Category Archives: Retire Early

Common Anti-FIRE Mindset Trap: It’s Harder Now Than Eras Before

Financial Independence, Retire Early,

Do I owe my early retirement success to the era I was in? This might be a touchy subject. There are certainly unprecedented events that we’re dealing with today that are very challenging. But I’m going there anyway. Putting the pandemic aside, if you still have your career intact is it harder now than it was in earlier decades to reach FIRE? Does believing that it’s harder now become an anti-FIRE mindset trap holding people back? I bring this up because of a recent reader’s comment to one of my FIRE journey posts stating that my lifestyle and path to FIRE is outdated, the result of luck and the era I was handed. 

I do get where they are coming from. There were many times when I felt the same way when I was younger and financially struggling to get ahead. I saw earlier generations and believed they caught all the breaks. Better benefits, higher pay scales in newly tiered pay systems, etc. It’s natural to go negative when things are difficult. There are certainly a lot of outside influences and changing dynamics that can hold us back. When experiencing setbacks, immediately faulting ourselves for our own decisions and actions isn’t the first diagnosis we enjoy coming to. When it comes to personal finance FIRE goals, the issue with having a then vs. now era thinking is it’s always an apples to oranges comparison. It offers no help, only excuses that won’t improve our situation.

Although things are different over time and eras, what remains common is the financial discipline needed to reach FIRE. 

That said, I wanted to take a snapshot to crunch some numbers during my financial journey to early retirement to get a feel for then vs. now. Just a simple attempt to quantify some of the differences and challenges. Also pose the question: Do other’s FIRE success stories and their efforts taken to get there have any merit or should their FIRE journey during a past era get all the credit?

Common Anti-FIRE Mindset Trap: It’s Harder Now Than It Was Before

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Are Generational Era Comparisons Valid Or Just An Anti- FIRE Mindset Trap?

My oldest daughter just turned 37 and after our lovely socially distanced backyard get-together I was triggered to consider this topic. Like most people today, she and her family have financial challenges. Especially now in a world full of uncertainty during the Coronavirus pandemic. I began to think where I was on my 37th birthday. A time as a father of three where I was struggling to make ends meet, three years before I contemplated what is known as FIRE today. It was 1995 and even back then the world chose winners and losers where life was turned upside down with uncertainty. It also marks a time in my life that brought many work and financial decisions. Hardly being handed a “then” lucky era of benefits. 

Work and Career

I was near my 17th year of a telecom career at a regional Bell Operating company in 1995 at the age of 37. My employer had a 14 state footprint in the west and midwest. It took me 13 years to climb the ranks from service representative to top level technician. Reaching this technical milestone was a long-time goal from the moment I started working there. I took a lot of evening college classes, correspondence courses, and company qualification testing over the years. Finally reaching a place where I loved my job, the work, and especially its good pay scale. 

I was only a few years into my dream job when in 1995 my company decided to go through mass centralization. Instead of having organizational presence in every state, they would be centralized in 2 locations. I was in Salt Lake City UT, now my job was moving to Denver CO. Because of seniority issues and how the centralization employment matters were worked out I either had to follow my job which meant moving my family from our home where all our extended family and support system was, drop to a lower paid non-technical position if one opened up, or face lay off. At that time good paying jobs were scarce in Salt Lake City.

I was not a fan of Denver. Neither were many people impacted from non-Colorado states. Many employees decided not to follow their jobs. That low acceptance rate created promotion opportunities and I was instead offered an engineer position to relocate. We reluctantly accepted given the job uncertainty of staying in our home. I spent my 37th birthday alone like many days and months that year in our near empty Colorado house while my family stayed behind in Salt Lake City until the end of our kid’s school year. 

An era handed benefit? I would disagree. 

It was a risky and life altering decision. Would I do it again if I went back in time and know what I know now. Not a chance. However, it did work out financially as far as my early retirement goes. My younger sister who also worked at the company chose not to follow her mid-level position and instead stayed in Salt Lake City. She ended up in a clerical position and was stuck at that lower paying level for the remaining 15 years of her career. That ultimately resulted in far less for her retirement. The era was not overly kind to her to overcome her decisions. Our decisions and actions during challenging times will impact outcomes.

The era money side comparison of this decision- 

I did some 1995 to 2020 money value conversions to show if I received any better era provided benefits. 

In 1995 after a decade plus slow slog to becoming a happy technician in Salt Lake City I was making $36,000 a year. That converts to $61,205 in 2020 dollars. A great salary in Salt Lake City, not as good in higher cost of living Denver. I was given a salary increase around 10% for accepting the engineering position to $40,000 which equates to $67,663 in today’s dollars. I would have most likely only landed a mid-range non-technical lower salaried position of around $28,000 ($47,364 today) had I not followed my job. These numbers are either seen as great numbers, mediocre, or bad. It’s all subjective to where you live, how you live, and what you do for a living. It does provide a snapshot of career and financial decisions from a past era. 

Then vs Now Housing Numbers

We never considered renting in 1995 after relocating. We had spent 17 years in our first starter home located in a less desirable part of Salt Lake City. It was 980 square feet and I had finished the basement to double that living space over the years. We sold our Salt Lake City home in 1995 for $85,000 which converts to $143,784 today. We bought our nearly same sized Colorado home for $157,000 which when 2020 dollar converted is $265,578. 

I never bought our homes as investments but more a hedge against inflation.

For the first years of our home ownership the house payment ate an entire paycheck. As time goes and pay increases the house payment remains nearly the same while hopefully income increases. Rent over those years certainly did go up. However, both homes did appreciate as an investment and appraise today for more than the 2020 converted dollars calculated above. 

Era handed benefits? I not only paid more for a house, but the biggest hit came in monthly payments.

Our inflation hedged home in Salt Lake City was $321 a month or $543 in today’s dollars. Compare that to our Colorado home’s $1,180 payment which converts to $1,996 in 2020 dollars. That and other higher living costs ate a big chunk of my 10% increased salary. I was once again where my house payment took an entire paycheck.

We had an 8% FHA loan that we began in 1978 in Salt Lake City. New mortgage interest rates were even higher in 1995. We used some of our home sales money to buy down points to get the Colorado loan at 8% too. That’s where apples and oranges come in. Houses do cost more today. As mentioned, my own home is valued higher than straight dollar conversions. But payment wise things are more aligned with today’s era. 

Today’s Interest Rate Smoothes Some Era Housing Differences

My youngest daughter spent the pandemic lockdown with her daughter and 2 dogs in a 2 bedroom rented townhome at $2,100 a month. Once the lockdown lifted she took advantage of the 30 year <3% mortgage loan rates and just bought a home for $383,000. Her payment is $2,200 which includes tax/insurance/PMI. Nearly equal to what she was paying in rent. But it also tracks fairly close with my converted 1995 era monthly house payment amount of $1,996. Even her salary tracks closely to my 1995 to 2020 dollar converted engineer salary. 

Yes, one can say that I benefited from a slight era advantage in housing of around $200 a month. And that doesn’t include any of her cost to handle any repairs. Hardly enough to support the it was easier then than now anti-FIRE mindset trap unless we go down the higher loan payoff numbers. But what I see is that in this era, my daughter hopefully has an appreciating asset for about what she paid in rent. With keeping nearly the same monthly housing cost she also has the opportunity to continue saving and investing for the future.

This Era’s Advantages – Now vs Then

All I wanted to do when I started what turned into a 31 year telecom career was to get a job as a technician working alone high up on telephone poles. It never happened, I still ended up a tech but on the software side of things. I started as an entry level service representative answering phones and before I knew it, as opportunities for advancement opened up, I realized the importance of a 30 year pension and retirement health benefits. A definite benefit of the era I was in. But even a lot of that disappeared because I was on the tail end of that era. It became more and more age and service restricted with every executive change. What was first promised and a key point for sticking it out was diminished over the years. The rules and reasons for decisions changed.

Those who started in the era just before me had all the guarantees and protections. I did think that they caught all the breaks but didn’t let it hold me back. It required adjusting my plans within the confines of what my era provided and do what I could to meet my financial goals. I see many opportunities in this current era, not less. But they are only opportunities if taken.

Disappearing Retirement Benefits- Healthcare

The hardest thing I ever did in my life was force myself to stay at my company over 3 decades just to get promised retirement benefits. I put up with a lot to keep going after so many years invested. Later when new hires were paid more than us we were constantly reminded that our pay was lower because of that benefit. In the end they either diminished or they ended them. It was definitely a golden handcuffs situation and the company knew it. There was a lot of dirty corporate crap pulled on people of my era. 

