Retirement and "Family Inc"

I took an early retirement situation that in 2010 had fail rates north of 50% (only realized in retrospect*, kind of like hiking thru fog only to realize once the fog lifts that one was hiking along the edge of a 1000 foot sheer cliff) to one that in 2016 has fail rates south of 5% (the bull market helped, of course).  Ex the 2009+ bull market, I owe almost everything in that transformation to applying the self-discovered hard lessons of treating retirement holistically and more or less as a "family Inc." kind of thing...with me as CEO and board of directors, not to mention un-paid intern, mail guy, tech help desk, cook, and cleaning lady. These Family Inc. style principles are the same principles articulated in this post (and the underlying book) at Alpha Architect: Book Review — Family, Inc.: Using Business Principles To Maximize YourFamily’s Wealth.    

You can read either the post or the book on your own but here are some of the main points that comport with my own experience and/or intuition.  As quoted from the blog post:

• …effective family wealth creation requires a holistic view of family finances, and how basic financial principles can be applied to them…we should view family wealth creation [and preservation, for that matter] from an integrated…perspective, balancing employment, investment, consumption and long-run objectives in much the same way as we might think about owning a business.     

•  …asset allocation frameworks…ignore important components of future wealth, most notably the value of one’s lifetime income, and how a strategic view of one’s labor should considered in combination with other assets... The emphasis Doug puts on thinking about human capital as a large part of one’s portfolio was unique and is often overlooked by many investing books. [Personally I have found an increasing awareness of and literature on human capital, especially in retirement lit.  That is both correct and reassuring. But that also means I do not necessarily find the point of view described in this bullet point as 100% unique]

• Another asset that can be viewed in a broader business/financing context is Social Security, which is “the mandatory purchase of an inflation-indexed annuity that is guaranteed by the government.” [ Not new, really.  See most retirement blogs e.g., Ken Steiner at HowMuchCanIAffordInRetirement.com]

• McCormick also includes a helpful section on how to create a dashboard of analytical tools that can help monitor and measure Family, Inc., including an income statement and balance sheet, and how to conduct sensitivity analysis to ensure you are properly positioned for the future.

Ok, that last point deserves some attention.  Keeping an income statement and a balance sheet and treating the family universe a little like a business can be a powerful and deceptively simple idea, an idea ignored at one's own peril. 

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* triangulating by way of a variety of calculators, simulators, and math models