Very high income… but how long to keep this up?

[RockyMtn]

Ok, typing was not my strong suit... perhaps we scared him off!

He's probably working.

 

[aim-high]

Lifestyle issues . . . being able to afford it is a terrible reason to buy it. Of the people I know who are living that large, most of them don't really know who they are. There's no real freedom -- even if they are FI or FIRE.

 

[Ruminator]

Follow-up on original post

Thanks all for your thoughtful responses. Have been taking time to contemplate them…

A few questions you asked –
- Income – Confident it will continue / grow at roughly the level suggested. Know there are big error bars around both market returns and, to a lesser degree I believe, my income.
- Expenses – Several of you commented how expenses will tend to rise with income. Have definitely observed that … we are committing though to even off at current expense levels, which is more than sufficient for us to live very well.
- Kids – yes, 2 who are elementary / middle school aged. 529 plans are almost fully funded.
- Part time option – A few of you suggested this and I have definitely thought about it. While this is theoretically an option, the best opportunities tend to go away and in some ways, for me, that would lead to greater stress.

So my thinking on this is still a work in progress, but I’m netting it all out as follows:

- Back off by 5 or 10% at work on least value-add / least enjoyable obligations to mitigate stress by making more time for family, relaxation, etc. Loved the "take Mondays off" suggestion to address Sunday night stress... I tend to be a very hard driving person and think taking my foot off the gas just a bit can make life more balanced. Will use / get leverage where it can help (had to laugh too at the “get 4 assistants” suggestion someone made

- Keep our spending steady rather than rising with income, and save all the increases in comp. Will start keeping an actual budget in 2015 - not to stress myself out if we're off, but at least to stay more aware...

- Put my head down for the next 5 years and then think about where I am financially and personally. Ultimately your responses on this thread reminded me how fortunate I am to have this income/savings potential. I do think I will really enjoy the level of financial freedom I can get to over time, and it’s worth the "unavoidable" bit of pain that comes with my work…

Will check in again sometime and let folks know how it’s coming along. Thanks again all, really appreciate all the ideas.

 

[Jerry1]

I make nowhere near your amount of income, but I make good money and I don't know of anyone who makes good money no matter how you define it without being stressed. There's been a lot of good responses but I will add one. Right around your age, I felt the same way. Something about 40 that makes you wonder "is this all there is?" "what is the meaning of life?" . . . Obviously you will have to work this out for yourself, but keep in mind that you are going through something that many have. For me, the only way to answer it is to keep a couple things in mind. I forget who the quote is from but it was in Covey's Seven Habits - basically, no one on their death bed ever said they wish they'd have spent more time at work. Try to find the balance that suits you and your family. Making money and raising a family are both worthy of your time but the balance is what you need to find. I knew one partner that seemed to have the right idea. He worked hard and made good money but he never missed his son's soccer game. He drew a line and people respected it. Firm up your core principles and some of the answers you seek will be self evident.

 

[Texan1636]

My situation bears some similarities to yours (very high paying job), but there are differences (when I posted here, I cited career stresses and real decision of whether to stop now or keep going a couple of years to hopefully get to $8mm or so). One thing I would note from my experience, having been exposed to many highly-compensated people: jobs with that kind of pay are not secure - ever. Maybe you are in some unusual career and I'm not understanding it, but jobs I've seen that earn anything like $2 million or more are, by nature, insecure. Examples would be investment banker, C level executive (you might have parachute but the job itself is not secure), hedge fund or private equity fund professional, small number of high-end consultants and Corporate lawyers. It also has been my experience that jobs in this pay range tend to be very consuming in terms of personal life and ordinarily don't lend themselves well to "cutting back" voluntarily.


