Last weekend I moved. Don’t get impressed. I’m still moving every day this week, too. (Why do I have so much stuff?!?)
On Saturday, my neighbor showed up at my door with a home cooked meal and I nearly cried into the casserole dish.
We sat down to dinner and of course, started talking about money, spending, etc. You know, as one does. My neighbor is also part of the FI community. (I’m telling you, this Longmont thing is REAL.)
He left his job about 8 years ago. Walked away, no regrets, never looked back, aside from some funemployment projects here and there. And in the years since, his portfolio has done something that a lot of us dream about but don’t always plan for: it’s grown. A lot. Aside from 2022, which was rough for basically everyone who owned anything, the market has been kind to him. Really kind.
Here’s the part that stuck with me. He told me his comfort level with his finances is high right now. High enough that he’s loosened up on spending. He’s not out there buying yachts (I checked, no yacht in the driveway), but he’s not white-knuckling his budget either. He spends more freely than he used to, and he still comes in comfortably under the 4% rule. Not because he’s restricting himself, but because the market did a lot of the heavy lifting for him.
I’ve been chewing on that conversation ever since, mostly because it’s such a clean, real-life example of a phrase you’ve probably heard a thousand times: time in the market beats timing the market. It’s a cliche at this point. It’s printed on mugs. It’s the kind of thing your uncle says at Thanksgiving right before he tells you about the stock he “should have bought.” But cliches become cliches because they’re true, and my neighbor is walking, casserole-delivering proof. (It actually was homemade Indian food.)
The Math Behind the Mug Quote
Let’s actually look at what happened here, because the numbers are the fun part.
Say my neighbor retired 8 years ago with a portfolio built to support a 4% withdrawal rate. If the market had just puttered along at some flat, boring rate, his 4% withdrawal today would still be roughly a 4% withdrawal today, give or take inflation adjustments. Nothing dramatic. Steady as she goes.
But that’s not what happened. Instead, the market (with the notable exception of 2022, which we will get to) did what it’s done historically over long stretches: it grew, and it grew a fair amount. The S&P 500, dividends included, has averaged something like 10% a year over the long haul, before inflation. Some years it’s up 25%. Some years it’s down 20%. But zoom out far enough and the trend line points up and to the right.
When your portfolio grows faster than your withdrawals, your withdrawal rate as a percentage of the portfolio shrinks, even if you’re pulling out more dollars than you used to. That’s exactly what’s happening with my neighbor. He’s spending more freely, sure, but his portfolio has grown enough that his withdrawals, in percentage terms, are still comfortably under that original 4% line. He gave himself a raise without asking his portfolio’s permission. His portfolio just said yes anyway. (Actually, it was the market that said yes.)
What About 2022 Though?
I’m glad you asked, because I asked too, and my neighbor didn’t dodge it.
2022 was not a fun year to be retired and living off your investments. Stocks fell, bonds fell (which is not supposed to happen at the same time, and yet), and anyone checking their portfolio balance that year probably needed a stiff drink and a nap afterward. If you were taking withdrawals during 2022, you were selling assets at a loss, which is the exact nightmare scenario that keeps early retirees up at night.
But here’s the thing about a single bad year inside an 8 year stretch: it’s a blip, not a trend, as long as the rest of your plan can absorb it. My neighbor didn’t panic sell. He didn’t go back to work in a fit of fear. He rode it out, because the years surrounding 2022 more than made up for it.
This is the entire argument for time in the market over timing the market, condensed into one guy’s retirement. If you try to time the market, you’re betting that you can predict the 2022s and dodge them while still catching the good years. Nobody does this consistently. Nobody. Not the loud guy on financial TV, not your coworker who “called” the last dip, nobody. The people who actually build wealth in the market are the ones who stay in it, bad years included, because the good years, historically, have outnumbered and outweighed the bad ones.
The Psychology Part Is the Actual Hard Part
Here’s what I find genuinely interesting about my neighbor’s situation, and it’s not the math. The math is straightforward, honestly. Compound growth plus time equals bigger number. A kid could figure that out with a calculator and enough patience.
The interesting part is that he’s letting himself enjoy it.
A huge chunk of the FI community struggles with the opposite problem. We save aggressively, we hit our number, we retire (or reach financial independence and keep working anyway), and then we white-knuckle our spending forever because some lizard brain part of us is convinced the market is about to fall off a cliff the moment we relax. It’s called One More Year Syndrome when it keeps you working past your number, but it’s got a cousin that keeps you underspending for the rest of your life even after you’ve stopped.
