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Does this make sense?
Old 05-20-2006, 12:15 PM   #1
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Does this make sense?

Hello everyone

I am just wondering if anyone has taken this approach, or if you have any thoughts on this plan

I am a 30 year old accountant here in Canada and make just under $75K per year. I have always been a diligent saver and am about 6 months away from paying off the mortgage on my home. Purchased 4 years ago for $185,000 and now probably worth $300,000 (Edmonton housing market has been crazy the past few years). I did this by being....well cheap in all honestly....and living at home until 26. No other debts at all.

Basically I do not like my career. I have been in 4 different companies and I do not enjoy working for "the man". I just do not like sitting in an office for 8 or 9 hours per day and dealing with "crisises" that have no relevance to anything truly important. I have an accounting designation and it is a very hot market right now for accountants, there is certianly a lot of upside in my profession. I probably would not mind working for a very small company as the politics/stress would be less (along with lower pay)........

Having said all that, I will be able to save approximately $35,000 per year for the next 15 years between my company match RSP and my own investing. (right now I have $35000 in my retirement accounts).

When I plop this into Excel, the future value of this is about $1.1 Million at 9%. My plan is to stop working at 45 and simply work part time...enough to cover my monthly expenses which are $1400 without my mortgage. I'm not sure what I would do...probably do bookkeeping or tax returns or maybe deliver the mail or something without stress. I would really only need to work 2 days per week to meet my expenses.

I would do that until my early 50's so presumably that $1.1 Million would grow to about $1.5 Million at a rate of 4% per year (I would switch to a conservative investing approach during my semi retirement). Then presumably I could live on the interest of this nest egg until I started receiving social security which would help me out. $1.5 Million X 3% = $45,000 should certainly be enough if I have no debt.

I know this is very simplistic, but is it doable? I see my bosses still working at 55 and 60 and I have no idea why... Do they truly enjoy endless boring meetings? Do they have nothing better to do with their time? When I look around and see people working to 60 I just assume that me wanting to semi retire at 45 is a pipedream, but looking at my numbers it seems doable......

One of my employees is 65 and still working...she mentioned she loves to go RV'ing and showed me a picture of her rig....it is one of those monstrous things that cost $300,000....I now know why she is still working at that age....different strokes for different folks I guess....
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Re: Does this make sense?
Old 05-20-2006, 12:34 PM   #2
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Re: Does this make sense?

Quote:
Originally Posted by accountingsucks


Having said all that, I will be able to save approximately $35,000 per year for the next 15 years between my company match RSP and my own investing. (right now I have $35000 in my retirement accounts).

When I plop this into Excel, the future value of this is about $1.1 Million at 9%. My plan is to stop working at 45 and simply work part time...enough to cover my monthly expenses which are $1400 without my mortgage.
One probelm with your logic is that your 9% 15 year calculation ends up with $1.1 million in 15-year-inflated dollars. In other words your calculation assumes a 9% real return. That seems pretty optimistic to me. If you assume, say, 3% inflation, leaving a 6% real return (still fairly optimistic, IMO), your $1.1 million becomes more like $900,000, and this is assuming that the $35,000 put in each year is all in today's dollars.

If, on the other hand, you only get 4% real return, the number becomes about $760k.

All that being said, retiring in Canada with a paid-off house and $760k is pretty doable. But if you hate your job that much, is it worth it? Only you can answer that. But 15 years is a long time to suffer....
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Re: Does this make sense?
Old 05-20-2006, 12:42 PM   #3
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Re: Does this make sense?

Quote:
Originally Posted by accountingsucks
Purchased 4 years ago for $185,000 and now probably worth $300,000 (Edmonton housing market has been crazy the past few years).* I did this by being....well cheap in all honestly....and living at home until 26.* No other debts at all.
Basically I do not like my career.* I have been in 4 different companies and I do not enjoy working for "the man".
How do you like living in Edmonton? *What are your chances of finding your dream job at a smaller firm in your current location? *Are you more interested in going into business on your own, and would you be willing to relocate? *What's your next step?

Because the cumulative stress of trying to do the same thing in the same place for the next 15 years under the current conditions has a high probability of killing you. *At least one of the conditions has to change before you'll realistically raise your life expectancy.

