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Barista FIRE with kids in Switzerland
Old 07-07-2019, 08:40 AM   #1
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Barista FIRE with kids in Switzerland

We have chosen a seemingly novel "scenic route to retirement." I am a bit uncomfortable with the novelty factor and I am really hoping for feedback from somebody who has made similar choices. (If I'm honest I am also looking for some validation from strangers on the internet, even though I know how that usually ends!)

We are 40 years old and settled down in Switzerland with two preschool children. I am working as a contractor/consultant on an irregular project-to-project basis, currently working half-time. I split the remainder of my time between professional development (~10h/week) and taking care of the kids. (I'm focusing the details of this post on myself rather than DW.)

We have $1.2M in a balanced portfolio of index funds and our annual expenses are currently $100K/year but should decrease to $70-80K once the children start school. We we have a $200K mortgage on our home.

Financially we have accumulated approximately 60% of our FIRE number. In Switzerland our costs for healthcare and university are bounded and we have no major expenses/purchases on the horizon.

The big question in our lives is: How should we think about FIRE? On the one hand we could be "Mustachians" by moving to a less expensive country and FIRE tomorrow (easy for us as expats.) On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path that is reasonably responsible and allows us to enjoy working on our own terms, pursuing our own interests, taking professional risks with our time and energy.

What we have have decided to do is "Barista FIRE" here in Switzerland. We will start immediately withdrawing ~$50K/year from our portfolio (VPW method) to cover around half of our living costs. We will then work enough to cover the remainder of our expenses, which in practice requires about quarter-time engagement on average. This will leave us with a lot of free time that we will use for spending time with the kids and also pursuing our own personal and professional interests (naturally more of the latter once the kids are in school.)

We genuinely enjoy working, when we can do it on our own terms, and we have entrepreneurial spirits. My intuition is that our extra-curricular activities will generate enough irregular income to fill up our retirement accounts so that we can retire fully at 50-55. I also accept that this may not be the case, in which case we would have to choose between staying in the workforce for longer or moving to a less expensive country where we can FIRE.

My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?

Thank you, and apologies for the long rambling post!
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Old 07-07-2019, 08:58 AM   #2
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Welcome to our forum.
If you withdraw 50k for the next 15 years, that 750k from your 1.2m portfolio. Thus you would need to have savings/growth of ~1.5m over the next 15 years to reach your goal of 2m.
Is that doable?
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Old 07-07-2019, 09:02 AM   #3
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Welcome to our forum.
If you withdraw 50k for the next 15 years, that 750k from your 1.2m portfolio. Thus you would need to have savings/growth of ~1.5m over the next 15 years to reach your goal of 2m.
Is that doable?
I am expecting the portfolio's value to be more-or-less the same despite withdrawals, based on not withdrawing a constant $50K but rather following the Variable Percentage Withdrawal method from Bogleheads: https://www.bogleheads.org/wiki/Vari...age_withdrawal
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Old 07-07-2019, 09:16 AM   #4
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On the one hand we could be "Mustachians" by moving to a less expensive country and FIRE tomorrow (easy for us as expats.) On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path...
"Bostachians"?
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Old 07-07-2019, 09:18 AM   #5
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Welcome to the forum. I will not advise any but leave it up to the other experienced in this manner of retirement. Good luck with your search and I look forward to reading more posts from your adventures.
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Old 07-07-2019, 09:38 AM   #6
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My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?
Welcome to the forum.

I suspect the practicality of the approach hinges on two things:
1) Your backup plan
2) The "engagement-to-income" curve of your employment

Backup plan: You will be exposed to sequence-of-return risk for quite a long time, and during this time if things don't go to plan (on the income OR investment returns OR expenses front) then you'll need to find a way to modify one or both of the other two factors to adjust. Do you have "fat" in the expenses that could be cut? Is re-engaging in more lucrative full time work a practical alternative once you enter the slow lane? Trying to bump up investment returns (by taking more risk) is usually not prudent.