I retired early at the age of 51 in 2009. I depended on getting retirement health insurance so that I could finally do my thing. There was no Obamacare-ACA then. Now one could carefully structure their retirement portfolio to produce income below the ACA income thresholds and get affordable health insurance. Seems like a benefit of this “now” era as long as ACA supporting people continue to get voted into office. I am still allowed to buy into my ex-employer’s health plan. For the year 2020 retirement health benefit I pay $1,334 a month.  

The all and powerful Internet

In 1995 as I reported to work at my relocation work cubicle I saw what was to be the internet for the first time. But it was the Intranet then. All within our own servers. Even if you wanted to go outside into the big www world there was mostly only porn. 1995 was a time when it was the only business model making money with it. Although one could access the internet from home, 1995 was still a slow going dial-up modem era with limited content available.

Centralization and relocation is far more limited now with the internet.

Sure, corporate headquarters will still move and force employee relocation. But I know that my job could have been done remotely. Some of my peers were even allowed to remote report before I retired and most do today within that same organization. Even if stung with the same relocation circumstances today, the internet would make finding a new job easier if I had decided to stay put. Our house search was a pain without the internet as we know it now. Finding a Job, house, research, you name it, all relied on getting hard copy paper by newspaper, a book, or sent materials. More information and data means being able to make better decisions.

The internet era has also provided the ability to invest without having a huge portfolio with a broker.

In 1995 we were only a couple of years into 401K investment options beyond the limited investment choices of cash or our employer’s company stock. For most of my working era it was a single 401K savings choice. There are so many investment opportunities from research to actually investing available today.

Education is expensive

I grew up low-income. Without a scholarship I was unable to afford college after high school. As soon as I turned 18 I had to start paying rent. Even if qualified, my parents wouldn’t consider cosigning on a student loan. I was a high school honor student and college was just financially out of reach. I worked and used work related tuition aid to attend night classes when I could. All course studies had to be aligned with my employer’s work related qualifications. 

Many people of today’s era start out in the hole.

They go right from high school to University degree programs. Then student debt rides their backs for decades if not managed or never attaining a suitable salary to manage it. I’m sure this is where a lot of the anti-FIRE mindset trap of “it’s harder now” comes from. Student debt is a real problem of this era. But it’s even more a problem for people with huge student debt and a degree that doesn’t offer a higher paying career worthy of it. 

In my era I ran into the same high education costs dilemma although I know they were smaller numbers. I haven’t any cost examples because I could never afford to pull that trigger without incurring heavy debt. Debt during a high interest rate era wasn’t something I could do. I also had little time to commit to it. Once we started having kids, the era shared condition of childcare costs made it cost prohibitive for my wife to work. I worked 2 jobs which lasted 13 years. For me, my era and socioeconomic status only offered the slow slog of work gained experience, university night classes when I could, and correspondence courses.

Every Era Has Its Benefits and Challenges

It doesn’t matter what era we are in, FIRE is not going to be easy. One era isn’t necessarily easier, they’re different. I’m sure nothing I detail here will change many folk’s minds regarding whether it was easier then vs. now to reach FIRE. Especially anyone going through job loss, severely high student debt, or lives in an expensive region of the world. Every life’s era has its periods of uncertainty and the impacts of decisions we made earlier. What matters is what we do about it. I read something in the book The Wealthy Gardener that stuck with me- You either change what you are doing or accept what you have. 

Being able to reach a chosen level of financial independence is and has been hard during any era. That’s why so few get there automatically. It takes concentrated effort. Ditch thinking that other people’s FIRE success stories are outdated era handed lucky paths to financial freedom. They are valid examples of strategies that worked for them. Their stories were never intended to be a solution but to generate FIRE ideas that will work for you in this current era within your unique situation.

Milestone Reached: Entering New Early Retirement Phase

Retire Early, Retirement Doubt, Retirement Plan

When I decided to retire early I always considered my plan to be one of phases. Where milestones would be reached and planned financial strategies would become available to implement. Each early retirement phase brings decisions that would need to be made based on relevant current data and the realities of real time. We’ve never had a million dollar portfolio to draw from so planning is essential. In my wife’s and my early retirement we have just reached another early retirement plan milestone. We have now both enjoyed our 62nd birthday. Here’s a glimpse at our early retirement phase approach.

Milestone Reached: Entering New Early Retirement Phase

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Using An Early Retirement Phase Approach

Early Retirement Age to Age 59.5 Phase

Key to early retirement is how to fund your new lifestyle. Once the paychecks stop the money has to come from somewhere. In our case almost all of the money was in tax deferred retirement accounts. For our situation we rolled our 401ks into IRAs.

For my retirement at age 51, penalty free pre age 59.5 IRA withdrawals required my using the SEPP 72t loophole. I would use that until age 59.5 for monthly distributions to cover my part of our split budget. Because these distributions are meant to be uninterrupted for the longer of 5 years or age 59.5, when doing my “retire early and often” thing I would reinvest any retirement job earnings back into our net worth. I retired during the great recession and this went far better than anticipated. My earnings reinvestment included mortgage payoff, taking advantage of 401K opportunities, and adding to our Roth holdings. 

My wife retired on her 58th birthday after meeting her 20 year work anniversary. She received a couple of small perks for hitting that 20 year milestone from the local bank branch she worked for. Instead of using age 55+ 401k penalty free distributions she simply set aside enough cash in a savings account to cover her part of the budget until reaching age 59.5. This way she could avoid retirement account taxes/penalty issues for the first 1.5 years of her early retirement.

Age 59.5 to Age 62 Phase

In this early retirement phase my SEPP 72t would end and we both could then freely establish a monthly penalty free distribution rate from our IRAs based on budgetary and actual real time portfolio numbers. This phase still requires 100% reliance on our portfolio to continue funding our early retirement lifestyle and takes us to the age of Social Security availability when new decisions would be made. 

Age 62 to Age 65 Phase

This is the early retirement milestone we both have recently reached, my wife last December and myself this June. When to start Social Security benefits takes the consideration of financial, longevity, legacy, and emotional issues. We don’t know how long we will live, how solvent Social Security will be long-term, or whether financial markets will act historically. 

Based on what we know today and running our numbers through both a retirement calculator and Social Security calculator we decided to start my wife’s early age 62 reduced Social Security benefit. As the top wage earner between us and the way survivor benefits work, my plan has always been to wait until at least my full retirement age of 66.7. With my wife being the lower wage earner, starting her Social Security now allowed us to reduce her monthly IRA distribution by 66%. The smaller IRA distribution and her Social Security together covers all of her budget. I continue funding my part of the budget from my IRA distributions.

Age 65 to 70 Phase

With the age 65 milestone early retirement phase comes Medicare. For our entire retirement I’ve had to pay for retirement health insurance costing me in the 30% to 35% of my overall budget. Our Medicare should greatly reduce my budget and retirement funding needs. At this point I feel we will no longer be early retirees and just traditional well practiced and experienced retirees. 

This is also a phase where I will make my own Social Security decision. Either take it at full retirement age or delay until age 70. My FRA Social Security estimate would cover 75% of my budget as it is today and my budget should actually be lower after Medicare. Once beginning Social Security I will need much less dependence on my portfolio for lifestyle funding. 

Depending on portfolio performance we will also begin financial planning that looks at looming RMD–Required Minimum Distributions during this phase to have time to strategically prepare in advance. 

Age 70 and Beyond Phase

I can only hope to have RMD problems in our last early retirement phase. Meaning there is a good sized portfolio left after decades of retirement. When this time comes we will do as we have done. Evaluate the reality of the real time and deal with it strategically. If still in our current home we will also start to consider what’s next. Our 2 story home sitting on a quarter acre in Colorado at 6,200 feet in elevation might be more than we will want to stay into older age. This is a phase where the reality of our own aging will play a major role.

It All Seems So Simple Now

When we were still working and planning for early retirement it sometimes felt scary. We get conditioned after decades of employment and paychecks. There can be fear of walking away and giving it up, even for the freedom that early retirement offers. All of the unknowns and cautions thrown at us can be intimidating. Especially when looking at it financially covering 20, even 30 plus years of our lives. But by chunking our retirement plan into retirement phases it makes it easier to mentally visualize and financially plan for. At least it has for us. 

Recession Lessons Learned Hold Up During Pandemic Market Drop

Bucket Strategy, Investment Strategy, Retire Early,

I was still in my first long career and just months away from my FIRE date in 2008 when it became obvious it was all going to hell. I learned valuable personal finance lessons regarding once in a lifetime economic dumps when everything is unprecedented with no signs of stability in sight. But back then I was still employed and had options. Retiring early and living off of a portfolio presents different challenges when that “just enough” portfolio can be severely stressed. I took the recession lessons learned and applied them to my early retirement portfolio strategy. Here’s a quick rundown on how it has held up during this pandemic crisis and its related market drop.