Quote:
Originally Posted by accountingsucks
I know this is very simplistic, but is it doable? *
Yup. *Sounds too easy, but once you commit to the LBYM lifestyle adjustments the rest of it just compounds out of control. *I'm not sure how realistic a 9% rate of return is, but perhaps your tax situation is different.

Quote:
Originally Posted by accountingsucks
I see *my bosses still working at 55 and 60 and I have no idea why... *Do they truly enjoy endless boring meetings? *Do they have nothing better to do with their time?
It's either that or they haven't saved enough money. *I suspect it's rationalized as the former when it's mostly the latter.

The good news is that you won't feel guilty for getting out before they do!
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Re: Does this make sense?
Old 05-20-2006, 12:43 PM   #4
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Re: Does this make sense?

The reason I am not taking into account the real rate of return is because presumably my income will outpace inflation. Assuming my expenses are $25000 per year today (w/o mortgage), that would be let's say $45,000 twenty years from now and if I'm working part time I'll be making more than I am today. Keeping the $'s constant makes the analysis easier - again this assumes my salary beats inflation and that when I'm semi-retired my income will cover my expenses.

The only place inflation would have an impact is when I am not working at all. In that case I have no income and inflation erodes my nest egg by 3% per year.

It's not like I am miserable at my job, but I am not passionate about it. I don't think I could be about anything where I am working for someone else.
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Re: Does this make sense?
Old 05-20-2006, 12:50 PM   #5
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Re: Does this make sense?

Quote:
Originally Posted by Nords
How do you like living in Edmonton? What are your chances of finding your dream job at a smaller firm in your current location? Are you more interested in going into business on your own, and would you be willing to relocate? What's your next step?

Because the cumulative stress of trying to do the same thing in the same place for the next 15 years under the current conditions has a high probability of killing you. At least one of the conditions has to change before you'll realistically raise your life expectancy.
Yup. Sounds too easy, but once you commit to the LBYM lifestyle adjustments the rest of it just compounds out of control. I'm not sure how realistic a 9% rate of return is, but perhaps your tax situation is different.
It's either that or they haven't saved enough money. I suspect it's rationalized as the former when it's mostly the latter.

The good news is that you won't feel guilty for getting out before they do!
Edmonton's a great place besides the winters. Reasonable cost of living, lots of stuff to do outdoors. It's a big city with a small town mentality. Also there will be no shortage of work given the crazy expansion of the oil sands a few hours away in Ft. McMurray. Unemployment is non-existent here...those with no jobs simply do not want to work. Many fast food places are now giving employees retention bonuses for staying a certain amount of time.......

I really am not optimistic about finding a position I will enjoy and I do not want to retrain for several years and start again....this is also stressful. I think somewhere out there is a position that I would enjoy more and is still in my field. I guess the reason I put up with it is that there is this light at the end of the tunnel and 15 years is not that long. Again.....I don't despise my job I simply don't enjoy it....there is a difference. Most people would not choose to work if they did not have to.
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Re: Does this make sense?
Old 05-20-2006, 01:18 PM   #6
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Re: Does this make sense?

Quote:
Originally Posted by accountingsucks
I really am not optimistic about finding a position I will enjoy and I do not want to retrain for several years and start again....this is also stressful.* I think somewhere out there is a position that I would enjoy more and is still in my field. I guess the reason I put up with it is that there is this light at the end of the tunnel and 15 years is not that long.* Again.....I don't despise my job I simply don't enjoy it....there is a difference.* Most people would not choose to work if they did not have to.
If you don't hate accounting then you probably should stick with the field and develop your strengths. But you can try to change the other circumstances.

My BIL the CPA refers to himself as "the accounting slut". He works for anyone in the DC/Annapolis area paying what he considers a decent wage, and he loudly/publicly states that he has no desire to run his own empire. He's not seen as a threat by partnerships.

He started 20 years ago at a bigger tax-prep firm filled with junior CPAs all plugging away individual returns. Over the last 20 years he's gravitated to subsequently smaller partnerships... from franchises to big multi-partner firms to four-partner firms to two guys who are happier when he's the office manager. I think he's just been appointed a junior partner to keep him at the firm so this may be his last job. His income has risen accordingly-- he's probably breaking through to six figures with his bonus-- but he'd rather work on tax returns than supervise an office full of self-professed Slackers or have to schmooze the customers. He claims that he can get through an entire workday saying "Well, I don't know. What did you learn when you looked it up in the tax code?"