Engagement-to-income curve: This is highly dependent on your skills and the market for them. In my particular case, the $/HR were much better with a full-time gig (really, more than full time). Staying current, maintaining required qualifications, maintaining personal contacts and professional reputation, etc all were important, and if I'd scaled back a lot I would have been less valuable and the fixed "overhead" hours and hassle factor would have been spread over fewer working hours. It just made more sense to keep the pedal to the floorboard for a few more years than to scale back. Also, I found that once I had achieved sufficient savings to permit jumping off, my tolerance for minutiae and craziness declined a lot. But, every situation is different, and in other cases going to part-time can make a lot of sense.
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Old 07-07-2019, 10:45 AM   #7
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Welcome to the forum. It seems HC is a huge obstacle to FIRE. Some of us are lucky to have great ACA plans (but have to keep income < $61K. School/college another obstacle for the younger RE's. You're in a place where you can decide how you spend. What is the $100K spending based? Taxes? Vacations? Food? Utilities?

Posters here have wide varieties of spending habits. Honestly, I'm amazed at the accuracy and stealth spending we have on this forum. Of course, depends on HCOL or LCOL areas but most easlity adjust.
DH has a sideline consulting LLC that allows us to keep our portfolio untouched for 3 more years. We vacation as we please, eat out and so on...enjoy life. Again the obstacle is healthcare. That is the biggest worry on our plate.
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Old 07-07-2019, 10:54 AM   #8
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Your post is somewhat contradictory. Right now you work half-time and spend 40 hours a month on professional development. Are these the skills and job you will transition with to a partial ER. Or will you literally work in a coffee shop?

I can't see the trade off a being a good one financially, especially with young children. If you're going to work it should be for maximum money per hour. Half time to quarter time is about 10 hours a week. And your income with drop by a half..
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Old 07-07-2019, 11:03 AM   #9
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Welcome aboard, eurobogle. I had to look up “Barista FIRE”. Work a little, just enough, but keep lots of free time.
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Old 07-07-2019, 11:10 AM   #10
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Welcome aboard, eurobogle. I had to look up “Barista FIRE”. Work a little, just enough, but keep lots of free time.
Had to look it up? Oh boy...you need to go spend some time in the Reddit forum on early retirement so you can "get with the times."

Personally...I would avoid that place like the plague.
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Old 07-07-2019, 11:30 AM   #11
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Had to look it up? Oh boy...you need to go spend some time in the Reddit forum on early retirement so you can "get with the times."

Personally...I would avoid that place like the plague.
I don’t, and I do.
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Old 07-07-2019, 12:11 PM   #12
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Thanks for the detailed reply samclem.

Quote:
Originally Posted by samclem View Post
Welcome to the forum.
I suspect the practicality of the approach hinges on two things:
1) Your backup plan
2) The "engagement-to-income" curve of your employment
Currently we are living the median lifestyle (+ expensive part-time childcare) in a HCOL country. There is not too much fat to trim here. However, we could halve our living costs by moving to another "Tier 1" country where we are citizens and where we could live happily. I see that as a realistic backup plan and would be fine with moving if we wanted to retire and our income had been disappointing.

I would also be fine with returning to more-or-less full-time work once the kids are settled in school. I may even choose to do this willingly for the right project. I feel that we are currently in the middle of an atypical 10-year period of our lives when we have kids are home pretty much all day every day (childcare is scarce and expensive in Switzerland.) However, I prefer to see a full-time job as a backup plan rather than an assumption.

Engagement-to-income curve: There are a lot of unknowns here but experience so far is that I make better money contracting/consulting than I did when I was salaried, I'm able to work from home and manage my own schedule, I can negotiate time-bounded contracts (X hours per week for Y months), and my reputation is strong enough that I'm not exposed to managerial BS. There are risks: I've turned 40 now (gasp!) and my part-time output is less impressive than full-time, but for now this seems manageable especially with discretionary time for speaking at conferences etc.

I believe that I'm in a really privileged position that I seem to be able to choose which months of the year I will work, and how many hours per week, and be paid well for the time that I spend. This seems like something to take advantage of -- especially if it might not be this way forever.
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Old 07-07-2019, 12:16 PM   #13
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Your post is somewhat contradictory. Right now you work half-time and spend 40 hours a month on professional development. Are these the skills and job you will transition with to a partial ER. Or will you literally work in a coffee shop?