Second thing I would note is that, if you have only fairly recently started to make and save large amounts, you probably have the vast majority of your investments in after-tax accounts. While this is a "bad" thing in the sense that you could have accumulated more if you could do it on a tax-deferred basis, it's a "good" thing in the sense that you may pay very little in federal income tax in the early years of your retirement (as you will have lots of basis to use up in various investments). I could end up spending over $300k per year in early years of retirement if all goes well, but may pay less than $20k in federal income taxes in those early years.

 

[Big_Hitter]

One thing I would note from my experience, having been exposed to many highly-compensated people: jobs with that kind of pay are not secure - ever.

especially if it's in the energy industry...

 

[aida2003]

Ok, typing was not my strong suit... perhaps we scared him off!

I don't think so. Didn't he admit that he's really in a sweet spot of making millions? Member here said all he needs is to accumulate $10-12MM to fund his future. With the progressing earning scale in his OP, he's plunged back into the pool to catch more fish I bet. Hopefully he'll be back next year to update on his increased salary and retirement savings. I bet he's too busy to type, but he'll be an occasional lurker.

 

[pb4uski]

Aida, he came back, see post #28.

 

[aida2003]

Aida, he came back, see post #28.

Yeah, I know. Yesterday I was reading on the laptop and for some weird reason the threads on this forum kept showing up much much shorter than they should be. That was the first time I've seen it happening. If a discussion/thread consists of a few pages, I'd see maybe 4-6 posts on one page when I know there should be more like 20-25 at least.

However, I just glanced at his post, and it was posted on the X'mas Eve. When I wrote yesterday I remembered this 2nd post of his vaguely and said that he has fully plunged back to work. So, I'd love to hear about his progress about the number of millions he'll save/grow over the next half decade.

 

[RockyMtn]

I too was in a high pay ($2m+ per year when I left), high stress job. Non stop travel, phone calls at all hours and basically on call 24 hrs a day. At the point that I had enough of all of it, I set a date, told the big boss that when this contract was over I was done. Backing off really wasn't an option. It was either all in, or all out.

I saved well, didn't over do it with an extravagant lifestyle. The number that I wanted and attained was similar to the OP's.

That was almost six years ago. I truly enjoyed my job but I was not defined by my work. I probably spend more now than when I was working because now I have time to spend and enjoy the $$$. I have no more stress, travel on my schedule as opposed to someone else's and am enjoying life more than ever.

It's all about priorities and what you want to do with your life. In my case I came to realize that work was highly overrated and I didn't care if someone called me CEO, President or my first name. Funny, but now most of the folks I hang around with have no idea what I did for a living nor do they care.

Do I miss it? Some days yes, most days not one bit!

 

[Ruminator]

Update

Thanks again to all who contribute to this forum and to those who thoughtfully replied to my earlier posts... now 1.5 years ago!

That point in my life marked the beginning of some big changes, in part inspired by this board (which I continue to stalk daily . We sold our expensive home and paid cash for a home in a lower COL area. We cut our living expenses (with basically zero pain) by 40% by just paying better attention. And the income kept going up as expected.

Netting all that out, we now have around 4.5m in after tax investments, 1.0m in retirement, and no debt. Our living expenses are currently <4% of savings, but I want to add some padding and make room to weather any downturn without stress (i.e., closer to 2% WR).

On the "life" side of the ledger, I'm working hard to reduce stress by prioritizing work just a bit less. I still reflect and laugh about someone's suggestion earlier in this thread of taking Fridays off, or hiring 4 assistants. It is easy to get wrapped up in your world and not realize the degrees of freedom you have. The progress is incremental, but in any given month I can point to 3 or 4 choices I've made that prioritize family+life over work, and that has made a big difference.

Knowing I am close to FI also helps immeasurably, as at this point I could coast (or even quit) and probably be fine. But the habits that got me to where I am professionally are pretty deeply set! So work remains intense - often stressful, but at times enjoyable when things are going well.

I'm now looking to an ~2018 timeline for "retirement", whatever that ends up meaning for me... Am putting that out there to keep myself honest!