Every May, after the tax season ended, he'd meet with a partner to tell them what he accomplished that year and what he thought he was worth. If he got a raise he came home smiling and looking forward to another year. If he got a pat on the back he came home smiling and started working on his résumé. By the following November he'd usually have an offer, and he'd pull the plug in December (the appropriate minimum notice). The impact of quitting just before tax season was not lost on the partners, and word got around after a few years that my BIL is a professional worker who doesn't put up with crap.

He uses that reputation to his advantage and, while he appreciates the autonomy of a smaller firm, he also knows that it's at the mercy of the partners' personalities. (At opne of his firms a partner went through a divorce that destroyed the entire company.) He knows that someone in the network will hire him away whenever he's ready to move. Admittedly this takes a big ego (almost as big as mine) and cojones the size of cannonballs. It doesn't hurt a bit to have a working spouse, either, but he's never been unemployed for more than a month.

He doesn't have his ego tied up in work or in the profession. He says he's a frustrated stock-picker & blackjack player who moonlights as a CPA to pay for his research. He & spouse are going to ER in about 10 years but cheerfully acknowledge that their free-spending vacation-loving lifestyle has delayed it from happening next year.

Develop your strengths, extend your loyalty as far as your paycheck, maintain your contact network, and keep looking around for something that interests you. Let the bosses see that you're not afraid to move on. A low-consumption lifestyle gives you plenty of flexibility for the occasional skipped paychecks.
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Re: Does this make sense?
Old 05-20-2006, 01:21 PM   #7
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Re: Does this make sense?

Have you thought about starting your own business--maybe tax accounting for small firms and individuals? Not necessarily this year, but something to look forward to and prepare for over the next couple of years? Also, if you get married, your spouse will presumably bring some savings to the table, which might shorten your working life.
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Re: Does this make sense?
Old 05-20-2006, 03:51 PM   #8
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Re: Does this make sense?

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Originally Posted by astromeria
Have you thought about starting your own business--maybe tax accounting for small firms and individuals? Not necessarily this year, but something to look forward to and prepare for over the next couple of years? Also, if you get married, your spouse will presumably bring some savings to the table, which might shorten your working life.
Yes this is true, but that likely means kids too...I've basically assumed that these will offset themselves......
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Re: Does this make sense?
Old 05-20-2006, 06:06 PM   #9
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Re: Does this make sense?

Have you considered becoming a cross-border tax specialist? Alberta has enough of us aliens to keep a number of individual practitioners busy in that specialty. these guys are also business consultants who tell us what dumb things not to do and what we REALLY should have done in the first place.
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Re: Does this make sense?
Old 05-20-2006, 06:08 PM   #10
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Re: Does this make sense?

Quote:
Originally Posted by accountingsucks

I guess the reason I put up with it is that there is this light at the end of the tunnel and 15 years is not that long.*
And if you found out tomorrow that you only had 10 years to live, would you still stick it out?
* 15 years is a long time to be going through the motions. You keep saying you're not happy working for someone else, so maybe it's time you started working for yourself. *Seriously, you're 30, no family to support ... you're in a good position to take on a little risk. If it didn't work out, well, you know how to look for a job, right?
*
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Re: Does this make sense?
Old 05-21-2006, 03:41 PM   #11
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Re: Does this make sense?

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Originally Posted by Ed_The_Gypsy
Have you considered becoming a cross-border tax specialist? Alberta has enough of us aliens to keep a number of individual practitioners busy in that specialty. these guys are also business consultants who tell us what dumb things not to do and what we REALLY should have done in the first place.
amen to that. They guy I hired in Vancouver, while good, is pretty spendy. I'm paying for his high-rise rent on Hastings street. If I could get the same quality service for cheaper, I'd jump at it. And Edmonton is closer to where I live.
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Re: Does this make sense?
Old 05-21-2006, 04:31 PM   #12
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Re: Does this make sense?