Recession Lessons Learned Hold Up During Pandemic Market Drop

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Year To Date Numbers Look Rotten

Pulling some numbers for use as an example from the first of the year (1/2/20) to (3/19/20) before the market stimulus bump shows substantial investment market damage.

  • DJI, Dow Jones: -33.6% 
  • GSP, S&P 500: -29.2%
  • IXIC, Nasdaq: -24.3%
  • VTSMX, Vanguard Total Market Index Fund: -30.0%
  • Leisure Freak Tommy’s retirement portfolio: -17.4%

Fortunately the stimulus market bump occurred and the end of quarter numbers did improve from the week before but still the worst quarter since 1987. 

  • DJI, Dow Jones: -23.2% 
  • GSP, S&P 500: -20.0%
  • IXIC, Nasdaq: -14.2%
  • VTSMX, Vanguard Total Market Index Fund: -20.3%
  • VTI, Vanguard Total Market Index Fund -22.4%
  • VTSMX, Vanguard Total Stock Market Index Fund -20.3%
  • Leisure Freak Tommy’s retirement portfolio: -12.2%

2008 Recession Lessons Learned – Portfolio Diversification Matters 

My being somewhere between leanFIRE and FIRE had me a bit more conservative to reduce risk. I used the recession lessons learned to attempt lowering financial pain from another extended market dump during my early retirement. Although I have no problem working in retirement when I want to, I never want to NEED to work for survival. I’m sure that post pandemic there will also be plenty of new lessons learned from this crisis to carry forward. 

I know plenty of people who are all in with stocks, mostly through Index and ETF funds. I would watch the market go gangbusters of late and think, what if I had only been all in stocks or stock funds too? One of the recession lessons learned was that diversified portfolios recovered much quicker than those all in stocks. 

Great Recession Diversified Portfolio Recovery Details

Stocks/Bonds Maximum Loss Time to Breakeven
20/80 9% 22 months
40/60 23% 25 months
60/40 35% 37 months
80/20 46% 42 months
100% Stock 55% 59 months

Another 2008 recession lesson learned was that sometimes bonds will track with stocks instead of going the opposite direction as in past history. That may be the case this time too. Diversification can lessen portfolio decline but not stop it. As listed above, my portfolio is down 12.2% for the first quarter of 2020 with this COVID-19 pandemic. But that’s much less than the sampled stock indexes.

The numbers look bad and may get much worse. 

If I was fatFIRE I might be able to stomach large losses and continue on. I wondered if being all in stocks over the past few years meant the excessive gains they have enjoyed are far greater than what has trimmed thus far during this pandemic market dump. So I took a quick look at the numbers on 3/20/20 prior to the stimulus market bump when things were at their recent worst.

  • DOW closed 3/20/20 at 28,869. That takes it back to what it was 11/1/16
  • S&P 500 closed 3/20/20 at 3,258. That takes it back to what it was 1/1/17
  • Nasdaq closed 3/20/20 at 6,880. That takes it back to what it was 11/1/17
  • VTSMX Vanguard Total Market Index Fund closed 3/20/20 at $56.01. That takes it back to what it was 12/1/16

I used the Vanguard date of 12/1/16 because it went the farthest back and I looked at my portfolio amount. I haven’t added any money to my portfolio during this timeframe and on top of that it has been paying out to me monthly since then. Comparing my 12/1/16 portfolio amount to 3/20/20 it was down -16.4%, which was 1% better than it was when looking at the first of the year to 3/20/20. That’s even after paying out to fund my and my wife’s early retirement lifestyle since that time. There were also associated CFP wrap fees on 90% of the portfolio since then. So unless I am missing something, being all in stocks appears to be a lot riskier when a major market dump occurs. That would account for a longer post recession portfolio recovery time frame.  

My FIRE Portfolio Allocation

I do keep a diversified allocation of stocks and bond funds like many people do. But I do something else. I use a bucket strategy where I keep two years expenses in cash and short-term bonds along with another year in a savings account. It was 2 years ago (3/2018) when I set this asset allocation.

  • 18.5% Cash/Cash Investments
  • 29.5% Bonds Fixed Income
  • 48% Equities
  • 4% Alternatives

I did not see the astronomical portfolio growth over the past couple of years that I would have with a larger stock allocation. But I also didn’t experience the higher level of losses now. I hope things come back to some version of normal sooner rather than later. With all the unknowns I now really appreciate having the cash as my FIRE portfolio survival insurance. It’s calming to know it’s there to  support our retirement lifestyle without resorting to depressed priced asset sales for a couple of years. 

If post pandemic recovery goes like that of the great recession then I hope to see similar favorable recession portfolio recovery timeframes for a portfolio with a diversified stock/bond/cash allocation. A leanFIRE to FIRE early retirement means I don’t have a lot to cut from our lifestyle to reduce spending during a sustained market dump. That’s why I took the 2008 recession lessons learned to heart to help ensure my early retirement portfolio survival during once in a lifetime or never before seen world and market events. 

I’m not trying to tell anyone what they should have done before the pandemic hit. 

If I could go back in time I would have gone to all cash last month. But that’s not how things work. I have no idea how the recession lessons learned or my portfolio will hold up with the next market close or even my own personal survival. I am only sharing this to support FIRE as a worthy goal. When some are saying this pandemic market dump means the end of FIRE or the end of early retirement, I feel it’s times like this that reinforces the need for the good personal finance habits of FIRE. I believe that FIRE is still a worthy goal. These are the times that really test our financial strategies and offer lessons to use going forward. 

 

Update 4/30/20: Anyone who experiences job loss due to the pandemic can check a new estimated stimulus unemployment benefit calculator. Zippia analyzed each state’s unemployment policies to determine how much unemployed workers can expect to receive under the coronavirus stimulus by state and salary. Remember, in addition to state level benefits, unemployed workers now receive an additional $600 a week for the next 4 months regardless of income. (The calculator is not a paid or sponsored link)

My Ten Year Early Retirement Anniversary: What’s Next?

Early Retirement Lifestyle, Retire Early,

I sometimes find it hard to believe that my ten year early retirement anniversary has come. Time passing quickly is a reality of my early retirement story. Never a boring moment.  It all started on Thursday December 17, 2009 when I walked out of the only life I knew. 31 years of life working in a career that I sometimes loved and a lot of times hated. If I am honest with myself it was for the most part an abusive relationship. 

I planned and purposely saved for 10 years to retire at the young age of 50. 

Then just as my FIRE goals were met a devastating recession struck. It felt like a sign from the almighty that I must remain in employment bondage, a feeling that fed once conquered early retirement fears. So I hesitated going forward with my escape plans as asset values across the board began their long drop with no end in sight. 

I stayed on the job.

I basically retreated back into the arms of my abuser and continued putting money away into what seemed like a black hole. It took another year before there were signs that the financial freefall had ended and a bottom found. A year that included weekly layoffs and piling ever more work obligations on the survivors. Oh how I begged for layoff and a sweet severance package, but always denied. Nope, I was destined to remain their beast of burden.

Signs it was time to go.

It was what happened in a management staff meeting that pushed me to conclude it was time. Just another in a long line of asinine comments from the CEO and new financial insults for the non-executive class. Recession or not, I just couldn’t serve under those overpaid bullying assclowns and delay my freedom plans any longer. So after a year delay I pulled the trigger at the age of 51, regardless of the recession’s end not yet being called. 

I celebrate this anniversary because retiring early and walking away towards freedom is one of the best decisions of my life. 

My Ten Year Early Retirement Anniversary: What’s Next?

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My Ten Year Early Retirement Anniversary: Reflections of this adventure and what’s next

Minute 1: Walking Out Of The Door For The Last Time

Freedom at last, it was finally over. I could feel a weight being lifted off of my shoulders. I don’t think my situation is much different than anyone else who has been in a professional non-executive position for a long time. Your company relies more and more on you to support important but unshiny legacy operations. Things they can’t seem to value when it comes to salary but lose their minds when there are problems or delays. All the crap that’s difficult to recruit and keep new people to do. 

In my case that included a 24X7X365 tethering by pager. I get it, that’s business and we do it or get canned. It’s a devil’s bargain. But that damn pager interrupted my life day and night through holidays, vacations, and weekends. Even when it never screamed. It had a mental weight of 100 pounds and demanded that it always be accommodated. 

Then there was this, something that drove me to this huge milestone- There was so much more I wanted to learn about and do in my life. I felt employment liberation as I walked to my car and drove away into winter’s early sunset.

