How Early is Too Early?

[bbuzzard]

My wife and I have saved and invested with the goal of early retirement since we were married. We are now 41, with a 12 year old child. FI has finally been reached. We find ourselves in the position that our investments, at a 4% withdrawal rate, will replace our current after-savings income (As an aside, this is as much a reflection on the fact that we save 50% of our after tax income as it is a reflection on a large investment portfolio).

We are now facing the reality of RE. It was much simpler as a theoretical goal than reality. We are currently leaning toward waiting until my son enters into college (7 years). This would give us more savings and hence a larger standard of living in retirement, probably replacing 100% of or pre-retirement income. This makes both of us more comfortable. FI was actually a bigger goal the RE, and right now we are about as bullet-proof as possible. Retiring would reduce the FI aspect of things, which makes us nervous.

Alternatively, we could loosen up and spend a bit more since our retirement nest-egg is already established (perhaps dangerous as it is easy grow spending, but difficult to reduce).

What I would really like to do right now is reduce my workload to 3 days a week, but this is not possible since I am a partner in my firm and that-is-not-done. I will mention that I have a low-stress, flexible job, and like what I do, which makes it much easier to work. My wife does not want to quit unless I do so, as she has no interest in being a housewife (no offense, this is an important position; it just is not for her).

The question here, and there is one, is how did you decide when it was the right time to RE? I know that no one can answer this question for me, but for yourself, how did you make this decision? Did you make this plunge without being certain that it was the right thing? Were you certain? How can I convince myself and my wife that retiring is the right thing to do? I feel safe in assuming that I am not the only one facing this problem when the possibility of RE became the reality of RE. Please note that I am not complaining as I am very grateful to have this dilemma.

I will add that I am certain I want to retire, I have many outside interest (travel, backpacking, kayaking, reading, writing, gardening, shooting, woodworking, metal working, boat building, coding, rock climbing, etc, etc.) and they will keep me as busy as I want to be. Anyway, please forgive my rambling, and please comment on what I can do to make myself feel more secure about moving forward with RE.

BBuzzard (long-time lurker, first post)

 

[aimhigh]

If I was as lucky as you to have your current situation I would do as so.
Sit back and look at your situaton as if you where someone on the outside looking in. Say like the famous old classic scrooge (not a reference to yourself ). Not many people are in a possition to do this. Many are stuck in jobs they hate or living in areas they can't get away from. How can you improve you and your families life style? How can you get the most out of the next 7 years before your son leaves the nest? What changes can you make to really make everyone happier and more complete. Early retirement my be the answer for most. But hey if you can do all these things and still work part or full time then you're still getting the most important job done... enjoying life and family. Your at a crossroads don't look back wishing you would have done things differently.

 

[AltaRed]

The question here, and there is one, is how did you decide when it was the right time to RE? I know that no one can answer this question for me, but for yourself, how did you make this decision? Did you make this plunge without being certain that it was the right thing? Were you certain? How can I convince myself and my wife that retiring is the right thing to do?

I will add that I am certain I want to retire, I have many outside interest (travel, backpacking, kayaking, reading, writing, gardening, shooting, woodworking, metal working, boat building, coding, rock climbing, etc, etc.) and they will keep me as busy as I want to be. Anyway, please forgive my rambling, and please comment on what I can do to make myself feel more secure about moving forward with RE.

BBuzzard (long-time lurker, first post)

I am FI and will RE in approximately 4 months at age 57. It took me the better part of a full year to make this decision, but I knew it was right when I knew I would rather be doing almost anything else than what I am currently doing. I think you have already answered that question yourself.

And yes, there still is a degree of uncertainty about the big change (a required relocation as an ex-pat is part of the decision). But that uncertainty would not likely disappear for 2-3 more years until I was 60 with a full undisounted pension and that is no longer worth the wait.

If you are FI, I would simply suggest taking the plunge. You can always go back to work in some form if you ever get tired of doing all the things you currently want to do.

 

[wabmester]

Similar situation to yours, BB.  Wife and I retired at 40 and 33.     Investment income sufficiently replaces former wage-slave income, and we have a young kid (created just after retirement, BTW).   Work wasn't too bad, but it felt like a grind, and I had an endless list of more interesting stuff to do.

