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Early Retirement is like leaving the Casino when ahead

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My Father-in-law told me, Do Not Let Greed Delay Your Retirement, Early Retirement is like leaving the Casino when ahead. My father-in-law passed away suddenly a year ago and today has me remembering his wise advice. His is a cautionary tale that stuck with me and contributed to my own early retirement story. I was still several years away from my early retirement goal and my father-in-law had only been retired for a couple of years when he offered his advice to me.

Early Retirement is like leaving the Casino when ahead – Odds Favor the House

Your Employer Can Change the Rules

My father-in-law worked for United Airlines on their Ramp Services Crew. His career was about loading bags and freight with a mind to keep the plane’s cargo evenly distributed, de-icing planes in the winter, and everything else that they were to do. 30 years into his job that provided awesome travel benefits he could retire with a full pension, his 401K, and a bunch of United Airlines stock given to employees instead of salary raises. As he explained, only after you retired could you cash out of that stock and diversify (before new rules about employee stock holdings).

At age 58 he was still healthy and although he had plans of retiring and traveling the world on the retired airline employee travel benefits he decided that by staying a few more years he could build up more savings and collect higher social security later on.

A few years pass and some freight shifts during loading a plane and injures his back. After medical treatment and some rehab he returned to work but his back was never the same. He hung in there a few more months until he hit 35 years of service and retired.

Aside from health issues associated to his back injury something else happened during those last months while he was getting ready to retire. United Airlines filed for bankruptcy. His company stock representing years of raises was all but wiped-out overnight. You don’t get a warning so you can quickly retire and sell your stock (that would be insider trading). So he counted his blessings and retired with his pension. Soon afterward United Airlines ditched their pension and handed it off to the PBGC which came with a reduced monthly benefit.

Your Health Can Change

6 months after retiring he found out he has bladder cancer. After surgery and other cancer treatments it was successfully removed but left him tethered. He needed to always be close to a rest-room which made the thought of traveling less attractive to him. Still feeling blessed for beating cancer he couldn’t help but to think what if. “What if I had retired when I was 58 with my 30 years? I would have been able to sell that stock and travel as we had always planned.” What if indeed.

As he told me, “I got greedy and should have left the casino when I was ahead”. Ahead in both retirement money and health. He knew of my early retirement goal and then warned me, “Don’t Let Greed Delay Your Retirement because your future is unknown”. He then said he didn’t believe in crying over spilled milk but knowing what he knows now he would have left as soon as he could. The old hind-sight dealio for him but great advice for me to chew on.

Cancer would have still visited him but they would have had a few healthy years to get out and do all the traveling they had long-planned to do.

Leaving the Casino When Ahead

I did take his advice to heart. We don’t know what our future holds for us. Early Retirement is like leaving the Casino when ahead. If you stay too long or linger eventually the House will win. The “House” or “Casino” is the system of life in the modern world. The system where we work doing things other than what we really want to do by trading our time for money.

We choose financial responsibility as our game of choice which is our gamble to winning a chance to have as much time as possible HAPPILY LIVING free from needing to work.

We gamble that financial responsibility will pay off and we will be able to follow our passions and our interests before our slowing through aging, decreased health and then leaving the planet with our inevitable death.

With the anniversary of my father-in-law’s passing it is something that I have thought a lot about lately.

Do Not Let Greed Delay Your Retirement – The Temptation for More Money

There are the internal factors like greed and fear at work tempting us to work longer, save more, and delay our retirement for more money. There are also the externally applied messages to feed our greed and fear.

  • Messages telling us we need huge sums to retire with the same lifestyle we have when working.
  • Messages telling us we need to delay retirement to get bigger Social Security checks.
  • Messages telling us we need to plan on funding retirement until age 100.

Early Retirement is like leaving the Casino when aheadThese generic messages can cause us to look at what we have and decide to risk doubling down to have even more. Gambling our decreasing time for more money. Some folks pull it off but many lose. The odds favor the house. Life is finite. We burn through our time no matter how much is left, great or small. Most people have to burn through their time because they don’t play the game well (spending foolishly instead of saving/investing, heavy debt, making bad financial decisions) or have a long run of bad luck (poor work opportunities or underemployed) where the cards never came up for them. However if we do play well and have luck fall our way then we should resist greed or fear and know when to leave the casino when ahead.

Early Retirement is like leaving the Casino when ahead – Know When Enough Is Enough

This article isn’t about being financially reckless and pitching a career without first having done all that needs to be done to fund our retirement. Beating the House and winning with early retirement means we had just enough good luck and have played the game well through practice, commitment, and learned skills. We gambled with our earnings by saving and investing instead of seeking instant consumerist gratification. Gambling that we are going to hit the jackpot of retirement and have a greater tomorrow. If we are fortunate we will have retirement earlier than most who are spending time in the casino.