The Decompression From A Career Mindset 

It takes time to detox from the corporate world. Retirement  can be a mind warp after spending a lifetime in a system of career obligation with only little breaks allowed. I thought I had it figured out. But the system of education and work is so good at conditioning us to be productive first, personal life second, that it took time to shed it. A few weeks in and I was happily enjoying the freedom to do what I wanted to do or do nothing at all without feeling guilty about it. 

That opened the door to my reinvention by replacing living productive as defined by my career mindset to instead living with purpose as defined by my interests and passions, no matter how silly or serious they were. Although I had always believed that I would be open to working in retirement under my terms, I used every minute of 5 months off to fully reset my brain before accepting an opportunity. 

Expanding My Social Circle

At the time of my retirement I had lived in my town for 13+ years and I didn’t really know anyone very well. My social circle was 99% work related. Saying that now sounds sad, but it’s true for many people. So I made working on my social circle a top priority. I uncomfortably opened myself up and pushed myself to be more social. It started by frequenting a locally owned coffee shop that I used to only visit on weekends with my son years before. It became my social outlet and is where I’ve made many new good friends in town. 

I also took advantage of opportunities to take free classes offered through the library, town, or local businesses and had a blast signing up to volunteer around town. Volunteer opportunities that ranged from single track hiking/mountain biking trail maintenance to pulling beer tap handles at town sponsored events. 10 years later and I still volunteer.

Making new friends and increasing our social life is something that adds happiness to anyone’s retirement. Looking back at this time of my ten year early retirement anniversary, expanding my social circle and being more connected to my community are my most valued retirement accomplishments. 

Embracing The Retirement Definition- It’s The Absence Of NEEDING To Work, Not The Absence Of Working

I have had fun and learned a lot doing my retirement gigs. They were much more enjoyable than my first career. The first opportunity was very close to home in a smaller company working in a field I had long wanted to learn about. It had far lower responsibilities than my first career which was great as a retiree to step back and just enjoy the ride. It was my first taste of working while retired on my terms regardless of money.

Then came my encore career. Another field and industry I had an interest in learning and experiencing. It actually paid more than my first long-time career which allowed me to do something I had never planned to do, clear my modest mortgage. 

Through it all I saved and invested all earnings from my paid retirement adventures. But in all cases when I learned and experienced what I wanted out of any gig or I could tell there was BS bucket deposits being made, I leave and return to retirement leisure regardless of salary. There have been a couple of other short retirement gigs during the past ten years and who knows, maybe some more in the future too.

Leisure Freak – What Started As An Internet And Website Building Lesson Turned Into A Fun Retirement Activity

While working in my encore career the younger analysts and developers always talked internet lingo. I decided I wanted to learn what it takes to build and run a website. Leisure Freak was then born. I never intended to be a blogger. In fact, I didn’t even know what a blog was.

I built Leisure Freak simply as an informational site but quickly learned the lords of search engines require blogs to build followers, backlinks, and social media feeds in order to place. I admit that I am not very good at it. There are just things I prefer not to do or worry about.

I do as much on Leisure Freak as I want. I have enjoyed my online relationships with other bloggers and have learned a lot about how the internet works. It’s amazing to see how talented people can earn a good online living if they strike gold. That’s certainly not me, I’m just happy that it pays its own way. It has been a fun ride so far. 

The Early Retirement Dream Of Travel

As far as travel goes in early retirement, everyone’s dream is different. The last thing I enjoy doing is jumping on an airplane after a decade of flying all over the country an average of a week a month during my career. We have done the fun and typical Hawaaii travel but what I have really enjoyed is road tripping. It’s budget friendly, on our timeline, and we travel as much as we want to. I do enjoy reading about other’s exoctic travels but it hasn’t been our thing, so far anyway. 

Money Reflections

I feel I should say something financial on my ten year early retirement anniversary. There are all the warnings about portfolio performance and withdrawal rate dangers during the first ten years of retirement. How what happens during those years determines long-term viability. Well, I have been receiving distributions in the 4.5% range from my portfolio since day one to fund my lifestyle. I have also plugged all gig earnings back in when I’ve worked, never considering any paycheck as extra spending money.

During the past ten years the markets have climbed and real estate has recovered. Since I escaped back 10 years ago my net-worth is up 35% even with it paying out the funding for my early retirement lifestyle these 10 years. 

However, it’s important to note these three noteworthy points: 

  1. I did not start with a million dollar portfolio.
  2. My retirement began in the very early stages of a recession recovery. 
  3. I leveraged any earnings from my short retirement gigs. 

Just saying.

It seems to work out when setting a reasonable withdrawal rate against a diversified investment portfolio. Then just letting your planned retirement lifestyle of purposeful spending do its thing. Yes, my withdrawal rate has been higher than what most recommend. But it isn’t forever. I fully expect to receive my earned Social Security benefit. If not, then it will fall on my plan B. 

So I Hit My Ten Year Early Retirement Anniversary, What Now, What’s Next?

For the most part it is retirement as normal. I will be living and doing a lot of what I have been doing. Monitoring finances and making family, friends, health, hobbies, fun, travel, giving back, all the good stuff of life my priority. Then there is utilizing the skill of saying NO to unwelcome obligation to work, people, or anything I don’t want in my life.

But there have been some areas I’ve been thinking about going forward:

I’ve been wondering, when does early retirement end and regular retirement begin? 

I don’t know why this was something my brain latched onto and it’s silly for sure. I have come to decide that early retirement ends at age 65 when I can finally end my high health insurance payments and go on traditional retirement Medicare health insurance. What does it matter? I like saying I’m in early retirement. I see it as a badge of honor.

It’s a huge accomplishment for me. A low income kid pulls off FIRE with no connections in the corporate world or connections in other influential areas of authority. I’m a nobody and that is just fine with me. I just worked my way into middle class by doing what others didn’t want to do. All the way to stealth wealth. Well, it’s my own definition of wealth, having just enough to beat the system and walk away young while still on top. 

Time to reach out and reconnect.

Once I retired my old work pals and I had little in common anymore. It could be too that they were a little pissed about my escape. I’m sure the overlords punished the remaining by dumping my work responsibilities on them. There are yearly Christmas greetings between some of us but today I can count on one hand those from that career that I am still close with. Some have since retired themselves while others still toil. I think it’s time to reach out and reconnect with some of my old work pals. Feel it out and see if there’s anything still there. 

Forgive my corporate tormentors.

I was able to disconnect from my past corporate life in major fashion. I never looked back. That might have played into my distance with ex-coworker pals. But I do take too much pleasure in mocking and disparaging certain aspects of management and corporate culture. Especially one particular CEO, now a convicted felon. Sometimes a little anger slips in. Especially when I read or hear about some of the same BS I endured happening to others either in the corporate realm or government ranks. My wife says I have some kind of corporate world PTSD because I get triggered and feelings of the past come out. I need to work on that and forgive but not forget. I will keep the mocking. 

Evaluate and take action regarding my changing interests and passions.

There are things that I pursued during these ten years of early retirement that I see my interest and passion fading. I now feel like going in different directions on parts of it. I think that is a natural occurrence. I’ve already identified some aspects that I was once ravenous about that now feel like I have held onto longer than I should have. I need to move on. Plans are already being made. There are things to get rid of and even sell to make a clean cut to create the space, both physically and mentally for the new.  

Preparing for a changing financial picture during the next 10 years of retirement.

There will be a lot of things associated to retirement finances happening during the next 10 years. I will see Medicare, Social Security, and even RMD at the end of this next decade of retirement. There are plenty of opportunities for tax and withdrawal strategies between now and then that I will be working on. 

celebrate 10 years of early retirement

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Well, that was a fun rambling. One thing is certain for what’s next- I’m looking forward to breaking from my Friday-only beer rule today. Yes, I’m having a ten year early retirement anniversary celebratory craft beer this evening at my favorite coffee shop. Right where I am likely to come across people I now know and feel blessed to have in my life. Prost!

Dreaming of Retiring in Your 40’s? These 5 Tips Can Help

Retire Early, Retirement Plan,

To retire at an early age of 40 something is a dream cherished by many. With a proper strategy, the financial planning hurdles can be tackled to create a substantial pool of retirement savings. Right from choosing the best retirement plans to cutting down on unnecessary expenses, saving for retirement requires knowledge and insight. If you too are working towards retiring in your 40’s, the 5 tips described below can prove helpful. 

Dreaming of Retiring in Your 40’s? These 5 Tips Can Help

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1 – Lookout for Taxes

It’s important that your investments are tax-efficient. You can save as much as is possible for you in 401(k), IRAs and other such options. With these options you can save more and grow your savings faster so that your retirement fund gets a boost. You can even benefit from the employee-sponsored 401(k) where your employer matches your contribution in your retirement account. The traditional 401(k) allows you to make either pre or post-tax deductible contributions and earnings are tax deferred until withdrawals/distributions. On the other hand, the contributions you make in a traditional IRA account are generally tax deductible and withdrawals or distributions are taxed. IRA vs. 401(k) is a perennial question. The best retirement plans are those which suit your financial health and the type of retired life you wish to live. 

