A New FIRE Plan

[FIREd]

A few weeks ago, DW and I took a vacation. No, not one of our rare but typical whirlwind vacation when we travel around the world to visit family and friends and come back exhausted. This time, we just unplugged from the world and stayed home, enjoying each other's company and life's little pleasures. I think it was the best time we've had since our honeymoon 10 years ago.

Going back to work was absolutely brutal after this nice vacation. DW works about 80 hours a week, I work more regular hours but take care of our household (I also take care of MIL's home and yard maintenance). We usually take about 2-3 weeks of vacation a year but more than ever, work follows us wherever we go. We are increasingly unhappy, not with each other, but with our lives (or lack thereof) in general and with our work environment in particular. We are both INTJs (I scored very high for I), and we are having more and more trouble dealing with people's cr@p at work without getting all worked up about it and bringing it home with us. We have had some rough patches at work before, but it feels like the patches are getting longer, rougher and more frequent. Work is becoming all-consuming.

Clearly, we need to make a change soon. Originally the plan was to work until our 50's and then retire completely when we reach FIRE. However, there is no way we can continue working like we do now for another 14+ years. DW and I think we can hold on another 3 years or so at our current jobs. So we have come up with a new FIRE plan.

Right now, we have strong financial incentives to keep our current jobs until early 2013. After that, the financial incentives become much less compelling. Therefore, we have zoomed on that date for making the big change. I estimate that by early 2013, we will have accumulated enough to cover our total annual expenses with a 4% SWR and our fixed annual expenses with a 2% SWR. So I think that we will be nominally FI, but we won't be in a position to retire completely at age 39. So the plan is to find other, more gratifying jobs. We already have a few ideas and prospects. These jobs will almost certainly be in our current line of work, but the income and hours will probably be much lower and/or more irregular than they are now. Hopefully, the income from those jobs will continue to cover all or most of our expenses for a few years beyond 2013 so that our portfolio can continue to grow until we reach a SWR of 3-3.5%. Then we will decide whether to retire or not.

Our new plan is a great source of excitement, but the prospect of voluntarily giving up fat and steady paychecks at a fairly young age is a bit daunting. We have started to mention our plans to family members and so far the reception has been cool. They think we are nuts to give up good jobs in this economy (though they have no idea we have managed to accumulate a nice portfolio during our short careers).

So what do you think, crazy or not?

 

[REWahoo]

So what do you think, crazy or not?

Absolutely!

And the nice thing about it is you've got three years to make a decision...

 

[WhoDaresWins]

If you can afford it, and you both agree, I would retire when you are able since it would be nice to spend time together. Like a vacation everyday. This past Friday, we got our retirement statements forecasting what we would get if we retired now, in a few years, etc. There is a rumor going around that my employer (a government agency) might be offering buyouts to some of us. It amounts to 3 extra years tacked on to our retirements if we go now. They would like to replace us with younger employees who have different contracts with less sick leave time and no longevity pay. Food for thought. Unlike the OP, I am single(widowed) and my work friends comprise much of my social life. Something to ponder. Employer would keep health insurance in place until I am eligible for Medicare in 9 years.

 

[ksr]

So what do you think, crazy or not?

I'd say Not Crazy. But then, of course, you are asking the question on an Early Retirement forum.

It sounds like you have a good handle on your investments and income, and have mapped out a strategy. A willingness to do some part-time work as necessary goes a long way towards filling in some gaps in income. I know some people want to work until they are sure they never have to work another day in their life, and I respect that. However, I needed out of megacorp so badly, that I was much, much happier escaping and finding some pleasant pt work that pays well. It's been almost 3 years for me (I "semi" retired at age 47) and I've never been happier. There's nothing that would make me want to go back to the old grind.

I thought that a 4% WR was a little too aggressive for my comfort level and my age. It sounds like you might feel that way as well. As REWahoo points out, you have a few years to work out the details. Remember, life is too short to be miserable at a j*b if you don't have to be.

 

[ESRwannabe]

FireDreamer, your plan sounds excellent to me. I was aiming for ESRing asap but recently I have been thinking I would just like to do something differently full time.

