ESR Strategy

[JoshTrent]

I am wondering if any other Young Dreamers share my ESR Strategy of:
- working like mad for a set amount of time for accumulation
- then working PT or menial j*bs while nest egg grows
- then retiring

My plan is basically that - is anyone else thinking this way?

 

[REWahoo]

I am wondering if any other Young Dreamers share my ESR Strategy of:
- working like mad for

Give us a hint: ...the man? ...peanuts? ...grins?

 

[JoshTrent]

Yeah sorry.. it posted it too quickly.. or maybe not!

 

[Katsmeow]

Not a Young Dreamer...but I will tell you what is a barrier to me.

I worked full time in a highly paid field until I was 56. Then I switched to ESR in the same field. Actually same employer, same job but basically I do the things I most liked about the work.

Coincidentally I also have training in another field (master's degree). Working in that field wouldn't be a menial job but it is much lower paid. To be clear, last year I worked about 15 hours a week making what would an hourly rate comparable to what I would have made if working full time (I realize lots of people don't have that kind of thing as a part time option). But it is still well paid so even working 15 hours a week I made about double what I would make working full-time in the field where I have a master's degree.

I've thought about getting a part-time job in the field where I have the master's degree at some point. I think it would be less stressful, I could find something closer to my home (long commute now) and would do what I would more personally enjoyable. But every time I think about it I realize that to take a part-time job in that field I would making 1/4 or so what I make part-time now and probably about 10% of what I make with a full-time job in the field where I worked during my career.

I find it difficult to conceive of working, say, 15 hours a week making 1/4 as much as I could make working 15 hours a week in my existing field. And how would I feel if I was making 10% as much as I made in my full-time career?

 

[GrayHare]

Very doable if you are a self-starter and don't mind the hard w*rk / long hours while you're young. A downside: since few others do this, you'll have few with whom to commiserate.

 

[LOL!]

I worked at a good job then went to half-time at age 50. I don't have a menial job. I still have a nice office, lots of perks, very low stress, and good people that report to me, so I don't have much work to do. And like many on the forum, my spouse works, so I really don't have to.

 

[Aiming_4_55]

When I started, I didn't have a plan. I just wanted to make money and have a better future.

Here's what happened to me:

- age 21 - 42: worked like hell with megacorp and landlord
- age 43 (FI in late-2012 with SWR of about 3.8%) - estimate age 48: work as contractor (less hours, but very reasonable hourly rate) and landlord
- estimate age 49 - 60 landlord (estimate $50k net) but increase travel
- estimate age 61 + just ER

I decided taking a menial job for less than 25% of my contractor rate does not make sense as I would still live on someone else's schedule. Since I'm showing up for $$, it should be worth it.

 

[Mulligan]

Josh think hard about what Aiming wrote, and you definitely will have the time since you are young. But the "menial job" may lose its allure once you get into the daily grind of it, and then look at the check after your hours worked. I originally thought I would do that, but after thinking more thoroughly I chose a part time job in my field that paid better instead. Glad I did, have saved a few more bucks, and am packing it in for good this summer at 48.

 

[brewer12345]

Josh, I am angling for what you suggest, but coming at it from a different place. I had been shooting for full ER all along, but as I will turn 40 this year and having weathered some really crappy markets in my accumulation years I am realizing I probably won't make it. I don't think I can stand showing up at a cube every day to make it all the way to ER. So I have a professional milestone I will hit at the end of 2013 and after that I have decided that I will stick around as long as I can stand it, but over the course of this year I will be fleshing out Plan B. Plan B for me is something like ESR. I have most of the funds accumulated to get to ER, but given how young I am its a stretch. Instead, the plan (with some details to be worked out) is for DW and I to make between 40 and 70k annually and make small draws on the portfolio if needed. DW's no-capital outlaw business is looking like she will net 20 to 25k this year, so if I can figure out how to do that as well we would be in good shape. I also could always go back to full time work after a year or two if it did not look like it was working.

How will I generate my half of the income? Could be a lot of ways an that is something I have to flesh out. It would likely be either contracting or a small business of some sort, since I want lots of flexibility.

 

[Meadbh]

How will I generate my half of the income? Could be a lot of ways an that is something I have to flesh out. It would likely be either contracting or a small business of some sort, since I want lots of flexibility.

I think you should consider starting a microbrewery and financial advice center. I'll have a light ale and some corporate bonds to go. Cheers!

 

[brewer12345]

I think you should consider starting a microbrewery and financial advice center. I'll have a light ale and some corporate bonds to go. Cheers!

A joke, I know, but:

- brewery: massively capital intensive and the likely prospect of 70+ hour workweeks for little or no pay.

- financial advice: I am not a good marketer and there are many charlatans in the business. I would starve.

Ah well. There is always the "miracle of the loafs and the fishes."

 

[JoshTrent]

Thanks for the replies!

I am currently thinking of ways to do what I do, as either PT or contract work. Its service industry related.. so its difficult to do, if you aren't "in-house".