Original plan was to take a break, travel, and then do something new and exciting job-wise.    But I found that the ER life suits me well, and I currently have no plans to return to any sort of daily grind.    However, I remain flexible.   If finances falter, I try to keep my working chops current enough to remain employable.   And if I ever get the entrepreneurial itch, I'd probably scratch that itch (i.e., I'm not an ER work-free purist, if there is such a thing).

So, my recommendation to you is to take a 1-year "sabbatical."    You're young enough that you can still go back to work if you decide you need a bigger cushion.   But once you've tried ER, my guess is that you won't be going back.

 

[grumpy]

While you may not be able to change to a 3 day work schedule in your present job, since you are FI there is nothing stopping you from seeking a part-time job elsewhere. It shouldn't matter if you have to take a pay cut. Think of it as trial retirement. If you find then that you are really enjoying the extra time to do the things you want to do, and you see that your finances are holding up OK, then you can decide when to fully retire.

I was lucky in that iimmediately after I retired from NASA I was able to work on the same NASA project as a part-time contractor for two years. I worked 3 days a week for the first year and then two days a week for the second year. At that point I was absolutely sure the time was right to fully retire.

Grumpy

 

[Outtahere]

You say that cutting hours is not done at your job? Why not? Is there a written law against it? Have you suggested it and been shot down? If staying where you are for the next 7 years is what you want but at a more relaxed pace then voice that, see what comes of it, you're in a position that you can walk away being FI so having the conversation with your partners is a win/win situation for you.

 

[Nords]

Welcome to the board and congratulations, Buzz!  No such thing as "too early".

What I would really like to do right now is reduce my workload to 3 days a week, but this is not possible since I am a partner in my firm and that-is-not-done.

You would think that a partner would have some credible opinion and perhaps even a vote on the matter.  Martha managed to do it in her law firm.  What would your firm do to you-- make you quit?  Make you show up for the graveyard shift?  

So, my recommendation to you is to take a 1-year "sabbatical."    You're young enough that you can still go back to work if you decide you need a bigger cushion.   But once you've tried ER, my guess is that you won't be going back.

A sabbatical is the most-recommended method for a trial RE, and for you it's a great negotiating tool.  They can have you 3x/week (or whatever) or they can't have you until 2007...

I would think that as your kid enters the teen years, you would want to keep an eye on their every waking moment and know exactly where they are and who they're with every minute of the day maximize your opportunities for quality time before they stop speaking to you and don't want to be seen with you in public leave the nest.  These years can't be replaced!

 

[Sheryl]

Buzz - I can relate to a lot of what you're saying.   By living only somewhat frugally, we could be FIREd right now.  We are going for saving up a bit more, to make it more secure and comfortable.

The part of your post that I relate to is the partner in a firm situation.  I've read the advice in this thread and many others that "you can always get another job if you need to."  This is certainly true, but not always easy.

I'm not sure there is another job I'd rather get.  I feel like once I leave this firm, there is no point in trying to work somewhere else, except maybe some freelance or development stuff.   But I am pretty settled and comfortable where I am.  In this town there are few opportunities that are better.

Think again about the "that's not done" scenario.  I felt the same way, and thought that my parnters would never go for it.  But I have since started creating some possible ways that it could work, without pissing off the partners too badly.  By changing my responsibilities somewhat, is is now starting to seem possible I could go to part time in a year or so.    Even if something is totally unthinkable now, kick it around - think outside the box...  

Read Martha's posts, she's making the part time option work - to some extent.

Good luck - and welcome to the forum.

 

[LOL!]

We are still working and investing a substantial portion of our income.  FIREseeker says we could retire with our current living expenses with a 96% probability of success.  We have two kids, the oldest is 14.  We both have jobs that we love which seems unusual for folks on this message board ... you know the ones that comment about the daily grind, working for the man, etc.