Thank you all for your insight and encouragement.

 

[daylatedollarshort]

That point in my life marked the beginning of some big changes, in part inspired by this board (which I continue to stalk daily . We sold our expensive home and paid cash for a home in a lower COL area. We cut our living expenses (with basically zero pain) by 40% by just paying better attention. And the income kept going up as expected.

Good job. Thanks for the update. I'm not in your income bracket, but we also found many ways to painlessly cut our expenses in order to ER. I wish we'd done that years earlier. It would have meant a lot more days of retirement.

 

[audreyh1]

Netting all that out, we now have around 4.5m in after tax investments, 1.0m in retirement, and no debt. Our living expenses are currently <4% of savings, but I want to add some padding and make room to weather any downturn without stress (i.e., closer to 2% WR).

On the "life" side of the ledger, I'm working hard to reduce stress by prioritizing work just a bit less. I still reflect and laugh about someone's suggestion earlier in this thread of taking Fridays off, or hiring 4 assistants. It is easy to get wrapped up in your world and not realize the degrees of freedom you have. The progress is incremental, but in any given month I can point to 3 or 4 choices I've made that prioritize family+life over work, and that has made a big difference.

Knowing I am close to FI also helps immeasurably, as at this point I could coast (or even quit) and probably be fine. But the habits that got me to where I am professionally are pretty deeply set! So work remains intense - often stressful, but at times enjoyable when things are going well.

Sounds like you are well on track!

 

[Ruminator]

Good job. Thanks for the update. I'm not in your income bracket, but we also found many ways to painlessly cut our expenses in order to ER. I wish we'd done that years earlier. It would have meant a lot more days of retirement.

Thank you daylatedollarshort. Yes, it was remarkable as we looked through our expenses and found some easy areas to cut - slowing down "home improvements", making the next car more modest, etc. The bigger change though has probably been the day to day awareness of a savings goal, and all the small decisions (e.g., fewer spurious purchases on Amazon).

I now keep a running quarterly file of expenses and invested assets, calculating the "SWR as of today," and it has been exciting to see how small changes in run rate expenses dramatically change the overall picture. It's just math, but powerful math.

 

[rodi]

Great update.

 

[Katiek]

Thanks for the update and glad things are moving solidly in the direction of your goals.

 

[petershk]

Nice update. If you spending dropped 40% just by watching (I had a similar experience) and your NW grows a year or two... you'll be set no problem!


Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[ktmissouri]

After reading this entire thread, I had one additional thought to add. How is your health? What is your family history on things like heart issues and other health issues that can cause sudden death? That should also be a significant factor is deciding when to chuck the stress and live a simpler life. Stress is the silent killer.

There is nothing better than taking your grandkids fishing.

 

[daylatedollarshort]

I now keep a running quarterly file of expenses and invested assets, calculating the "SWR as of today," and it has been exciting to see how small changes in run rate expenses dramatically change the overall picture. It's just math, but powerful math.

We do that, too. It has become kind of a game to us to see how low we can go on the expense front and yet live as well or even better than we did before.

 

[medved]

I just saw this thread. Really interesting read, for me. My situation has some things in common with the OP. The details differ (I'm older than he is, I have more saved, my kids are older, my income is a bit lower and without the same likely upward trajectory), but the general idea is, at least to some extent, similar. What I have concluded, for myself, is the decisions are more about psychology than finance: From where do I derive my sense of self-worth? To the extent the answer is "work", can I manage to change that? (I would like to; but it might be easier said than done). How will I adjust to the lack of external validation that comes from my career? Is whatever stress/anxiety I feel really due to work, or is it just a part of who I am or other things in my life? If I retire, would stress about work be replaced by stress about having enough money to live comfortably for the rest of my life (stress is not always a function of objective facts)? These days, while I am still making good money, things are not going so great in my work -- does that mean it's a good time to leave, or is it psychologically more important for me to "go out on a high"? (Think about the baseball player who bats 310, hits 38 HRs, and then retires; as opposed to the guy who has two crappy seasons and then leaves thinking "I better retire; I sort of suck these days, and it does not look like it will get better any time soon...") Will I enjoy being retired? What will I do every day? What will be the impact on my marriage of my retiring? If I am bored, will I regret retiring? If I don't retire, and then I get sick, will I regret not having retired sooner? And various other questions...