My goal right now is to build my taxable portfolio up to where it will generate $10k per year from stock dividends, within the next five years. At that point I plan on looking into changing careers. I would like to move from server administration to programming. I had an opportunity to do that this year but I chose to stay put as I am getting close to hitting "critical mass" in my portfolio.

Since I typically live on approx. $30k a year, if I can get $10k a year from stock dividends then I will be set. The portfolio would grow enough on it's own at that point where getting to $30k in dividends could be done without needing to invest any more of my w-2 income.

 

[Westernskies]

3000+ posts here on FIRE- and you ask this question...have you not been paying attention?

 

[FIREd]

3000+ posts here on FIRE- and you ask this question...have you not been paying attention?

What, 3000+ posts already? Somebody must have hacked my account... Besides I only come here for bacon recipes, bunnies with pancake hats, and gold thread smack downs... Ha hum... I digress.

Well, the closer I get to FIRE, the more I second guess myself... That FIRE thing seems like a no-brainer when you are a young dreamer, but darn it doesn't look that straight forward when suddenly it's right around the corner...

 

[bbbamI]

Well, let me think about your plan for a minute....

.....time is on your side.....so.....

Mmmmmm...[-]tastes[/-] sounds sweet to me.

 

[Nords]

Absolutely!
And the nice thing about it is you've got three years to make a decision...

Well, the "decision" part will take about 10 seconds, but you'll spend the rest of the three years crunching, verifying, and re-crunching the data.

Best part is that you'll be job-searching with an FI attitude. You may actually be able to afford to do what you love...

 

[W2R]

I think your plan is great.

In fact, if I were in your shoes I'd be trying to figure out how to cut my expenses down to 75% of your present expenditures.

Then, by 2013 you could cover all your expenses (at the new, lower level) at a 3% withdrawal rate. A low withdrawal rate like that could lead to another vacation similar to the one you just had, but this time it could be endless.

 

[FIREd]

I think your plan is great.

In fact, if I were in your shoes I'd be trying to figure out how to cut my expenses down to 75% of your present expenditures.

Then, by 2013 you could cover all your expenses (at the new, lower level) at a 3% withdrawal rate. A low withdrawal rate like that could lead to another vacation similar to the one you just had, but this time it could be endless.

I have been looking at this for plan B. Cutting our present expenses by 25% is possible. But it would not be our first choice. My thinking is this: right now, we make about 7 times what we spend. So we don't really need to tightly control our spending. I wanted an iPad and I just bought one. No big deal. But in 2013, if we start making just enough money to cover the bills, I wouldn't be surprised if we naturally cut back on expenses. DW and I are savers and our expenses could fall as we adjust to having a much smaller income to work with. So we could reach the 3% treshhold sooner than expected.

 

[FIREd]

Well, the "decision" part will take about 10 seconds, but you'll spend the rest of the three years crunching, verifying, and re-crunching the data.

Best part is that you'll be job-searching with an FI attitude. You may actually be able to afford to do what you love...

I think that the decision has already been made in our mind and I have already been crunching data for weeks. Using very conservative assumptions, things look promising. But I am concerned about negative market impact between now and 2013. That's why I want to ensure that steady sources of income (dividends, rents, interests from CDs, etc...) easily cover our fixed costs by 2013 (back stop a la Norwegian widow). That way, even if the market cr@ps out on us in 2012-2013, we should still be able to go ahead and make the switch with enough of a financial net to catch us in case things don't work out as planned.

As for job searching, I do not think that we will do the Monster.com thingy with resumes and interviews. DW is great at networking (rare quality for a INTJ, I believe) and she is always keeping an eye on new ventures. We will be looking mainly at familiar start-ups (we both worked for biotech start-ups in the past and loved it). She has also been approached to join a successful consulting firm as a partner. So we'll see what the future holds.

 

[donheff]

It does seem like a no brainer. Most early semi-retirement plans involve dumping the big money job for a less stressful job before FI. If the new job turns out to be as bad as the old job you are screwed. But you are dumping it after reaching at least borderline FI and using the less stressful job to allow some breathing space. Much better approach.