That written, what we are doing is slacking off and practicing retirement even though we continue to work.  We no longer bank our vacations ... we take family vacations to spend all those weeks of vacations.  We get to work around 9 am, leave around 4:30 pm or earlier.  Take longer lunch hours to play basketball or whatever.  We coach our kids sports teams which is 8 to 12 hours a week.  We visit relatives on a whim ... take 4 day weekends.  It's true that while the kids are in school you are kind of stuck, but that's only when everyone wants to go somewhere together.  You can travel by yourself.  My spouse has gone sea-kayaking with her friends while I stayed home.  I've gone on manly-man vacations with friends while everyone else stayed home.

Since you listed a litany of things you do already ... I don't see a problem with what you've got going.  And the extra income does come in handy for a few vacations a year overseas for everyone.  As for ourselves, spending more occassionally has not been habit forming.

So don't get caught up with all the hype on this message board.  The folks here are all into retiring early and tend not agree with folks who have done otherwise.  Take it at your own pace.

 

[Nords]

Mr. Buzzard --  You are 41 years old.  I may well be wrong, but it seems to me that the 4% WD rate rule-of-thumb is really pushing things for a retirement that could last for 50-60 years.

Ruh-roh-- let's not start that debate again. At least not on this board!

Here's an old thread that addresses that issue, as well as Bernstein's "Calculator from Hell" series of articles:
http://www.efficientfrontier.com/ef/998/hell.htm
http://www.efficientfrontier.com/ef/101/hell101.htm
http://www.efficientfrontier.com/ef/901/hell3.htm
http://www.efficientfrontier.com/ef/103/hell4.htm
http://www.efficientfrontier.com/ef/403/hell5.htm

Spouse and I ER'd at 41 and expect to live for at least 60 years, but we're planning for 80. The numbers claim that we can make it at a 4% SWR, but of course there's history versus that Bernstein caveat.

Unless you have studies indicating otherwise, I would say that you're right-- you may well be wrong.

 

[haha]

Ruh-roh-- let's not start that debate again.  At least not on this board!

Spouse and I ER'd at 41 and expect to live for at least 60 years, but we're planning for 80.  The numbers claim that we can make it at a 4% SWR, but of course there's history versus that Bernstein caveat. 

Unless you have studies indicating otherwise, I would say that you're right-- you may well be wrong.

Unless I am forgetting, doesn't your wife still work at least part time? And don't you have and won't she have officer level military pensions and health care?

IMO, the "Debate" you referred to is the 800 pound gorilla menacing a very early retirement that will solely be funded with capital.

I did it, at a time when IMO it was easier. (Due to lower equity valuations back then, cheaper health insurance, etc.) I think it can be more stressful than it is worth. Not only to the one who is managing money, but to the whole family. But again, in my case  nobody worked, nobody had a  pension, and nobody had paid health insurance.

Of course the obvious truth is that people without health insurance, and without government pensions retire really early mainly because they have had it up to the gills, not because it is rational. There simply isn't enough information to approach something like this rationally, Fire-Calc or no Fire-calc. The “rational” figuring comes after the emotional decision, more as a way to lessen cognitive dissonance than as a decision process.

Of course, all this is JMHO.

Ha

 

[Sparky]

DW and I retired at 44 and 45 three years ago - so far, so good. Just be a little cautious about your 4%. We are in the process of selling our condo and buying another - we've done the old "widow's rule" - that is, don't make any large decisions until after 1 year (we waited 2).

I see every day in the obituaries about somebody 48 years old dropping dead - don't want that to be me.

Hey, this is it.

 

[acg]

The question here, and there is one, is how did you decide when it was the right time to RE? I know that no one can answer this question for me, but for yourself, how did you make this decision? Did you make this plunge without being certain that it was the right thing? Were you certain? How can I convince myself and my wife that retiring is the right thing to do?
BBuzzard (long-time lurker, first post)

Made the plunge in October (at 48)...a lot of emotional and psychological issues come into play along with the financial fears...If it feels good, do it...Feel the Fear and DO IT ANYWAY!...

Been on the road since mid-November, relocating to AZ from the midwest. House has still not sold (ultimately want to retire to Panama, Brazil or Thailand to take advantage of cost of living issues)...Signed a short term lease for an old, nicely furnished cobblestone cottage in the Coronado Forest (desert highlands in Huachuca Mountains) and just 10 minutes to civilization.