I might talk with a psychologist about all this. It seems like it might be worth ten hours of my time and a few thousand dollars to help me sort all this out, in my mind. Reading the thoughts of people on this forum is also helpful.

Is there anyone on this forum who made the decision to retire and now regrets it, for non-financial reasons? (I guess maybe those people would drop off this forum and/or go back to work)

 

[Markola]

I had a friend who put life's tribulations and triumphs in perspective by saying, "Eh, nobody's going to remember that in 50 years anyway". I don't find that the least bit depressing but rather, highly logical and liberating.

A given work place is only a train that we're completely on for a while and then completely off, then we're usually forgotten soon enough. That's why they say "Welcome aboard" when you suddenly materialized in their midst. They also say "Happy Trails" when you leave, meaning "You're now cut from the work herd and so I won't have a reason to invest any further 'bandwidth' in you, but 'so long'." That's just the way it is because we were only really there to solve particular problems for a business in return for payment. Why would we let ourselves get too emotionally attached to what really is a commercial relationship, one that usually emphasizes its lack of commitment to you in the employee handbook in the section stating that is an At-Will Employer. I don't expect to have a hard time letting go and getting on with life when I have enough money saved in 5-7 years because I have learned the hard way twice to invest my emotional health in firmer stuff.

 

[Ruminator]

After reading this entire thread, I had one additional thought to add. How is your health? What is your family history on things like heart issues and other health issues that can cause sudden death? That should also be a significant factor is deciding when to chuck the stress and live a simpler life. Stress is the silent killer.

There is nothing better than taking your grandkids fishing.

Fortunately, my health is very good and family history is favorable. But I'm not fooling myself that there aren't random events that could change all that (for me, or for a family member). Having seen a few friends / family members pass away or lose function much earlier than anyone would have expected is one of the factors that has me leaning towards calling it early.

...And I can't wait to take my grandkids fishing someday, but I think I've got a couple decades to wait for that!

 

[Ruminator]

I had a friend who put life's tribulations and triumphs in perspective by saying, "Eh, nobody's going to remember that in 50 years anyway". I don't find that the least bit depressing but rather, highly logical and liberating.

A given work place is only a train that we're completely on for a while and then completely off, then we're usually forgotten soon enough. That's why they say "Welcome aboard" when you suddenly materialized in their midst. They also say "Happy Trails" when you leave, meaning "You're now cut from the work herd and so I won't have a reason to invest any further 'bandwidth' in you, but 'so long'." That's just the way it is because we were only really there to solve particular problems for a business in return for payment. Why would we let ourselves get too emotionally attached to what really is a commercial relationship, one that usually emphasizes its lack of commitment to you in the employee handbook in the section stating that is an At-Will Employer. I don't expect to have a hard time letting go and getting on with life when I have enough money saved in 5-7 years because I have learned the hard way twice to invest my emotional health in firmer stuff.

Yeah, it's easy to feel like a big shot when you have important responsibilities and are having an impact. But having seen other big shots leave, it is amazing how quickly the system adapts - like air filling a vacuum.