 

[brewer12345]

Makes sense to me. We are considering something similar.

I guess I have started to think about it more in terms of a change in lifestyle rather than FIRE, ESR, etc. As for giving up the job, well, as I open my eyes a bit I can think of dozens of things DW, I or both of us could do to generate an income that ranges from very part time to very full time. No real reason to be locked into a 1950s career track, provided you can figure out the health insurance riddle.

 

[Purron]

Taking time off to unplug was just the right thing to do. It sounds as though you both have very hectic lives leaving little time to ponder your future. I can relate since my job was also very demanding and when the grueling commute was added in life was just a blur. It was like being on an out of control merry-go-round spinning faster and faster.

You both want to go in the same direction so I don't think the plan's crazy at all. You'll have time to make adjustments between now and 2013 to make sure you're ready.

 

[MuirWannabe]

I think it's great how you and DW can talk this through and be on the same page with each other about such important and life altering changes. It takes guts to make these decisions and getting both marriage partners aligned is not always easy. At least for me it is not easy. So I'm jealous of how you two are so aligned in your goals.

Seems to me your decision is not be carried out in a rash manner. So are you crazy? Not IMO. Good luck!!!!

 

[FUEGO]

Some thoughts:

1. Wow - 80 hrs a week for DW? Forget that! Can it be lowered to something closer to 40 much sooner, even if the pay increases stop?
2. Staycation - awesome. Sounds like you guys are so busy with work that it is probably a great way to unwind (in the comfort of your own home).
3. I think this idea makes absolute sense. Once you are FI on paper, it makes perfect sense to cut back to working at some enjoyable pace that will let you live your life AND provide income to pad the portfolio if you aren't quite ready to hang up the spurs yet. By 2014 we should have government guaranteed issue health insurance that could be very affordable if you can craft your income stream to be low enough.

 

[W2R]

IMO people almost always underweight how much stress is added to their lives by a long or difficult commute. Add in bridges or other bottlenecks and it is just like adding another job.

That is so true! I loved living close to work, and felt sorry for the commuters with their vanpools and audio books. It seemed like such a degrading, demoralizing practice.

 

[FIREd]

Some thoughts:

1. Wow - 80 hrs a week for DW? Forget that! Can it be lowered to something closer to 40 much sooner, even if the pay increases stop?
2. Staycation - awesome. Sounds like you guys are so busy with work that it is probably a great way to unwind (in the comfort of your own home).
3. I think this idea makes absolute sense. Once you are FI on paper, it makes perfect sense to cut back to working at some enjoyable pace that will let you live your life AND provide income to pad the portfolio if you aren't quite ready to hang up the spurs yet. By 2014 we should have government guaranteed issue health insurance that could be very affordable if you can craft your income stream to be low enough.

1) I don't think DW could cut back drastically on her hours without taking the risk of losing her job prematurely. But she could do a better job using up her paid vacation days. With seniority, she now gets 5 weeks of vacation per year. She has also accumulated a sizable number of paid vacation days over the past few years. So I think that she could take up to 7 weeks of vacation per year between now and 2013. We were thinking that a 1-2 week break every quarter would be awesome. And it would make the next 3 years more bearable.

2) Staycating has definitely been a revelation. Personally, air travel stresses me out and I find running from one continent to the next on a tight schedule exhausting. Plus I am already on someone else's schedule at work, so I want to be in charge of my own schedule (or lack thereof) during my vacations.

3) The healthcare situation is definitely our biggest worry. Of course, as we will continue working beyond 2013, we might still get health insurance benefits through our employers. But if we don't, I started looking around for high-deductible policies and they seem very reasonably priced for people our age (currently $126 per person monthly for a $1,500 deductible plan). I am still worried about possible pre-existing condition exclusions, but I think those will become prohibited on 01/01/2014. In case pre-existing conditions prevent us from finding affordable health coverage on our own in 2013, we could sign up for Cobra and wait it out until 2014.