With the constant generic messages of needing more and more to retire comfortably we should take that in stride and run our own numbers.

Everyone’s retirement lifestyle and lifespan is different.

We can’t exactly pinpoint our lifespan but we do have clues.

  • Our relative’s health and lifespans
  • Our current health
  • The actuarial lifespan estimates

We can account for the chances of longevity and hedge that bet either with our investment bucket strategy or by throwing in a QLAC if we want a longevity annuity.

Knowing how much we need to live our retirement lifestyle and how much we have wisely invested tells us whether we should exit the casino. It allows us to put our winnings to the test and know when enough is enough. I like to use the free Monte-Carlo type Retirement Calculator by FIRECalc. We can’t know when enough is enough until we finish running our own unique and specific numbers.

Having the right focus isn’t greed

Some believe that people who become frugal and super savers are money focused and greedy. I think they miss the point. If there is greed to be found in financial independence and retiring early it is in our wanting to cherish our time and not waste any more than we have to stuck in the rat race. We are time focused not money focused. Time is what we all gamble with. Greed comes into play when we lose sight of that and stay in the Casino far longer than we need to.

Final Thoughts

I miss my father-in–law. My father who I also greatly miss had passed away years earlier at an age below actuary lifespan estimates. Both of them succumbed to a form of cancer. Another piece of the casino’s bad luck that many of us may have a run of.

I have got a few calls lately from recruiters wanting to pitch opportunities that are aligned with the encore career I retired from not long ago. I admit the temptation of earning some extra cash and its high paying salary. I am all about retiring early and often.

It stokes some interest but only until I think about this game of chance I would again be playing. Re-entering the Casino and gambling my time for extra cash. Doing something that I am not passionate about and the entire time hoping I will still have time tomorrow to follow what my passions and interests are, living life again on my terms. I retired from that work for a reason because it no longer interests me. Why gamble with my time?

Once we know when enough is enough and have the smarts to leave the Casino while we are ahead we get the other prize brought by our won financial independence: Removing money from our life’s decisions. We can make decisions made at our spirit, our heart, our soul’s level.

Do you have any thoughts about Early Retirement is like leaving the Casino when ahead?

Has Your Early Retirement Number Changed?

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If you are still on your financial independence quest have you checked your target lately? Has Your Early Retirement Number Changed? As we approach the end of the year many of us in the FI space will be taking a look at our portfolios, budgets, and making plans for the coming New Year that is just around the corner.

It is a time when we look at our net-worth and gauge our progress. Assessment and adjustments are always necessary. That should include applicable changes based on your answer to the big question. Has Your Early Retirement Number Changed?

As we are on our Financial Independence journey we pay off debt. We cut all spending waste from our lifestyle and budget. We set an early retirement number as our target. A number based on what we know at the time. But nothing is static and our number will be changing.

Why Has Your Early Retirement Number Changed?

Allow me to show how and why my early retirement changed in the 10 years of my FI quest before I retired early the first time. I was 40 when I decided in 1998 that early retirement was my new quest. I fully committed to it. I set a budget, maximized my savings rate and investment strategy. Based on my vision of my early retirement lifestyle cost (which was a total reflection of my new frugal living lifestyle) I set my savings target. That was my basis for early retirement number one.

We Set Our Early Retirement Number Based on What We Know Today.
  • When I started my FI quest in 1998 the standard opinion was you could safely withdraw 8% to 10% of your portfolio in retirement.
  • I had around $100K in my 401K. My company pension had a projected lump sum value of $250K in 10 years (30 years of service/age 50). Which is when I wanted to retire.
  • My promotion to Lead Engineer put my Salary at $68K. My retirement lifestyle vision based on how we liked to live was generously estimated at $40K a year once we retired.
  • All I had to do to get that $40K a year early retirement income was to have a total of $500K.  Of which I could safely withdraw 8% a year from.
  • I already had $100K and a lump sum pension that would be worth $250K (if I could stay employed there another 10 years). I needed to save another $150K over the next 10 years to make my $500K total early retirement number.
  • Without even considering any gains all I had to do was save $15K a year from my $68K salary. Hopefully an increasing yearly salary. Sounds easy. But that $68K salary was before taxes. I had 3 teenagers at home with pending educational cost coming. We understood that in our plan things would get easier toward the end of the 10 year plan. With kids moving out and their tuition was paid off so that we could catch up any needed savings.
Random Acts of Life is why our early retirement number changes.