 

[Ruminator]

I just saw this thread. Really interesting read, for me. My situation has some things in common with the OP. The details differ (I'm older than he is, I have more saved, my kids are older, my income is a bit lower and without the same likely upward trajectory), but the general idea is, at least to some extent, similar. What I have concluded, for myself, is the decisions are more about psychology than finance: From where do I derive my sense of self-worth? To the extent the answer is "work", can I manage to change that? (I would like to; but it might be easier said than done). How will I adjust to the lack of external validation that comes from my career? Is whatever stress/anxiety I feel really due to work, or is it just a part of who I am or other things in my life? If I retire, would stress about work be replaced by stress about having enough money to live comfortably for the rest of my life (stress is not always a function of objective facts)? These days, while I am still making good money, things are not going so great in my work -- does that mean it's a good time to leave, or is it psychologically more important for me to "go out on a high"? (Think about the baseball player who bats 310, hits 38 HRs, and then retires; as opposed to the guy who has two crappy seasons and then leaves thinking "I better retire; I sort of suck these days, and it does not look like it will get better any time soon...") Will I enjoy being retired? What will I do every day? What will be the impact on my marriage of my retiring? If I am bored, will I regret retiring? If I don't retire, and then I get sick, will I regret not having retired sooner? And various other questions...

I might talk with a psychologist about all this. It seems like it might be worth ten hours of my time and a few thousand dollars to help me sort all this out, in my mind. Reading the thoughts of people on this forum is also helpful.

Is there anyone on this forum who made the decision to retire and now regrets it, for non-financial reasons? (I guess maybe those people would drop off this forum and/or go back to work)

Sounds like we're ruminating (heh heh, my username) on the same subjects. For me, while I've always done very well professionally, I feel like I have never fully identified with my work. I have a number of outside interests (many of which I have not had time to really pursue), so I don't think I will have too hard a time reinventing myself.

One thought experiment I've found helpful: if (a) I'm happy living at my current level of expenditure and (b) don't need any more money to fund it (I'm not there yet on (b), but will be soon), then at some point the marginal utility of more savings approaches 0. At that point, I can only justify continuing to work if the intrinsic rewards alone warrant it. So let's pretend I quit my job. Would I "volunteer" to work for free back at my same job, in the exact same role, if it was structured in a way that it had all the same intrinsic rewards it has today? Hell no.

So what that tells me is at that point I would really only be doing it for a mushy and unsatisfactory set of reasons - because it is the most intrinsically rewarding thing I can think of doing (unlikely), out of habit, to achieve wealth for wealth's sake, in order to avoid the cognitive dissonance in my colleagues/friends when they see me leaving a big paycheck (at odds with their own choices), etc. I view this as primarily a mental challenge for me to get over ... not a legitimate challenge to my plans.

Regarding regrets, my own sense from this board is that very few seem to regret their decisions, but clearly we're dealing with a biased sample! I think a key consideration from your description is reversibility of your decision. For me, it would be quite irreversible with a 50%+ pay haircut if I tried to get back into my industry. That raises the bar for level of certainty required to pull the plug. You may find you have more room to experiment with part time or even leaving with an option to return (i.e. sabbatical, or quitting and potentially starting a new job later).

FWIW, I think having a sounding board for your personal decision is absolutely helpful. The boards and blogs are helpful, but your situation, mindset, alternatives, etc are surely unique. Luckily for me, I have had a very effective "psychiatry" services from my wife (and vice versa!)

 

[medved]

Sounds like we're ruminating (heh heh, my username) on the same subjects. For me, while I've always done very well professionally, I feel like I have never fully identified with my work. I have a number of outside interests (many of which I have not had time to really pursue), so I don't think I will have too hard a time reinventing myself.

One thought experiment I've found helpful: if (a) I'm happy living at my current level of expenditure and (b) don't need any more money to fund it (I'm not there yet on (b), but will be soon), then at some point the marginal utility of more savings approaches 0. At that point, I can only justify continuing to work if the intrinsic rewards alone warrant it. So let's pretend I quit my job. Would I "volunteer" to work for free back at my same job, in the exact same role, if it was structured in a way that it had all the same intrinsic rewards it has today? Hell no.