Just came back from the electric company to establish service, the wierdest thing was answering the clerk's question "What's your occupation?" I blurted out "retired" and grinned .

The best news, so far, I am under budget, my investment income has increased (thanks to forum TIPS) greater than my previous monthly salary as a wage slave. The only bad news...I rec'd my gas bill from my home in Michigan (with water heater turned off and gas on minimum so pipes don't freeze). $170 bucks...OUCH! (No need for gas in Arizona, thank goodness).

Some initial anxieties, but, overall...well worth it. You are free to do, be and do as you please! Scooby, DO BE DO!!!

Just remember, this thing called LIFE is no dress rehearsal...and as you read the OBITS, the mortality age seems to get closer and closer. Time with family, friends and self = priceless!

 

[NYCGuy]

I would cast my vote with the crowd that thinks depending upon the reliability of the 4% SWR is too risky. 4% is just a heuristic. We can't predict the world for the next fifty years.

I myself don't much enjoy my present job and could retire now if we were ready to relocate. However, continuing to work increases the odds of avoiding the worst outcome for my wife and me: being old and out of money. That increased confidence is worth more to me than leisure, much as I know I would enjoy the free time. At some point the diminishing value of continuing to work may no longer be worth the sacrifice.

 

[yakers]

I'm not sure there is another job I'd rather get.  I feel like once I leave this firm, there is no point in trying to work somewhere else, except maybe some freelance or development stuff.   But I am pretty settled and comfortable where I am.  In this town there are few opportunities that are better.

I really follow this logic, or at least it applies to my situation. I like my job although I imagine not working would be the only thing better than a good job. When I read "Work Less, Live More" I don't get the part about doing something else. The pay is better and there is not a lot of pressure and I get a lot of "strokes" for doing a good job. When I stop working I just want to stop. Now I expect some of my volunteer work will take more effort than my current job. But that seems different to me.

 

[Nords]

Unless I am forgetting, doesn't your wife still work at least part time? And don't you have and won't she have officer level military pensions and health care?

Yup.  That part-time gravy train has been cut way back-- to about $11K/year-- but the rest of it sure makes the decisions easier.  It's also why the portfolio is so heavy in equities and why we're only a few months into a 30-year mortgage.

And we can't predict the future, but that doesn't make the past any less valid a tool.  In fact out of a lousy toolbox the past is perhaps the best tool we have.  Much of the current research is beginning to wonder if 4% is too LOW an SWR, although admittedly a lot more work remains to be done on the subject.  I just object to discarding a 4% SWR out of hand (without quoting a study or linking to problems) when everything that we show so far indicates that 4% is going to work. 

It's too easy to use SWRs to suck the motivation out of someone who needs a confidence boost to get them out of a workplace that's become dangerous to their mental & physical health. If nothing else, the analysis forces them to re-examine their job and perhaps the need for a career change or part-time work.

Or maybe the post just provoked an emotional anti-***** reflex response.

I wouldn't advocate an ER like Joe Dominguez or JG, but it can be done with portfolios & lifestyles like the Terhorsts & the Kaderlis.  Then there's Donner, who hesitated to ER with a lifestyle less than six figures, and OAP, who just couldn't stand to watch his portfolio fluctuate by a fraction of a percent.  There are plenty of examples across the entire spectrum, from possum living to that guy who sold his tech company at age 24 for $5M, but each poster has to do their own expense analysis and decide if the SWR is worth the lifestyle.

 

[Martha]

Bbuzard, welcome to the forum and its grand debates. I am with those who distrust a 4% withdrawl rate when you are relying entirely on your investments to pay for your retirement and you have no retiree benefits.

What I would really like to do right now is reduce my workload to 3 days a week, but this is not possible since I am a partner in my firm and that-is-not-done.

I work about half time as a partner in my law firm. My firm is more than 100 years old. I was the first to do this. Someone has to be first, why not you? I am the former president of our firm. Towards the end of my term I started to approach my board of directors about the possibility of going part time. I showed that it could work financially for the firm as well as for clients. It seems to be working pretty well, but not perfectly. Clients have a hard time getting used to it. I tell them to call me even if I am out, but they hate to impose on me when I am gone. But then they chide me for being unavailable. But the work gets done and everyone seems happy. Except I don't much like working at all anymore. Though this weeks isn't so bad because I am taking off on Sunday for a couple of weeks.

