Anyone planning to retire in steps?

[CompoundInterestFan]

I was thinking about this today. The way things are looking right now (at 33), being able to retire completely by 55 will be fairly difficult. Granted, it's a long ways away, and a lot could change between now and then, but right now I just can't get the numbers to work out. I found this rather depressing, but then I started thinking hey, what if I just continue saving as much as possible until 55, stop contributing, and let the pot ride for another 5-10 years? By that point in time, it will have (hopefully) accumulated to a large enough number that my annual contributions won't make much difference over those 5-10 years. But by not having to pay that amount into my retirement (and also having my house paid off), I could potentially downgrade careers to something less stressful, more fun, until the retirement pot accumulates enough so that I can leave for good.

Sure, I wouldn't be fully retired, but I wouldn't have the same job pressure I do now. It'd be kind of like a slow descent as opposed to a screeching halt.

Whaddya think?

 

[TargaDave]

I think it is a great option that can provide both financial and non-financial benefits. ESR Bob does a great job discussing this subject in his book. Just don't expect to find a huge percentage of "fun ER work" believers on this forum.

 

[chinaco]

Sounds like a reasonable approach. Or perhaps in your career you could go to part-time work. Sometimes that can be an option.

Be sure to work both sides of the equation... Income and your expected expenses. You might find out that FIRE @ 55 is still workable. The expense side really drives the income needs.


If you do not mind me asking... What is your target amount and how far off are your projections from your target?

 

[kat]

I also want to recommend ESR Bob's book. I like it a lot.

I think retiring in stages can be very workable. I have really retired as a lawyer, but I renew my license every two years and do a very tiny amount of work. I do that because it is an excellent way for me to get low cost health insurance available to sole proprietors through the state.

 

[DougViages]

Staging Retirement:

My DW and I (both professionals and mid -50's) will be staging down to 20-24 hour weeks by fall. DW will maintain health coverage as a director at a large hospital. We plan about two years of this structure, then we will decide about staging down, or dropping work completely. We feel a weight lifted off of our shoulders!

We are planning 12 weeks of travel over the next 18 months, so we are going to take advantage of our increased freedom.

 

[RunningBum]

I'm kicking around working 1/2 time next year instead of completely leaving. My boss said he'd consider it. The drawback for him is that it'd use a full headcount. I've done a couple short stints (month or two) of 1/2 time before and liked it.

 

[Martha]

I had a serious case of job burnout resulting from practicing law full time and at the same time managing our firm.

I stepped slowly down to retirement by resigning the presidency of our firm and working part time for two years. I took a good portion of the money and contributed the max in a 401k, both through employer profit sharing and employee contributions. At the same time we were selling rental real estate so we were in a high tax bracket so it made sense to shelter as much of the income as possible. I also had health benefits through work. So, I managed to work about a third of the time I had worked before and still make pretty good money and get used to not having life revolve around work.

Even though I worked part time I had to be available to clients and stay in touch via phone and email all the time. My clients had some problems adjusting. I would tell them to call me or email me if they needed me. But they are so Minnesota; they wouldn't want to bother me at home so they wouldn't call and then they would gently suggest I was not available. It took a long time to work that out in a way that made everyone happy. It was also impossible to manage work load so it was at a consistent level. I had reduced the number of my clients. They might suddenly have a pile of work and then work might dry up for a while. It was difficult to plan around that because no one really would have much advance notice. I might have continued this indefinitely if I could have planned workloads in advance, but the nature of my work simply did not allow that.

The biggest downside to phasing our of work was that I got too used to life not revolving around work.

 

[Lusitan]

I'm about the same age as you are and I'm also planning to do something similar. For me it will be more like reaching bare-bones FIRE by 40 and then deciding whether I can find a low-stress or part-time job (or maybe my own little business in something that I'm interested in) to earn more to increase my spending limits. It's a still a vague plan at this point but that's the general idea.

 

[ajs56]

Phasing into FIRE is exactly our plan. We are 50-51 and have a nest egg (taxable & tax deferred) which should grow to about $1.2-1.4M by the time I'm 62, assuming a 8% average growth/return. At 4% SWR along with SS, that should cover our retirement years (age 62-90+).

In the meantime (age 51-62...) we have commercial and storage rentals which generate enough cash (now that we recently retired some associated debt) for our currrent level of living expenses (including sizeable allowance for health ins), which includes domestic travel and living comfortably. Managing this only takes maybe 10-20 hours/week for my DW, and her days/hours are flexible, so I plan to scale back to a similar part time "schedule" either with my current employer, or by finding a less intense job for a little extra cash and to keep occupied, leaving us both flexible and free 3-5 days/week to enjoy pursuing hobbies, traveling, or whatever.

We think that totally retiring at age 50 might be too young, but wee are looking forward to more flexibility and the opportunity to see what we want to do next, if anything.

Congrats on your early FIRE planning and thoughts! I suspect that you may get there earlier than you think.

Best.