So what that tells me is at that point I would really only be doing it for a mushy and unsatisfactory set of reasons - because it is the most intrinsically rewarding thing I can think of doing (unlikely), out of habit, to achieve wealth for wealth's sake, in order to avoid the cognitive dissonance in my colleagues/friends when they see me leaving a big paycheck (at odds with their own choices), etc. I view this as primarily a mental challenge for me to get over ... not a legitimate challenge to my plans.

Regarding regrets, my own sense from this board is that very few seem to regret their decisions, but clearly we're dealing with a biased sample! I think a key consideration from your description is reversibility of your decision. For me, it would be quite irreversible with a 50%+ pay haircut if I tried to get back into my industry. That raises the bar for level of certainty required to pull the plug. You may find you have more room to experiment with part time or even leaving with an option to return (i.e. sabbatical, or quitting and potentially starting a new job later).

FWIW, I think having a sounding board for your personal decision is absolutely helpful. The boards and blogs are helpful, but your situation, mindset, alternatives, etc are surely unique. Luckily for me, I have had a very effective "psychiatry" services from my wife (and vice versa!)

You are correct -- I am a "Rumintator" too, even though you own the name!

Like you, I never thought that I identified much with my work or that my "sense of self" came from my work. I often told people "this is what I do; it is not who I am." Much of the time, I did not even really like what I was doing, though I was pretty successful at it. And I certainly have other interests, though they have been shoved aside by years of long hours at work (and by kids, etc.). But as it gets closer to the point at which I could actually pull the plug, I worry that maybe I am deriving more of my sense of self-worth from work than I would like to admit to myself. It seems the only way to test that is to leave and see how things go -- but that is a high-risk experiment.

That gets to the issue of how easy it would be for me to return, if I were to leave and then subsequently change my mind. I could probably get back into it if I made the decision to do so within a couple of years after leaving, but I would likely take a big pay cut. And as time passed, it would become more difficult, even if I were willing to do the same work for much lower pay. I am operating under the assumption that "when I am done, I am done."

It would be very unusual, in my company, for me to leave in my mid 50s. I can recall only two other people who have done that, in the 25 years or so I have been here. You might say "what difference does it make how common it is; you should do what you want, not what others choose". I guess that is right. But the environment creates a certain "baseline" for one's thinking. If there's hundreds of people standing around the perimeter of the swimming pool, but nobody has jumped in, you will probably think twice before taking the leap. ("I think I fancy a swim, but all these other people are pretty much the same as me -- I wonder why none of them are in the pool").

I like your "thought experiment" (why am I working if I have enough money; would I do this for free). I guess I would say if I continue to work it would be to increase the margin of error (increase the likelihood that I will have enough money to meet my needs and wants for the rest of my life). Even if the odds are pretty high, they could be higher. Inflation could be higher than expected. I could live longer than anticipated. My kids could need more support than I anticipate. My wife or I might decide we would like to spend a lot more than we presently anticipate. I realize this risk-averse mindset could lead one to work forever. I don't want that. Really, there is zero chance I would work past age 60. It is just a question of how much before that I retire. (I am 52 now).

Besides being risk averse, why might I continue? Possible answers: it is the path of least resistance (an object in motion...); slight fear of the unknown (what if I don;t like it); everyone else is doing it (follow the crowd); the external validation thing; a desire to leave on a high point (things are not going as great for me right now; I hate to feel like I left at a low point); and ability to do more charitably. I realize these are not very good answers (with possible exception of the last one). But they are a part of what I am trying to sort through.

On the other hand, a motivator to leave is that I am really not enjoying work very much these days. I am frustrated and annoyed at it. Why should I live my life frustrated and annoyed, if I don't have to? Why not accept the benefit of the money I have earned and saved?

Regarding "wife as psychologist" -- yea, many of us have that, I guess (when we want it, and maybe even when we do not!). The problem is she's too close to the situation. I feel like I need a sounding board who is totally objective and has no skin in the game.