On the financial side, I'll see how it works out in few days when the year end calculations are done. My guess is that I will earn about 1/3 of what I earned last year. But last year I billed as a full time lawyer and earned money managing the firm as well. Combat pay.

 

[nellieb]

How about working a few hours a week auditing lawyers bills. Might be refreshing to be on the other side of the table and pick up some income.

 

[Martha]

How about working a few hours a week auditing lawyers bills.  Might be refreshing to be on the other side of the table and pick up some income.

Man, that sounds like fun. I could do that.

 

[unclemick]

Don't forget the Norwegian widow and her dvidend checks.

Heh heh heh

 

[Sheryl]

Bbuzard, welcome to the forum and its grand debates. I am with those who distrust a 4% withdrawl rate when you are relying entirely on your investments to pay for your retirement and you have no retiree benefits.

Ok, so:  Is there anyone here who has actually practiced taking a consistent 4% withdrawal for any number of years?

If you have other income/insurance/pensions on top of the 4% that doesn't seem relevant to me, but if you have those things and so are drawing less than 4%, it would be interesting to know what you actually are withdrawing.

 

[cute fuzzy bunny]

Noting that I quit at 39 with the same bucket of worry. Trust me, the biggest worry you're going to have is finding your ER'ed days full of stuff to do and wondering how you'd ever fit a 40 hour a week job back into it. And your savings on hair restoration products and anti ulcer medications.

As far as practicing a 4% swr, not me. I did the couple of days of SWR analysis and found that every set of numbers I ran turned up fairly positive results, that I could live on the "safe" withdrawal.

This was after three years of being ER'ed and never hearing about "safe" withdrawals. I just practiced a method of taking interest and dividends and looking for enough growth to offset average inflation, and if I was making a bunch of bucks I didnt feel bad about buying a big ticket item or two that year.

Its all going to be different for everybody as far as how much they think they need, how comfortable they are with their pot and withdrawals, how far they're willing to reel in the spending in bad years, etc.

With no debt, a good income from my wife that we really dont need, more interest and dividends coming in than we're spending even while living a good upper end of the middle class lifestyle and clicking off better than 10% a year returns through an up and down five year period...I feel fine.

Should things turn badly in the markets/economy for a long period, without a debt load to worry about and with a reasonable set of expenses, we could cut our costs substantially and still live pretty well. We could get by on 12-15k a year for several years and we can get to that level without any cutting near the bone. I can make 15k a year selling cars a couple of days a week if I had to. I also know that my brains didnt fall out of my head when I quit working, so even if I had to go back to it full time 10 years from now, while I might have to take an entry level job to "re-prove" myself and it might take 2-3 years to get back to my old pay level...even an entry level job pays more than I'd need to pay the bills.

So I think the keys to an early-early-early-retirement are to have a life worth more to you than the work world is, and if you have a family theres more than enough there to eat up your time...have a cushion that with all of the rationalization and analysis shows you can do it...keep your investment exposure and risk to levels that you can manage without going too far in either direction.

As far as withdrawal rate, I dont have any idea. I'm taking what I want/need and my pot is growing faster than inflation. Thats MY safe withdrawal rate.

Edit: two more things strike me, off the SWR thing. I've seen a few people ER and then go back to work. To me they looked like they identified themselves so closely with their jobs that they couldnt find an identity without it. Or they were like Nicholson in "about schmidt". They really had no life outside of their work world and didnt realize it until they quit. I think both might be symptoms of something the prospective early retiree wants to consider and figure out how to fix whether they quit working or not.

 

[Sheryl]

As far as withdrawal rate, I dont have any idea.  I'm taking what I want/need and my pot is growing faster than inflation.  Thats MY safe withdrawal rate.

This makes a lot of sense to me, and is what I will probably do, too.

 

[Jay_Gatsby]

It seems like the original poster is hesitating not only because of money, but also because his identity is somewhat wrapped up in being a full-time partner. Anyone else agree?

 

[cute fuzzy bunny]

As in my later edit to my last post, yes. And something that should be considered whether he retires or not.