My neighbor didn’t fall into that. He watched his portfolio grow, did the math, confirmed he was still safely under his withdrawal threshold, and then actually let himself spend more. Nicer dinners. (More generosity, apparently, given the delicious Indian dinner I enjoyed on Saturday.) He recalibrated his comfort level based on real data instead of lingering fear from his saving years.
That’s not reckless. That’s actually the system working exactly the way it’s supposed to. The whole point of the 4% rule and its various cousins (the guardrails approach, the variable percentage withdrawal method, the “just wing it and check annually” method that more people use than admit to) is to give you a framework you can trust enough to actually spend the money you saved. If you hit financial independence and then never let yourself loosen up even when the numbers say you can, what exactly was the point of all that saving?
What This Means If You’re Still in the Saving Phase
Maybe you’re reading this and thinking, great story, but I’m nowhere near retiring, so what does this actually do for me? Fair question. Here’s the part that applies to you right now, tonight, while you’re still years out from quitting your job over dinner with a neighbor.
The lesson isn’t “wait 8 years and hope for the best.” It’s that the years you’re in the market matter more than the moments you pick to get in or out of it. If you’re currently sitting on cash because you’re nervous about valuations, or waiting for “the dip” before you invest your next contribution, you’re playing the same losing game as the loud guy on financial TV. Nobody consistently calls the top or the bottom. Not you, not me, not the algorithm your cousin swears by.
What you can control is showing up. Automating your contributions so they go in every paycheck, market conditions be damned, is the boring, unsexy version of my neighbor’s story. (Actually, that’s the reality of his story.) It’s you building the 8 years of runway before you’ve even quit anything. “Automatic investments every paycheck” isn’t glamorous. It won’t make a good dinner party story the way “I retired 8 years ago and the market carried me” does. But it’s the mechanism that eventually lets you become the guy telling that story.
There’s also a lesson here about not overreacting to your own 2022. Everyone who’s been investing for more than a few years has one. A year where the number went down and it felt personal, like the market had it out for you specifically. If you sold during your version of 2022, or you’re planning to sell the next time it happens, take a beat and remember my neighbor. He didn’t sell because the market was down, he only sold what he needed to to fund that year’s expenses – but he also didn’t stress over those sales. He didn’t even seem particularly rattled when he told the story, and it’s been years. The bad year is real, the losses on paper are real, but “selling everything because the market is down” is what turns a temporary dip into a permanent one.
And if you’re the type who’s already hit your number, or you’re getting close, there’s a version of this lesson for you too. It’s the permission slip to actually loosen the purse strings when the math says you can. I’ve talked to plenty of people in the FI space who saved diligently for 15 or 20 years, hit financial independence, and then just kept living like they were still saving for it. (Sometimes I see them in my mirror.)
That’s not discipline anymore, that’s just habit wearing discipline’s clothes. My neighbor recalibrated. He looked at his number, saw it had grown past what he needed, and let himself spend accordingly. That’s not the risky move. Staying frozen in scarcity mode after you’ve already won the game, that’s the move nobody talks about enough.
So What’s the Actual Lesson Here
I could wrap this up with some tidy little bow of a lesson, but I think the real takeaway is messier and more useful than that.
Markets, historically, go up over time. Not every year, not in a straight line, and definitely not without the occasional gut punch year like 2022 thrown in to keep you humble. But over long stretches, the kind of stretches that matter for FI, the trend has historically favored people who stay invested over people who try to dodge in and out.
There’s another cliche about that. If you’re timing the market, you don’t have to be right once, you have to be right twice. Once to get out, another to get back in again.
There’s an amazing chart on Fidelity in their article, 3 Reasons to Stay Invested that gives the hypothetical growth for a portfolio that started out with $10,000. Timeframe 12/31/1987 – 12/31/2025. If you missed the top 5 days of that period, your portfolio is worth 38% less than the same portfolio that was in the entire time, through the downs as well as the ups. And it keeps getting worse if you miss the top 10 days, top 30 days, or top 50 days.
One day CAN make a huge difference in your portfolio.
My neighbor didn’t do anything clever. He didn’t time a bottom or call a top. He just left his job 8 years ago, stayed invested through the good years and the one truly bad one, and let compound growth do what compound growth does when you give it enough runway. Now he’s spending more freely, still coming in under his withdrawal threshold, and bringing delicious food to tired neighbors on move-in weekends.
If that’s not a real world advertisement for time in the market over timing the market, I don’t know what is. Cliche or not, mugs and all, it holds up.
And honestly, if your version of “the market being kind to you” also involves better dinners for your neighbors, I’m fully in favor of that particular ripple effect continuing.
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