I am tried of the long work weeks and late nights, there has to be something more. I have a young family and it would be nice to hang out with them more. Right now though, the money is just too good. That's why I am thinking of socking away what I can now.. then letting that bake (a little CO humor there) until it had grown enough..

 

[comicbookgujy]

I'm 40 years old and a decent paying job right now. I thought about quitting at age 45 and work part time for the health insurance...but I'm not sure how I would feel making 10% of what I used to make.

I'm thinking of doing what I used to do when I was in my 20's and didn't have committments. Work 2 years and take 1 year off and go back to work for 2 more years and then take off 1 year again. I would like to do that but I don't think employer would be hiring a dude in his 40's doing this.

 

[bo_knows]

I'm 31 and with my projections, am entertaining the idea of w*rking until 40-43 full time, and potentially switch to part-time work (enough to cover expenses, but not save very much).

The idea is that by the time I reach PT work, my tax-defferred nest-egg will be projected to provide plenty of income by the time I can withdraw at 60.

One of the reasons I like this idea is because we have a 9mo old son, and we're looking to have another child. IF everything goes even remotely to our plan, we'll be in the position to be FI while they're still not even teenagers. It's not exactly prudent to say we're going to pack up and leave town and move to somewhere "cheaper" without regard to schools, just to RE. We like the area we're in and the schools are top notch.

But, hell... there's a decade of accumulation and life decisions ahead that very well could change my mind

 

[JoshTrent]

I'm 31 and with my projections, am entertaining the idea of w*rking until 40-43 full time, and potentially switch to part-time work (enough to cover expenses, but not save very much).

The idea is that by the time I reach PT work, my tax-defferred nest-egg will be projected to provide plenty of income by the time I can withdraw at 60.

This is my thinking as well. Would you mind sharing (either publicly or privately) what you figure to gain in that 20 years of growth without contributions? I am loosely calculating 300-350% for 20 years.

I appreciate your input!

 

[SunsetSail]

I will turn 40 this year with a relatively low stress, reasonable-hour high paying job. I'm fighting serious burnout now. DW just started a work from home gov't job that provides medical for life after 5 years and a small defined benefit pension after 10 years. Her salary is about $12K/yr less than needed to cover our expenses, and we have a good sized nest egg. She likes it and has no desire to stop working anytime soon. I have consulting opportunities that would require zero marketing and would easily cover the expenses, but I just can't bring myself to leave such a high paying position. I will be out in less than five years, probably when the mortgage is paid off and we can live completely off DW's salary.

My point is that it is hard to pull the trigger when dealing with 50+ years left on the planning clock.

 

[bo_knows]

This is my thinking as well. Would you mind sharing (either publicly or privately) what you figure to gain in that 20 years of growth without contributions? I am loosely calculating 300-350% for 20 years.

I appreciate your input!

Even though my calculations are somewhat crude, I don't view it as easy as a simple %. Mostly because I figure factors like "Will I contribute at least up to the match % of my 401k even in part-time mode?" "Will I quit before my wife?" etc etc.

I use this spreadsheet to project out. I typically like to use Today's dollars (because I dont like to try and do the mental math to figure out if $1M is a lot in 30 years), but I give the option of either. Put in the assumptions, then move to the calculation tab. You can then edit that sheet to calculate part time (divide salary by 2 at a certain point) or even change individual years of 401k contributions. Let me know if you have questions about it... it's my own little creation. It's crude, but I like it.

https://docs.google.com/spreadsheet/ccc?key=0AnZCadE3qiVNdGJxeHpvYlNxU0lKUjA3aFJDbzJOWEE (save a copy so you can edit yourself) Also, caveat, those are fake starting numbers. I can give you my actuals if you are curious.

 

[ronocnikral]

I've come to see the reality that I need to enjoy life as much today as I hope to one day in ER/ESR. While I still max out my 401k, 2 IRA's and save another $20k or so on the side, I've ratcheted that savings rate down so DW and I can do what we love, travel.

Ideally, I'd work until I was 45-50 and throw in the towel for ER. With no guarantees, and reading some of the 'stories' here, I'd rather make sure I do the things which I want to do most in life and then see how the ER thing plays out.

... a small defined benefit pension after 10 years...

Just out of curiosity, I thought the law was pretty clear that after 7 years, all employees have to be vested in a DB plan. Is your DW part time and that somehow affects her vesting in the DB plan?

 

[SunsetSail]

Just out of curiosity, I thought the law was pretty clear that after 7 years, all employees have to be vested in a DB plan. Is your DW part time and that somehow affects her vesting in the DB plan?

She is full time. I am not familiar with a 7 year max for DB plans. I believe there is a 7 year max for graded vesting and a 5 year max cliff for DC plans. It is a state government, so maybe there is a federal law that applies only to private employers DB plans. I have very little experience with DB plans, so I only know about her's in particular.

Edit: I did some research and I was correct, the ERISA vesting requirements do not apply to state governments. See the introduction of this document.