I can't see the trade off a being a good one financially, especially with young children. If you're going to work it should be for maximum money per hour. Half time to quarter time is about 10 hours a week. And your income with drop by a half..
Sorry, I think I have used "Barista" in a misleading way. My intention is to continue working in my primary profession, for the maximum hourly wage that I can, but be satisfied with earning enough money to cover our costs when supplemented with portfolio withdrawals. I will "hope" to earn significantly more than this in some years due to projects that are "too good to refuse" and I will invest any surplus into the portfolio for future full retirement.

So I am only saying "Barista FIRE" as a keyword to indicate a brand of FIRE where only part of our living costs are covered by portfolio withdrawals and we need to work to cover the rest (and somehow accumulate for full retirement in the future too.)
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Old 07-07-2019, 01:06 PM   #14
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Sorry, I think I have used "Barista" in a misleading way. My intention is to continue working in my primary profession, for the maximum hourly wage that I can, but be satisfied with earning enough money to cover our costs when supplemented with portfolio withdrawals. I will "hope" to earn significantly more than this in some years due to projects that are "too good to refuse" and I will invest any surplus into the portfolio for future full retirement.

So I am only saying "Barista FIRE" as a keyword to indicate a brand of FIRE where only part of our living costs are covered by portfolio withdrawals and we need to work to cover the rest (and somehow accumulate for full retirement in the future too.)
I wasn't sure.. Barista is kind of buzzword for a lot of things, and your idea makes the most sense. You have the option of working anything from 20 to 0 hours according to your comfort level.
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Old 07-07-2019, 01:57 PM   #15
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Had to look it up? Oh boy...you need to go spend some time in the Reddit forum on early retirement so you can "get with the times."

Personally...I would avoid that place like the plague.
Is there another name for a partial retirement in which you start withdrawing from your portfolio before you have reached your number? This seems like a reasonable approach to downshifting to me and so I am surprised that it is not more widely known. Maybe it is known by another name, or is such a dreadful idea that it doesn't get much discussion?
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Old 07-07-2019, 02:08 PM   #16
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Is there another name for a partial retirement in which you start withdrawing from your portfolio before you have reached your number? This seems like a reasonable approach to downshifting to me and so I am surprised that it is not more widely known. Maybe it is known by another name, or is such a dreadful idea that it doesn't get much discussion?
I couldn't tell you. I have only heard the terms "barista, lean, etc" used in the Reddit forums which I stay away from because there tends to be way, WAY too much noise in the room. Personally, I have the belief that if you are still w*rking to bring in money, then you aren't retired...instead you would be "part time" but that isn't accepted these days for whatever reason. Or as another example, the term "side hustle"...uh, no. That is called a part time j*b.
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Old 07-07-2019, 02:48 PM   #17
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We have chosen a seemingly novel "scenic route to retirement." I am a bit uncomfortable with the novelty factor and I am really hoping for feedback from somebody who has made similar choices. (If I'm honest I am also looking for some validation from strangers on the internet, even though I know how that usually ends!)

We are 40 years old and settled down in Switzerland with two preschool children. I am working as a contractor/consultant on an irregular project-to-project basis, currently working half-time. I split the remainder of my time between professional development (~10h/week) and taking care of the kids. (I'm focusing the details of this post on myself rather than DW.)

We have $1.2M in a balanced portfolio of index funds and our annual expenses are currently $100K/year but should decrease to $70-80K once the children start school. We we have a $200K mortgage on our home.

Financially we have accumulated approximately 60% of our FIRE number. In Switzerland our costs for healthcare and university are bounded and we have no major expenses/purchases on the horizon.

The big question in our lives is: How should we think about FIRE? On the one hand we could be "Mustachians" by moving to a less expensive country and FIRE tomorrow (easy for us as expats.) On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path that is reasonably responsible and allows us to enjoy working on our own terms, pursuing our own interests, taking professional risks with our time and energy.

What we have have decided to do is "Barista FIRE" here in Switzerland. We will start immediately withdrawing ~$50K/year from our portfolio (VPW method) to cover around half of our living costs. We will then work enough to cover the remainder of our expenses, which in practice requires about quarter-time engagement on average. This will leave us with a lot of free time that we will use for spending time with the kids and also pursuing our own personal and professional interests (naturally more of the latter once the kids are in school.)