 

2 – Save Half or More of Your Salary 

Generally, a majority of college graduates enjoy the peak salaries during their 40s. If they choose to retire at 40, they are curtailing savings by not contributing towards the retirement accounts during peak earning years. Besides, retiring at 40 also means you would have no access to Social Security or Medicare for at least 12 years into retirement. This would leave you with one less source of income and one more bill to foot during retirement. Also, the Social Security benefit will be reduced due to the lower average earnings when you actually attain full retirement age. Hence, if you want to retire early, you need to save 50% or more of your salary every year. 

 

3 – Invest Smartly 

Compound long-term growth investments are what you need if you wish to retire early. Otherwise, you may never reach your retirement savings goal or can run out of money during your retired life. Choose to be as aggressive with your investments as is possible for you. You also need to start investing as early as possible. Remember, the longer your investments have time to grow, the more likely it is that they would match the stock market’s long-term average return. 

 

4 – Avoid Unnecessary Expenses 

You can save money by cutting services which you pay for but do not use. Consider cancelling the subscription to that magazine which you never read, or the gym membership if you haven’t gone to the gym in months. The more such unnecessary services you cut off, the more money you save. 

 

5 – Get Rid of High-interest Consumer Debt

It’s best to free yourself entirely of any high-interest consumer debt or at least maintain a low debt-to-income ratio. Few debt obligations for real assets such as a primary residence or rental properties are exceptions as long as their monthly debt payments are low. If you plan on retiring in your 40’s, a 20% or lower debt-to-income ratio is advisable. 

 

Pro-tip: Your lifestyle expenses before retirement have a huge impact on your retirement savings. Minimalistic lifestyle can help you save more and faster for retirement. Besides, maintaining a simple lifestyle will attune you to a comfortable lifestyle post retirement even with fewer funds. 

 

The risks associated with early retirement cannot be completely mitigated. However, you can be foolproof with you plan. You can also seek professional help to test your investment portfolio in order to ensure that you are on the correct path.  

 

This informative post was contributed to Leisure Freak by Rick Pendykoski.

About the author:

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as MoneyForLunch, Biggerpocket, SocialMediaToday, WealthManagement, SeekingAplha, and NuWireInvestor. If you need help and guidance with traditional or alternative investments,  visit  www.sdretirementplans.com.

Binary Early Retirement Is Nonsense

Financial Independence, Financially Free, Retire Early, Retire Often,

What seems to be an issue with some folks when it comes to financial freedom and early retirement is it’s either this or that. You’re either financially free and retired or not. Basically, If you choose to do any kind of paid work or activity then you are no longer retired or financially free. Give me a break, what a crock! Binary early retirement is nonsense. Having financial freedom means having choices without financial worry when using our common sense. Yet people just can’t shed outdated notions about early retirement and the financial freedom that allows for it. Especially those binary early retirement loving critics who haven’t experienced it for themselves. That said, let me say I do see why they think what they think and I hear their criticism. Simply, there are long entrenched traditions regarding retirement. However, let me explain where I am coming from. 


Binary Early Retirement Is NonsensePhoto by Franck V. on Unsplash

Why Binary Early Retirement Is Nonsense

After nearly 10 years of early retirement through financial freedom that has included a stepped down position, a highly paid encore career, a lucrative retirement side hustle, a fun little short-term retirement gig, and this early retirement focused website, I speak from REAL experience. I claim and truly believe I’ve been retired and financially free through it all. All the way back to day one in 2009 when I ditched my long career. I live it and I have enjoyed the hell out of it. I’ve even increased my wealth at my pleasure, on my terms, and at our corporate world’s expense (yes, I have a particular attitude toward the corporate world). A total win-win!

 

I use the terms “highly paid, lucrative, and increased wealth” above to get the attention of any financially focused binary early retirement believers. 

But the reason I can honestly say that I was still retired and financially free the entire time I was getting paid working is I had the financial freedom to accept worthy opportunities I was interested in doing without regard to pay. I also had the financial freedom to quit doing them as soon as my interest ended, regardless of what they paid, and I certainly did. 

 

Financially free early retirees still have all the energy and drive that got them there. If they choose to work pursuing their interests and passions they can still consider themselves retired and financially free. 

They can then add any earned income to their portfolio, donate it to charity, or use it to help support a cause or hobby they want to continue pursuing. That’s the freedom lifestyle earned through executing a successful spending, debt elimination, and investment strategy.

 

It’s the absence of NEEDING to work that defines retirement, not the absence of working 

 

That’s not just some catchy concept, it defines retirement perfectly. Reject the outdated and rigid notion that we work until we can afford to retire and then never work for pay again. Why be financially free and then put limits on our freedom? 


Everyone’s vision of financial freedom and early retirement is different 

What’s common among them is that they have enough of a portfolio and/or passive income to be able to pull off their desired version of FIRE. A version which may or may not include any paid work. 

 

If doing any paid work in early retirement turns you off then don’t do it. I’ve freely chosen not to be in the paid work game since the summer of 2016. But, if the right opportunity presents itself I wouldn’t binary label myself retired and not pursue it. That’s the beauty of financial freedom.

 

There’s no call for trolling or shaming anyone who engages in a paid activity in their early retirement. Nor any other dictates of binary early retirement where it’s this way to be considered early retired or you’re not. Don’t let others negative opinions who unproductively criticize dissuade you from your own early retirement vision. Take away ideas from financially free early retirement stories and live your own vision. 

 

OK, I feel better now.

 

My Ordinary Early Retirement Story: Nothing Extreme To See Here Folks

Early Retirement Lifestyle, Retire Early, ,

It’s a world where extreme anything gets the attention, even when it comes to early retirement. News flash! Early retirement isn’t only possible for those going extreme. I just lived a normal ordinary life and found a way to financial independence. Mine is an ordinary early retirement story. Married, 3 kids, house, and a long career that started at age 20. A career where I worked my way up from entry-level call-center representative to lead engineer. During all of that there were side gigs, night school, all the ordinary boring stuff we do to keep our heads above water and trying to get ahead.

The ordinariness of my early retirement story doesn’t end there. I didn’t retire early in my 30s or 40s, I was 51 years old. Young by traditional retirement standards but hardly extreme or a sensational headline. A total snooze. Nothing to see here folks, unless maybe you are also ordinary and interested in the possibility of retiring earlier than most.

My Ordinary Early Retirement Story: Nothing Extreme To See Here Folks

My Very Average And Ordinary Early Retirement Story

When many early retirement stories are centered around highly educated middle class folks making big bucks and deploying super saver strategies to retire really young, mine is a more unremarkable common man’s story. I grew up in a lower-income family. My father worked hard but was economically limited by his 6th grade education, my stay at home mother made it through the 9th. I was unable to snag a scholarship so college was out of reach. I did what most did in our socioeconomic situation, I got a full-time job right after graduating from high school.

In a nutshell…

Marriage

Married my high school sweetheart just before I turned 19. We just celebrated our 42nd!

1rst Home

Bought a new 980 square foot starter home a year later in the less than desired side of town with a FHA loan and a low 8% interest rate. We put in a lot of sweat equity to help cover the minimum down payment. They offered stuff like that back then in the late 70s.

College

Working full-time I took night college classes when I could, mostly paid for by work tuition aid benefits. I sure couldn’t afford to pay for it on my own with what I was paid.

Little bandits show up

At age 22 become a parent. We had 3 kids two years apart. All little blessings that we freely gave all our love and money to. Sure glad my job offered healthcare benefits.

Making it work

Childcare costs is and has always been a financial killer. My bride gave up her secretarial job and became a stay at home mom until the kids started school. I worked 2nd jobs and side hustles to make ends meet. Well, the ends almost met.

Debt issues

Incurred too much debt along the way when kids were young as we tried to get by. It was a struggle and a royal pain to manage until my wife could start working again. The same sad story for a lot of ordinary people.

Finally, saving for retirement

Started saving in a newly promoted  company retirement thingy called a 401K when I was 27. Something new that had a little company match to go with it. What an amazing concept!

Job mobility traffic jam

Stayed at the same telecom company 31 years through thick and thin, slowly advancing through the ranks. It took 17 years from my start as a service rep to becoming a network engineer. I don’t know if this means I have superpower patience or I’m just stubborn.

Move or lose your job

At age 37 I reluctantly accepted a corporate restructure inspired interstate relocation to keep my job. Moving my family to stay in my line of work was good for my career but a personal life regret.