 

[FUEGO]

I'm a little further out than you are from FI (more like 5 years for me). But I'm starting to have these same "what if" thoughts. Cut back on work before reaching FI, or just stick it out. I'll still be in my 30's (and have young kids) so it doesn't seem "proper" somehow to call it quits at that age if I have a steady job that isn't too bad. Although DW and I work very close to 40.0 hours a week (it's a personal goal of ours). And the commutes aren't too bad.

But man are the weekends sweet and relaxing. I think it might be time for a mini staycation for me soon. Hopefully I can turn every week into a 7 day staycation soon!

 

[walkinwood]

Please don't side-track this thread into myers-briggs.

There's good information here. Let's focus on the OP.

 

[walkinwood]

I have been looking at this for plan B. Cutting our present expenses by 25% is possible. But it would not be our first choice. My thinking is this: right now, we make about 7 times what we spend. So we don't really need to tightly control our spending. I wanted an iPad and I just bought one. No big deal. But in 2013, if we start making just enough money to cover the bills, I wouldn't be surprised if we naturally cut back on expenses. DW and I are savers and our expenses could fall as we adjust to having a much smaller income to work with. So we could reach the 3% treshhold sooner than expected.

We found that we cut back on expenses pretty naturally after we quit our jobs, and then pared them back some more when the stock market dropped. Having said that, I think there is a unique 'expense level' that is right for each person/family/location and to try and live below that for an extended period of time will cause stress & unhappiness.

We found that money became much more important to us when we quit our job, and it took months before I could stop worrying about it. Your statement about buying an iPad because you wanted it - you will naturally start thinking twice and thrice before making those purchases once you stop having a regular paycheck.

There are so many similarities between your situation and ours going back some 4-5 years.
All the best.

 

[FIREd]

We found that we cut back on expenses pretty naturally after we quit our jobs, and then pared them back some more when the stock market dropped. Having said that, I think there is a unique 'expense level' that is right for each person/family/location and to try and live below that for an extended period of time will cause stress & unhappiness.

We found that money became much more important to us when we quit our job, and it took months before I could stop worrying about it. Your statement about buying an iPad because you wanted it - you will naturally start thinking twice and thrice before making those purchases once you stop having a regular paycheck.

There are so many similarities between your situation and ours going back some 4-5 years.
All the best.

My plan is to start living on a stricter budget starting next year. For that, I think, we need to stop seeing so much money coming into our checking account each month. So:

We happen to have a year worth of living expenses in a savings account right now. I would like to start sending 100% of our paychecks directly to our investment accounts and try to live for an entire year solely on what's currently in that savings account. I will force us to plan expenses better and it should help us transition from living on a large, ever expanding income to living on a smaller, fixed income. I suspect our living expenses will go down as a result. It might also help us find that "unique expense level" you speak of. And finally, I think it will force us to weed out some fixed expenses in order to free more cash for discretionary expenses. For example, DW and I think that cable TV does not provide the kind of value it once did (actually, I consider it a danger to my health because, the more I watch it and the higher my blood pressure seems to get!). We are willing to try living without for a few months. I doubt, we'll miss it much. Personally, I wouldn't mind dropping my expensive AT&T iPhone plan in favor of a much cheaper, prepaid voice-only plan with T-mobile (like this: How to Use an iPhone Without a Data Plan (Voice Only) « Art of the iPhone). I rarely transfer data to/from my iPhone over 3G (I mostly use our wifi connection at home for data transfer), so I don't think I would miss having a data plan at all. Plus I use only a fraction of the monthly minutes allowed under my AT&T voice plan, so a prepaid plan would certainly be more economical. Right there, we could free up over $1,000 a year. Currently, our high income help us justify those unnecessary expenses. But they will be much harder to justify when our income starts dropping.

 

[Gumby]

Please don't side-track this thread into myers-briggs.

There's good information here. Let's focus on the OP.

As requested by you and others, I have split the Myers-Briggs discussion into a separate thread.

 

[REWahoo]

We happen to have a year worth of living expenses in a savings account right now. I would like to start sending 100% of our paychecks directly to our investment accounts and try to live for an entire year solely on what's currently in that savings account.

Excellent plan.