We genuinely enjoy working, when we can do it on our own terms, and we have entrepreneurial spirits. My intuition is that our extra-curricular activities will generate enough irregular income to fill up our retirement accounts so that we can retire fully at 50-55. I also accept that this may not be the case, in which case we would have to choose between staying in the workforce for longer or moving to a less expensive country where we can FIRE.

My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?

Thank you, and apologies for the long rambling post!
Hi there!
I communicated with you by PM and found the thread there that you posted asking the same question back in April over on bogleheads.

https://www.bogleheads.org/forum/vie...79963#p4519846

Several questions
1. Will you have a pension or other form of guaranteed retirement income that kicks in later in life?
2. You didn't say whether your investments are all US index funds, a mix of US/International, etc., you also didn't state the stock/bond mix.

Let's start with your use of VPW. First, don't forget the "V" in VPW. You are not guaranteed to have $50K withdrawals every year, adjusted for inflation. So during those low withdrawal years, you have to work more to make up for the shortfall, if you're able to find such work. For example a 60/40 all US portfolio in VPW has you withdrawing $49,200 the first year with your $1.2M portfolio if you want it to last until you're 99. If you had started a retirement in 1966, then in 1982 you're withdrawal (accounting for inflation) would only be worth a little more than $23K. It climbs up from there but doesn't get back to where your first year's withdrawal was until 1996 or so. Can you live with inflation & a bear market eating away at your withdrawals & portfolio like that?

Second, unless you want to continue to make low withdrawals forever, you're going to need to have your extracurricular activities more than support you're shortfall - you're going to need to still be able to save additional money for a full blown retirement later on.

Summary:
- Near term, you'll need to be able to live possibly lower withdrawals than you might expect because you plan on using VPW and your withdrawals will move around based on your investment returns. And you have to think about what inflation might do to the effective value of those withdrawals over time. This might be somewhat mitigated if you plan on using VPW only on the $1.2M portfolio and only for a shorter amount of time, for example, 25 years to get you to age 65. Much higher withdrawals, but you still the possibility of significantly reduced withdrawals based on returns. And you'll still need to save for the eventual full blown retirement.
- In the longer term, you'll need to consider being able to save even more money beyond what your withdrawals and extracurriculars might generate in order to have a reasonable full retirement later on. And you need to factor any pensions and/or government social security type benefits on top of that.

Cheers!
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Old 07-07-2019, 02:54 PM   #18
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Is there another name for a partial retirement in which you start withdrawing from your portfolio before you have reached your number? This seems like a reasonable approach to downshifting to me and so I am surprised that it is not more widely known. Maybe it is known by another name, or is such a dreadful idea that it doesn't get much discussion?
Semi-retired is one such term, although it's usually applied to people doing this later in life, not at your stage. No matter, though!
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Old 07-07-2019, 03:44 PM   #19
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My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?
In hindsight, I think we could have retired in our 40s or at least just worked part-time, if we had watched our expenses closer when we were younger. We stayed in a high cost of living area after retiring in our 50s, but other than housing we find ways to make it quite affordable with sustainable living and low consumption as a lifestyle choice. I wish we had done that sooner because we really like being retired.

I guess for us the scary part was health insurance pre-ACA, but since you're not in the U.S., you don't have that issue.
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Old 07-07-2019, 04:52 PM   #20
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Maybe instead of vpw think about a low ‘perpetual withdrawal rate’ that would be self sustaining with your asset allocation. Then you can look at the supplemental income needed per year. If your withdrawal rate is low enough, your assets should continue to grow.

My big concern in your shoes would be the consulting income drying up or decreasing over time. It’s not always easy to stay in demand and gets harder during an economic downturn, when your assets are worth less as well. At 40, this is usually the age where you can put your foot on the gas and likely make the biggest $ for your time, so it’s a risk to step back, especially with young kids and a lengthy time horizon.

Just my two cents. We’re in a similar place in life, with young kids, though we’re a little older. Firecalc has us at 94% if we pulled the plug today, and 100% if we cut our spend by 10%. DH is consulting and I’m working PT, with the hope that market returns will get us to that 100% with a little buffer. Our income won’t cover all of our expenses, but gives us a pretty low withdrawal rate. When the market takes a nosedive, I can guarantee we’ll be stressed, but we also have a fair bit of fat to cut.
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