Taking financial control

At age 40 became personal finance aware. I wanted something more out of life than constant corporate and employment obligation. Met with a financial planner aligned with my early retirement goal of retiring 10 years later at age 50. Things got real.

Hardly a salary superstar

I worked hard and was respected in my field, even nationally, but could never hit the 6 figure salary club. Talking with my peers from other “like” companies nationally I was fully aware that I was a chump. My company just salary-treated long-time employees differently, in a bad way of course.

Damn recession

October 2008 was my target retirement date but the deep recession caused me to flinch and delay my early retirement. I’m told that recessions will do that to a lot of people. Well, maybe only ordinary boring people.

That’s it, I’m done!

Late 2009 I decided the recession had hit bottom and the economy was going to eventually climb out. It was time to stop wasting time and retire at the age of 51 to live life on my terms. I gave a one month notice and started making preparations. Company lawyers chimed in as if I cared and f’d with me as much as they could. Turning in my pager to end the years of being on call 7 X 24 X 365 took a huge weight off of me and I felt taller as I left the building for the last time. Now who’s the chump!

Pursued some interesting opportunities

I believe that retirement is the absence of needing to work, not the absence of work. So I carefully chose some great retirement gigs. That’s nothing that retirement traditionalist will get excited about. Staying open to opportunity in early retirement is far from being an extreme topic that causes a buzz anywhere. In fact, I think a lot of early retirees understate how common it is to work and earn money doing something they enjoy in their retirement. So I’ll call this secretly ordinary.

Here are a few of my boring ordinary financial impacting moves that worked in my early retirement favor….

Debt and Savings

Sorry, but I had no secret investment strategy. What can I say? Automatic payroll deductions, compounding interest, reinvested dividends, stock growth, consistent dollar cost averaging, it works when given enough time. My motto – Saving anything is better than saving nothing. I started only saving the minimum for the full company 401K match and concentrated all extra money on debt payoff. Once debt free I stayed debt free other than our modest mortgage. I just piled all extra money into maxing out the yearly allowable 401K contributions and ROTH IRAs. Soooooo ordinary….

House

No house flipping, moving up to larger or better homes every X years, or leveraging equity to build wealth. I have seen some exciting stories of people who have successfully done that. Nope, not me. I just bought a house that I could afford without stretching finances too impossibly far and still meet our housing needs. I always boringly considered a house as a stable place to live and being a hedge on inflation. What did that get me? I’m in our second lifetime house free and clear.

Education

We didn’t have student loan debt to worry about. My wife went to community college to get a secretarial certification and I worked full-time. We paid for her tuition and books as we went. I took night classes and employer promoted remote learning courses when I could.

Later in life we had to make decisions and set limits as to what we could sensibly cover for our kids education. My son was an artistic hands-on guy so he went to a trade school to pursue his interests. Our daughters attended 2 year community college. One did go on to additional education. We paid as we went and nobody was saddled with long-term student debt. Is it just me, does anyone still choose this route anymore?

Frugal Living

The lifestyle we created to control spending and maximize savings is what I call frugal. It’s far from extreme. We never allowed lifestyle inflation to creep in after there was more money coming in over the years. We basically practice purposeful frugality since starting our FIRE journey and we’re constantly making tweaks. Others may disagree with my kind of frugality. I read some more extreme frugal efforts people use to reach employment liberation at super young ages and I am impressed.

What I did was push against our frugal threshold limits so our lives would still be enjoyable and keep our budget sustainable. Hacks here and there, coupons, have the patience to wait for sales, stop wasting money on nonsense, etc. Nothing extreme, just average normal stuff someone can do when they ditch blind consumerism. It does add up to big savings over time. I sure won’t win any frugality contest nor attempt to enter any. The funny thing is, when adding frugality, our lower cost lifestyle becomes a habit and ordinary.   

Paying for early retirement

I faithfully followed the aggressive but realistic 10 year early retirement plan created by my CFP when I was 40. No sensational or extreme story here other than I consistently stuck to it.  There was also a diminished retirement benefit that I earned and rolled into an IRA along with my 401K. I used a SEPP 72t IRA arrangement to avoid early withdrawal penalty to fund my early retirement. Unremarkably, with my ordinary life and financial status, there was no million dollar portfolio to retire early on.

Health insurance

Oh yes, the golden handcuffs that weren’t real gold. Even though a company merger did its best to destroy a lot of my company’s retirement benefits earned if you survived 30 years there, I left with a grandfathered but non-guaranteed retiree medical benefit. (I have to say that my staying there that long, given all the corporate BS they dished out, is the most remarkable thing in my story.) It allows me to buy into the employee health plan but is a “Use it or Lose it” benefit. It went up to $1,340 a month for 2019 and can be killed any year going forward.

I could save money by going on the ACA. I choose to stay with my retirement health plan as long as it lasts or until we become medicare eligible because the ACA is under constant political threat.

Retire early and often

I’ve had some awesome retirement gigs since my first early retirement that really worked out for me. Far beyond anything I envisioned. They were rewarding on both personal and financial levels until they weren’t and I just retired again. My lifestyle was funded by my SEPP 72t IRA so anything I earned was reinvested and I cleared the modest mortgage balance that I initially retired with.

As for now, I have run through my pursuit-list of paying gigs I wanted to learn and do. I still keep my eyes open and continue exploring all of the new things that pop up in the world of opportunity. I’m happily on the sidelines until the next passion driven interest comes my way. I think it’s a cool attitude to have about early retirement, but I get why others wouldn’t.  

My Ordinary Early Retirement Story: Nothing To See Here Folks

As You Can See, A Totally Boring and Ordinary Early Retirement Story

That’s it folks, my only claim to fame is I figured out a way to retire early within my ordinary life limitations and blessings. No big event, major breakthrough, windfall, extreme measures, or financial success secret.

I do read incredible FIRE stories about people who retired in their 30s or 40s. They travel the world, make money online from anywhere they want to, live on a sailboat or in an RV, amass millions of dollars, etc, etc. Their stories are very inspiring and fascinating. I have picked up some great early retirement ideas to use from them. But given what I enjoy and want in life, I’ve filed the more extreme and sensational elements away as unrealistic for me to actually pull off or even really want to do.

All I wanted was to simply ditch the rat race and stay living in my community near my kids and grand kids. A life with the same lifestyle I had always lived, but with more freedom to focus on what I value and enjoy a little more travel. No grand lifestyle changes or unnatural feeling lifestyle downsizing. Just the right early retirement for this ordinary average guy.

There Are Many Flavors Of Early Retirement: Why Mine Isn’t For You

Retire Early, Retire Often, Retirement Plan

There are many flavors of early retirement that people have found success with. The recipe usually starts with the same base ingredients. It begins with envisioning what our ideal retirement lifestyle would look like. Then it’s all about what it will cost, how much we need to save to pay for it, and what could actually be done to pull it off. But different people will add different favoring to the recipe. What works for them may not be appetizing to others. Based on what people believe about early retirement and the negative feedback that they enjoy sharing, I know that some of the flavors of early retirement that I found success with isn’t for everyone.

There Are Many Flavors Of Early Retirement: Why Mine Isn't For You

Photo by Marie Grob on Unsplash

The Flavors Of Early Retirement I Chose That Might Not Work For You

When I left the grind I didn’t really know anything about financial independence retire early (FIRE). I simply wanted to retire as young as I could and had to figure out what would work for me. I met with a financial planner, I would read books, and I researched the few online resources at that time to get real life early retirement success stories. All of this provided some great ideas and for various reasons there were many things that just wouldn’t realistically work for me. It’s the things that could work for me that mattered. That’s what I used to personalize my early retirement success strategy.

If you are on your early retirement journey then you are most likely doing the same kind of research and know exactly what I am talking about. Although there are many flavors used in my early retirement that are useful to a variety of people, here are a few that you may or may not like –

Early Retirement Allows For Paid Work

This is a flavor where a little goes a long way when added correctly. Even though “Retire Early and Often” is my tag line, my having worked some retirement gigs and a short encore career is the thing that I catch the most grief about from people who love to let me know the rules of retirement. I get it, traditional definitions of retirement means being done with working. It seems to be very hard for some people to let go of. This flavor of early retirement that I chose and live by spells it out this way: Retirement is the absence of NEEDING to work, not the absence of working.

I don’t need to work to live the lifestyle I want to live. But I certainly stay open to opportunities that I would be interested and passionate about doing. Months and years will and have separated my adventures in paid retirement gigs.

Many early retirees will engage in any number of paid endeavors both big and small.