Without going into great detail as the story is well-known we had some economic changes that cycled through the 10 years of my FI quest. The Tech bust of 2000-2002, the great recession 2008-2010, and on top of that other things happened:

  • My company was bought out and nearly bankrupted. The pension fund was raided and depleted causing an eventual freeze but in the meantime more and more people were being removed from its roles through new maneuvers or due to lay-off before reaching pension eligibility.
  • Interest rates dropped to zero and now the opinion was you could only safely withdraw 4% of your portfolio in retirement.

All of these bad things happened and a version of them will cycle through again during most people’s FI quest. You should be able to see why your early retirement number will change so it is important to reassess and adjust your number based on what you know today.

Has Your Early Retirement Number Changed for the Better?

For those of us who stick to our plan and continue to invest during down market conditions our early retirement number can change for the better.

  • The lower interest rates allowed me to refinance my mortgage and lower the payment by nearly $400 a month.
  • The lower bond interest rates meant my now underfunded pension’s lump sum was higher than the earlier estimated $250K the plan I had initially counted on.
  • I paid off all my kid’s education and two weddings and was debt free other than the mortgage that was around $100K now.
  • My retirement lifestyle vision just happened to stay at $40K a year to fund it. Some things cost more but others cost less over the 10 year period. I didn’t have to fund a higher lifestyle cost than I initially planned for.
  • Doing the math my new number based on a $40k early retirement funding amount and a safe 4% withdrawal rate would make it $1M. That was double the target number of $500K that I had started my FI quest with.
  • With all that had happened in the markets even with my saving well more than the $15k a year my total available portfolio was far short of $1M.
Assess and adjust.

Smiley Face is a Leisure Freak. Has Your Early Retirement Number ChangedI stayed in my career another year and increased my savings in non-retirement accounts. I then came to the decision that enough is enough when I didn’t like the direction the company was going. I retired early at age 51 and still well short of $1M. I then set my new number and was going to make that work.

It is important to reassess and adjust your number yearly.

I retired early with a lower number than what the new conventional 4% wisdom’s math would dictate so after assessing my target numbers I made another adjustment to a lower retirement funding budget of $33k which was slightly higher than a 4% withdrawal rate because I knew a few things.

  • One thing I know is that early retirees don’t just sit the sidelines and never again engage in paid endeavors again. We have too much energy and ambition. I knew I was going to retire early and often pursing opportunities of passion and interest.
  • The $33k a year took care of everything but some travel and a few other wants in my retirement lifestyle. Surely even in a recession (2010) and scarce jobs I could make $7k a year doing something I would enjoy doing to make up the difference.
  • A new pension freeze was going into effect so the amount would never grow. Why not take what is left of my pension benefit out of their cookie jar and put it into mine so I can invest that money now and have the chance to grow it.
  • Life is short and it was time to enjoy myself doing what I wanted to do.
Changes and Advances in Retirement Planning

We have the brains to look at our early retirement funding and see there is more than one way to look at things. All of which can change our targeted early retirement number.

  • The 4% withdrawal rule allows for increasing the yearly rate by the inflation amount.
  • The 4% withdrawal rate was related to 30 years of withdrawals at that rate plus any yearly inflation. I happen to BELIEVE that I will collect my Social Security benefit in my older age (far less than 30 years into my retirement) thus reducing the 100% reliance on my portfolio and most likely lowering below a 4% withdrawal rate at that time. Running the numbers through the FIRECalc showed I was on track.
  • Interest rates have nowhere to go but up. This may change the whole dynamic of safe withdrawal rates and thus impacting your early retirement number.
  • Inflation impacts different things differently. Right now fuel and electronics are way down. Health care is way up. It all depends on what you include in your budget. I was able to pay off my mortgage during my encore career before retiring early for a second time. However my budget remains at $40k because my health insurance has taken its place amount-wise in my budget.
  • I retired early and increased my wealth or net-worth which impacts what my ultimate early retirement number and funding withdrawal rate is.
New Changes In Retirement Saving and Funding

New ideas, products and rules means our numbers can change from what we first decided. New alternative retirement funding options like the QLAC longevity annuity brought to us by the US Treasury in 2014 makes it logical to be able to withdraw more than 4% in your early retirement years. I am still researching the QLAC waiting to see where interest rates land and will decide on it once I turn 60 (3 years from now). The QLAC also helps with RMD withdrawals at age 70 ½ so it’s an interesting option.

In Closing

Has Your Early Retirement Number Changed? You won’t know until you include it in your yearly FI assessments. If you find it has changed then make necessary adjustments. If it has changed for the better because your early retirement lifestyle vision’s cost has lowered by now having lower cost projections then change your number and possibly move up your freedom date. It’s always nice to beat your early retirement number but it’s not worth staying in the rat race any longer than you need to if your goal is to get out while you are healthy and still young enough to enjoy it.

So tell me, Has Your Early Retirement Number Changed?

Do you reassess your target amount yearly?