Quote:
I have an accounting designation and it is a very hot market right now for accountants, there is certianly a lot of upside in my profession. I probably would not mind working for a very small company as the politics/stress would be less (along with lower pay)........
My wife started work as an accountant for a small company (school system) at significantly reduced pay 2 weeks ago. She is only making low $40K per year. She should be making $60K+ since she has more than 10 years of accounting experience. However, she likes the job bcause of low stress and minimal poilitics, unlike those of big corporates.
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Re: Does this make sense?
Old 05-21-2006, 09:26 PM   #13
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Re: Does this make sense?

Quote:
Originally Posted by VoyT
* 15 years is a long time to be going through the motions. .... *
Amen to that.* You appear to be sentencing yourself to 15 years of accounting that sucks.* I'd be working on figuring out what you want to really be doing next month and next year instead of imaging whether you can quit your sucky job in 15 years.* Life is too short.

(May I suggest that you get a PhD in Physics and become a Professor?)
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Re: Does this make sense?
Old 05-21-2006, 11:27 PM   #14
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Re: Does this make sense?

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Originally Posted by LOL!
(May I suggest that you get a PhD in Physics and become a Professor?)
I found two jokes about Physics:
Quote:
A physics professor was hit by a brick falling from a house.
He fainted, but came to after a while and started smiling.
The onlookers were worried, so they asked him why the smile.
He replied, "I just realized how lucky I am because the kinetic energy is only half m v squared."

You enter the laboratory and see an experiment. How will you know which class is it?

If it's green and wiggles, it's biology.
If it stinks, it's chemistry.
If it doesn't work, it's physics.


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Re: Does this make sense?
Old 05-22-2006, 01:05 PM   #15
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Re: Does this make sense?

Quote:
Originally Posted by accountingsucks
...Basically I do not like my career.* I have been in 4 different companies and I do not enjoy working for "the man".* *I just do not like sitting in an office for 8 or 9 hours per day and dealing with "crisises" that have no relevance to anything truly important.* I have an accounting designation and it is a very hot market right now for accountants, there is certianly a lot of upside in my profession.* I probably would not mind working for a very small company as the politics/stress would be less (along with lower pay)........
As a 30 yo that is very tired of the cubicle hell provided by 'the man', this sounds so very familiar.* At the end of this month, I think we'll have the $$ available to pay off our house, too.* Damn that's a good feeling!

The DW and I have talked about how we'd like to escape this existence but there are so many unknowns.* No youngin's yet, so that could change things, but right now we think 10 years of doing this crap, if we can stand it, will enable us to chuck it all at age 40 and do something we want to do.* Having a philosophy that we will probably never stop working, we whole-heartedly want the ability to do what we want, when we want.* I figure some part-time income would give us/our portfolio some flexibility.

Your investment assumptions seem a little steep to me, but to each his own* Right now I'm going back and forth between 4-5% real ROR.* Even with that, I don't know what the future brings.* We may to decide to make drastic changes within the next five years... maybe go part time.* That will change things dramatically, but we'll do our best to plan for it.

I don't have any sage wisdom for you, but wanted to comment since I found our respective situations so similar.* Don't feel alone, dude.
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Re: Does this make sense?
Old 05-22-2006, 04:54 PM   #16
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Re: Does this make sense?

Consider going into business for yourself. It takes high energy and the returns may not be high, but you would be your own boss. Alberta is very small-business friendly. Work at Starbucks for spare change.

How about going into rental real estate? Buy a 4-plex in a nice part of town, live in one unit and rent out the others. Calgary and Edmonton are good places to look. Rent one or the units fully furnished, with housekeeping, to a local company who has people come and go. Start a one-man cab company for them. Run a limo for traffic to and from the airport.

Start a rent-a-car company in Edmonton. It is impossible to get a rental at the main airport.

Start an aurora-tourism business. The Japanese are nuts about auroras. There is a guy near Ft. MacMurray who does this. Offer weddings under the aurora. It would be best to have a camp further north for the purpose, because the aurora sometimes goes a long time without showing in Ft Mac. Try Uranium City. Auroras all summer around 1 AM. Cheap property (buy a house for $100), but very little infrastructure. Combine with a fishing license in Saskatchewan for Lake Athabaska. You won't believe the fishing there!

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