This chosen flavor of early retirement is one where I live off of my portfolio and strategically add any salary I may earn back into my net worth. I’ve shared my experiences and how much it has benefited me. It isn’t a flavor for anyone who can’t shake loose of outdated retirement rules and accept that they just might one day WANT to re-enter some form of paid work as part of their retirement. After spending decades in the rat race, I’ve found it both exciting, enjoyable, and even somewhat liberating to take on an opportunity for just as long as it meets my interests, passions, and needs.

An Early Retirement Where The 4% Withdrawal Rate isn’t Gospel

I chose instead to flavor to taste. No matter what percent is used or believed as a safe withdrawal rate, my flavor of early retirement doesn’t believe in a static withdrawal rate that’s set at our retirement date. I see it as guidance, not gospel. Why? Because life will happen. Things will change as we age and through time in our retirement. There will be things we can and can’t possibly plan for or control, both good and bad. I believe in having a dynamic withdrawal rate with a heavy dash of lifestyle inflation control. A 4% withdrawal rate on the common early retirement benchmark of $1M sets it at $40K a year. That’s great if you can earn enough to save $1M or more. But for me and most people I know, accumulating a portfolio of that size would mean delaying retirement to old age, if ever.

I started with a withdrawal rate closer to 5.5%. But I also calculated in my expected Social Security income to start about 16 years later. My Social Security, even if reduced because of government inaction to shore it up, should lower my portfolio reliance by at least 50%. That’s one major reason my starting withdrawal rate wasn’t planned as static over my retirement. Therefore I chose to retire early with less than a million dollars and began the early retirement lifestyle I planned for.

My flavor or early retirement has a withdrawal rate based on retirement calculator results.

I didn’t start retirement funding with a percentage of my portfolio, I started with an amount I needed. I simply ran the needed funding numbers against my portfolio amount and plugged in my future Social Security. Now nine plus years into early retirement my withdrawal rate is 3.7%. That’s even with today’s higher than planned health insurance cost. I expect my withdrawal rate to significantly drop even more once my Social Security begins. Medicare is even closer for me to start. It will most likely further reduce my withdrawal amount because our health insurance represents a third of my current budget.

The way I retired early probably won’t work for those who only believe in a gospel of a static withdrawal rate plus inflation. My early retirement flavor is to have a flexible, dynamic, and realistic withdrawal rate. One backed up by Monte Carlo retirement calculation results.

Funding Early Retirement With Tax Deferred IRA & 401K First

Flavor sequence matters. The traditional way to sequence our retirement withdrawal sources was to use non-retirement assets first. Then look to tap into our tax deferred IRA and 401K. Any Roth accounts are then tapped last. The thought is it’s best to spend down non retirement accounts first. Reasoning it’s better to allow our tax deferred retirement assets to continue growing tax deferred. Our Roth IRA funds would then be left for late life tax-free withdrawals. It seems like sound advice and for many this is the default path of retirement funding sequence. But that didn’t taste right to me because it doesn’t fully consider the impact of taxes.

My funding sequence uses a different retirement withdrawal strategy that considers tax efficiency.

The strategy I use starts retirement funding by first withdrawing from my tax-deferred (401K/IRA) retirement accounts. Withdrawals were limited to stay below the upper threshold of the 15% tax bracket. Today with the new tax law the goal is now to always stay within the 12% bracket. I was in a higher tax bracket than that during my saving years in the trenches. Getting the higher tax benefit savings then and paying less taxes now on tax deferred savings is a welcome gain.

Before I reached the age of 59 ½ I used SEPP 72t to avoid the early withdrawal penalty to fund my early retirement from my IRA. With that now ended I still use my IRA first. My withdrawal strategy will only withdraw from my non-retirement account savings/investments if I ever need more than what the 12% tax bracket allows. Roth accounts are still sequenced to be used last, only after my other non-retirement account savings/investments are depleted. My Roth is not being held until my IRAs are dry. They will also be used when needed for tax rate management. This withdrawal strategy was found to add to portfolio longevity. I also believe in using this strategy to assist with managing Social Security’s taxability when I eventually begin it.

Anyone who believes in and prefers the more simplistic and commonly touted portfolio fund withdrawal strategy will not favor this flavor that I use.

Flavor Your Early Retirement To Your Taste

The above flavors I shared are just a few that I’ve used for my early retirement. There are all kinds of early retirement success stories to be inspired by. They range from extreme frugality to mega portfolio accumulation. They come from people who are Social Security believers to those who have given up on it and would never consider counting on it. We will always come across some of the touted early retirement flavors that won’t work for the unique blend we prefer, we can realistically reach, or that we can tolerate.

During my pre early retirement research I did run into ideas that I took in as workable. But there were others I just moved on from as not being for me. I understand why some of the ways I put together my success recipe for early retirement won’t be for everyone. Hopefully what I share about my early retirement experience provides some new ideas that can be turned into your own unique solutions. Wherever your early retirement research takes you, look for ideas that appeal to you, verify through calculation, and craft your own winning combination of early retirement flavors to use for your success plan.

How To Be More Creative About Your Early Retirement

Retire Early

For many of us, retirement is a long way off. The current retirement age is 66, and it will only rise as time goes on. And while an early retirement is certainly appealing, it is often more of a daydream than a reality.

But with a little creativity and hard work, it’s possible to take matters into your own hands and enjoy an early retirement. Read on to find out how.

How To Be More Creative About Your Early Retirement

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Recommended reading: How I Fund My Early Retirement.

Early retirement starts at home

The best early retirement is the one where you barely have to lift a finger, and there’s no better place to start than your own home.

As property and rent prices rise, more and more people are seeking cheap accommodation alternatives. Renting out your spare room provides you with a steady income by using what’s already at your fingertips. You can retire early whilst still receiving a modest monthly income, plus help with the bills.

Alternatively, consider releasing home equity by downsizing to a smaller property. Depending when you bought your property, it might well have accrued considerable value in recent years. Downsizing also decreases your energy bills and property tax, increasing your savings.

Want to take downsizing to the next level? Selling your property entirely and moving into a motorhome, trailer, or even a houseboat. You get a tidy lump sum to fund your retirement, and you can wake up to nature at your doorstep.

But perhaps the most creative way to retire early with your home is by taking out a reverse mortgage. This is a loan that’s taken out against your property equity. However, rather than paying the money back, it is taken out of your equity, freeing up cash to fund your early retirement. Find out more here.

Change roles and branch out into new industries

Early retirement doesn’t necessarily have to mean retiring from the workforce altogether. Indeed, many retirees prefer working, as it keeps them busy whilst still giving them time off to enjoy themselves.

You might have already spoken to your manager about the possibility of semi-retirement, working part-time whilst staying in your current role. But for many of you, the answer is a resounding no.

But have you considered changing your job altogether?

Changing careers is a viable option that can revitalize your work-life by making you face new challenges, open up better pay opportunities, and give you the option of flexible working hours. You keep active and busy, work the hours that suit you, whilst still paying into your pension pot — it’s a great halfway solution that’s the perfect stepping stone to complete early retirement.

And it’s never too late to change careers. In fact, many men and women aged 50 and above are jumping ship to other industries — and they’re flourishing.

So why is this? The fact is, older people tend to have more experience and transferable skills than those individuals just entering the jobs market. These workers are also less likely to jump ship once they’re settled into a role, giving employers some stability.

Create a new résumé that highlights the transferable skills you’ve accumulated over your career. It’s also worth reaching out to friends who might be able to put a good word in for you with their employer.

Become a digital entrepreneur

Digital entrepreneurship is an increasingly attractive option for those seeking an early retirement. Initial investment and overheads are low, much lower than with a physical business. It’s also highly flexible — you work the hours you want, where you want.

Barrier to entry is low, and digital entrepreneurs generally get out of it what they put into it. Your digital business can be launched as a sideline to your primary job, giving you an extra income to contribute towards your retirement nest egg. Alternatively, it can provide you with a relatively passive income, giving you some spending money after retirement.

It’s easy to build a digital business from scratch. There are plenty of free or affordable tools available to help you on your way and loads of creative ways to monetize your passions:

  1. Start with a website, an email marketing platform, and one or two social channels. That’s all you need to get going, and at least 50% of that can be done for free (if you don’t factor in the time it takes to learn a bit of tech or create content). A lot of these digital expenses are subscription-based, helping you spread the cost of the initial investment. From easy-to-use website builders like Wix to marketing automation software such as Moosend, anyone can get started with building an online business with easy subscription tools, no matter what their experience is.
  2. Find something you love doing and monetize it. Love building ships in bottles? Sell them. Or do you have a passion for history? Create an online course about your favorite periods of history. The best business ideas are often personal (and a bit creative).
  3. Learning a lot about blogging, coding, marketing, websites, emails, copywriting etc? Monetize your newfound web knowledge and create some expert-level content in the shape of a course or mastermind that people can join for a small joining fee (or a rolling subscription).  Helping other people find their digital business ideas can be half the fun (and super lucrative — you’ll have a massive captive audience).

