved success through consistent profits and maintaining liquidity. They understood early on that converting to cash is a necessary condition for survival in this game.
One of my most open-minded realizations is that there are always opportunities. This mindset helps alleviate the fear of missing out that traders often feel when considering selling. Yes, giving up a well-performing position can feel painful, but remember: holding it out of FOMO will cost you more in the long run.
I often think about what it means to reach 'escape velocity': that is, your financial situation allows you to take planned risks without jeopardizing your life stability. Once you reach that level, that's when you can truly start playing the game and go all in.
How much is enough for retirement?
As someone who has been considering retirement, I often wonder: how much is enough? While the media often brags that it requires an astronomical number, I believe that for many of us, $1-2 million may be the best choice. Here’s why; let's first look at this issue from the perspective of TradFi.
In 2022, the average retirement account balance for those aged 65 and over was only $232,710. So, suddenly having $1-2 million isn't that much, is it? In fact, only about 3.2% of retirees have savings over $1 million.
Okay, I get it; the likelihood of you reading this article being over 65 is low, and you want to retire before 65. I was shocked when I first heard that Americans believe they need $1.46 million to retire comfortably. But then I realized a crucial fact: this number is an average. Everyone's needs can be very different.
Let's consider the 4% rule, which is a common retirement planning guideline. If you saved $2 million, you could withdraw $80,000 annually. For many, this is enough to live comfortably. Your retirement needs largely depend on the lifestyle you desire. Are you planning to travel the world, or are you content with simpler pleasures? The Bureau of Labor Statistics reports that the average annual expenditure for individuals aged 65 and over in 2021 was $52,141. Savings of $1-2 million can easily cover this expense.
Choosing where to live after retirement greatly affects your wealth usage. A $1 million retirement fund may feel tight in New York City but can provide a luxurious life in a small town or abroad.
Psychological Factors
Knowing you have $1-2 million in savings can alleviate a lot of financial pressure and allow you to truly enjoy retirement.
Ultimately, whether $1-2 million is enough for retirement depends on your personal situation. For many of us, it's not just enough money; it's more than we dreamed of. The key is to start saving early, live within your means, and focus on the things that truly bring joy to your life. Remember, retirement is not just about money; it's about creating a life you love, regardless of whether you have millions in the bank.
I understand what Fiskantes said above. Once you have put life-changing money in the bank or invested in real estate, you can easily participate in the market.
What do I mean by being relaxed? Well, I'm not saying it's easier to make money, I'm saying your mindset is more relaxed. You can make better decisions calmly, just let the trades come to you. And even if you lose, at least you won't lose everything because you have a safety net.
As Fiskantes said, 'The real fun starts here.' In this sense, this cycle is more interesting to me. If everything goes to zero, at least I have a secure fallback. That said, some people work more efficiently under greater stress, but I don't think that's true for most people.