Freedom and flexibility are what make digital entrepreneurship such a creative early retirement model. It’s what you make of it.

Connect with friends to achieve early retirement together

You’ve likely gathered a sizable network of friends and colleagues over the years. Many of these will be in a similar position to you: desirable of an early retirement but lacking the path to achieve it.

But by connecting with these individuals, you can create a solid plan that nets you a solid income (or at least a tidy nest egg) by capitalizing on your shared experience.

Reach out to old friends and associates from your time working. Identify the skills you have to offer and work together to create a business plan that takes advantage of these. Be honest about your own pros and cons, and speak candidly about where you want to go.

Do you want a passive business that delivers a modest but regular income? Or do you want to invest in a one-off venture that pays you a single but sizable sum? Get creative — you might find your shared knowledge takes your business to an unexpected (but profitable) niche.

For many, early retirement is but a pipe dream, something reserved solely for the super-wealthy. But with hard work, perseverance, and a little creativity, you can take control of your future and make early retirement a reality.

Use the ideas above as inspiration for your own retirement. Plan carefully, research diligently, and start working towards an early retirement that you can enjoy for years to come.

This post was contributed to Leisure Freak by Patrick Foster of Ecommerce Tips

Ecommerce Tips is an industry-leading ecommerce blog dedicated to sharing business and entrepreneurial insights from the sector. Start growing your business today and check out the latest on Twitter at myecommercetips.

Surviving The Final Stretch To Retirement: Fighting Emotional Urges

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Why is it that things always seem harder when there is just a little farther to go towards reaching our goals? I’m reminded of this psychological urge when dealing with the last mile to road trip rest stop relief. But the same kind of mind trips can and usually happens at work as we get closer to reaching our financial goals and announcing our retirement date. As someone who had to fight through it, surviving the final stretch to retirement will go much easier if we do a few things to help us push through.

Surviving The Final Stretch To Retirement: Fighting Emotional Urges

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Tricks To Surviving The Final Stretch To Retirement

When we plan for our retirement we should always focus on what we are retiring to. We envision what our life of freedom will look like and all the things we want to pursue. It not only sets the basis for what our retirement lifestyle will cost and what’s needed to fund it, but it also helps motivate us to establish sustainable smart budgets and save money to reach it. But face it, there is this thing we will happily leave behind. If we loved our job and truly enjoyed what we were doing, we probably wouldn’t have done everything we could to happily walk away from it. Love our job or hate it, there are always little things that we can’t wait to never have to deal with again.

For all but the truly blessed, your final stretch to retirement will have all of your workplace irritations amplified. All of the management buffoonery and self dealing that causes unnecessary rework. The plethora of unnecessary policy or process changes, finger-pointing, and scapegoating you’ve put up with over many years won’t change. The gaggle of incompetent and possibly insane coworkers, managers, executives, or clients you avoid at all cost will never change. Your commute most likely isn’t going to change for the better either. But we change as we approach the final stretch to our retirement and that is what we can and must control.

What’s needed is adding a new retirement goal.

We have a choice. Either gripe and complain while hating the last of our careers which can possibly end things before we are ready, or deploy some countermeasures to cut the work BS and our emotional urges. The idea should be to get through this final stretch to retirement in the best way possible to not only survive but win with a smile on our face.

The Last Stretch Is Important To Us

We have to understand and emphasize to ourselves that the last stretch is important, not only financially but also psychologically. Our target date was set for a reason that is most likely tied to specific milestones: Portfolio amount, pension eligibility, penalty free access to our retirement accounts, etc. We are generally earning the most from our careers at this time so we do need to stay to our plan’s end. Then there is the psychological aspect, we want to retire on our terms. That means sticking to our plan no matter how irritating our work becomes or how excited we are about our next chapter. We don’t want to do anything to screw this up and end up second guessing our retirement or regret ditching the rat race when we finally do. There’s enough mind-warps to deal with in our retirement transition without adding to it.

One easy trick is to set up a mental reminder of your retirement date.

We’ve all seen the retirement countdown clocks. If you have a great work environment and you’ve been open about your plans then something along that line is a good reminder for you and everyone around you about your joyous plans. For people in a less than perfect work situation it can be a great way to passive-aggressively mock an abusive coworker or manager without saying a word. You can also say it’s an unattainable dream to throw everyone off and leave them wondering why you smile every time you say that. If like many folks you are secretly on the path to retirement then use a picture or any other means for coded messages to yourself of when and what is ahead for you. The thing is this: The last stretch to retirement, no matter how trying it is for either good or bad reasons is only a temporary situation.  

Disinvest Emotionally While Keeping Up Job Performance

Even if you love your employer and work, every job has its share of BS. We put up with much of it no matter how irritating it is because we care about what we do, we want our paycheck, and we want to do well to earn any yearly raise. By gradually disinvesting ourselves emotionally from our job we can carefully set aside BS that isn’t really critical for the business. “Carefully” because this is a balancing act as we need to fly below the “I’m close to retiring” radar and maintain our job performance so that we are allowed to continue to our target date. If our retirement date is beyond the next salary treatment or bonus payout, then that may also play into your disinvestment strategy.

It’s all about cutting irritating activity or avoiding jack-hole folk that offers little or no return on our investment. Concentrate on performing the company’s value added activities you enjoy doing. or at least the activities that don’t bug the fun out of you. You know how they always say to someone who they are laying off that it isn’t personal, it’s just business? Well, we have to have that same type of mindset when surviving the final stretch to retirement. A lot of times the on-the-job BS goes the path of least resistance. Start adding a little emotionally free resistance. See if it can go somewhere else or simply not even be missed.

Counter The Nagging Feeling That There Must Be More To Life Than This

Some of us will hit the wall hard during our final stretch to retirement and everything about our job feels pointless. This can happen to people who are in a truly perfect job and company or a hated one. We can lose all patience and think about forgetting our plan because we’re so close to pulling the plug and life is too short to waste doing this. It sure happened to me. The excitement about our planned future can be intoxicating. The call of our retired life that lies just ahead can be very loud, but we can counter it.

Increase your life outside of work. My job was all-encompassing including an irritating demand that I carry a pager 24/7/365 in my last years. I was excited about what I was about to begin in retirement. By pushing to get a life outside of work, job stress and being tethered via pager be damned, I was able to keep things in perspective. It helped me tolerate the last miles on the job. It’s about forcing ourselves to get more balance in our life. I concentrated on what I wanted to be in retirement and let that direct what I mentally focused and acted on.

By doing this before we retire we also start to build a bigger and better social circle outside of work. This is a major perk to help us during our retirement transition. Sadly, many of us have a social life that revolves around our job and coworkers. Most of that will most certainly drop off once we retire. There really is more to life than our jobs. The trick is to start bringing some of that life we envision in retirement into our life while still dealing with our final stretch.

Don’t Tip Your Hand Too Early: Maintain The Secret Until You Are Ready

If the final stretch to retirement is driving you crazy, then you should fight any urges to blurt out your intentions before you are really ready to pull the trigger. It can make both good and bad work environments worse. There is a right time to announce your intentions to retire. Something flipped in my brain where I got psychologically cocky on a subconscious level. I knew I was close and I wanted to rub their noses in it with every unfair demand being pushed on me. I doubt I am alone feeling this way. Maybe you work somewhere that treats everyone great and you are motivated by impatience and your excitement to let the cat out of the bag. If so, you should still fight your urges. The last of your working experience can end up less than desired.

Here’s what we should understand: Business has very limited or no morality. It’s all about numbers, profit, and power. Don’t underestimate the possible ruthlessness of your employer or people who may try to undercut your chances of reaching all of your plan’s goals and retiring completely on your terms. The final stretch to retirement can be trying. Especially when in a stressful work environment or one filled with jack-holes or unfair policies bugging the holy crap out of you. Mentally disconnect from the nonsense. Keep your head, keep your secret until appropriate, and keep doing what you can to stay focused on your dream.

Fight counterproductive urges in your final stretch to retirement

If you are like many, including myself, who weren’t blessed with a wonderful work life experience toward the end of their career, then the final stretch to retirement can drive you nuts. It can even be true for other reasons for those who are blessed with a great work life. The final stretch to retirement will be a time of excitement, emotion, and sometimes many urges to do something counterproductive to your plan. It’s also a great time to make positive changes. Changes to improve both your experience in the final stretch of your career and get a head start on your transition to a new life of employment liberation.