-AJ

 

[teejayevans]

If you work for a megacorp, 1 option is to take a sabbatical and try out
the ER life for a year, and excellent way to have 1 foot on land while
you test the water.
TJ

 

[Gumby]

I have recently been thinking about just such a phased approach. I am currently with a large law firm in a big city. The pay is great, but I am starting to lose interest, and on a good day I w*rk 14 hours. The young wife and I have now built up a nest egg of sufficient size that if we just let it sit for several more years, it will be sufficient, even if we add nothing more to the pot. I have been thinking about downshifting to a job that will just cover the living expenses while we let the pot grow. Sure, I could take a few more years in the big city and retire even sooner than currently planned, but the young wife has 7 years more until she is pension eligible and I think there could be some domestic stress if I hang it all up while she is still in harness.

 

[CompoundInterestFan]

If you do not mind me asking... What is your target amount and how far off are your projections from your target?

Well, I figure that if I wanted to retire today , I'd need about $1.5 mil to live comfortably, but not extravagantly (assuming my house was paid off). Factoring in inflation (~3%), by the time I'm 55, that $1.5 mil will need to be about $2.8 mil. However, I project I'll only have about $1.8 mil by then, so another 5-10 years of compounding will really help. My wife and I are a single-income family, and we're planning to have kids soon, so I don't expect I'll be able to save a whole lot more than I'm saving now.

If you work for a megacorp, 1 option is to take a sabbatical and try out
the ER life for a year, and excellent way to have 1 foot on land while
you test the water.
TJ

Actually, I tested the water a few years ago, and the water felt good. It's really not a matter of whether I'd enjoy ER, but how quickly I can get there.

 

[chinaco]

Well, I figure that if I wanted to retire today , I'd need about $1.5 mil to live comfortably, but not extravagantly (assuming my house was paid off). Factoring in inflation (~3%), by the time I'm 55, that $1.5 mil will need to be about $2.8 mil. However, I project I'll only have about $1.8 mil by then, so another 5-10 years of compounding will really help. My wife and I are a single-income family, and we're planning to have kids soon, so I don't expect I'll be able to save a whole lot more than I'm saving now.

What asset growth rate did you use in your projection?

Be sure you consider all expenses for your WR amount. Does it include health care costs? Plus the cost of children is high. If you had a baby today... 22 years would possibly have the child graduating from college.


Nevertheless... You are $1mm short and have 22 years (age 55) to fill that gap. That is along time to deal with the problem. Luckily you have time on your side. As you know for compounding to do its things... you need time, which you have.

I know this is going to sound kinda obvious... but, unless your growth rate was overly conservative (your projection is off), you need to figure out how to get more money saved/invested or reduce your expenses or a combo of both. You might need to get creative to come up with something that works. To get creative, your current assumptions will have to be challenged to get there. (your stepped retirement is a creative approach). Some other ideas are:

• The most obvious (and simplest) way is for DW to work (possibly part-time). If DW could earn about $10k/yr for the next 22 years, save all of it and invest @ a 10% return (this rate may be a little high... but it illustrates the idea), you would just about have your $1mm gap filled. She could probably do that part-time. The problem you are going to have is that she is already retired . Good luck... but it is worth a conversation.
• You could (unfortunately these ideas are what you are trying to escape from ):
  • Figure out how to boost your earnings at your current job. Work toward advancement and get a promotion!
  • Consider getting a job somewhere else at a higher wage.
  • Get a second job for the extra $10k/year.
• You might be able to move to a lower cost area of the country or in your local area.
• Figure out how to trim more current expenses to increase savings today.
• Figure out how to trim post RE expenses to reduce the WR need.
• Have you looked closely at the tax implications in retirement... are you over estimating your tax burden?

One final note: Do not take on high risk investment investment scenarios to try to get there... you are just more likely for RE to move further out... use tried and true methods.

You are a smart guy, if you keep at the problem... you will figure it out.

 

[mathjak107]

when i was in my 30's i always thought id be retired by 55. but a terrible thing happened to my plans . A WIFE AND KIDS . HA HA HA

 

[uncledrz]

OP
I think you've got a great idea and a plan. No reason not to glide into full time retirement if that's what's in the cards for you.
We're doing that right now. DW is full time, and I've been going to PT over a 2 year period. Only thing is, the more I'm not connected to work, the more I realize that it's time to move on!!!! Too much hiking, biking, scub, travelling to do and work still is a restraint (but not too much so).
tioz

 

[teejayevans]

Actually, I tested the water a few years ago, and the water felt good. It's really not a matter of whether I'd enjoy ER, but how quickly I can get there.

It actually allows you not just figure whether you will enjoy it, but see
if your budget is accurate.
TJ

 

[ziggy29]

Yes, most likely I'll have a phase of "semi-retirement" along the way, presuming I find the right opportunity. When I'm only a few thousand a year short of being able to FIRE, that will be about the time to consider it. That could be as little as 5-10 years away (I'm 41 now).

The stopper may be that it will be difficult to find health insurance with a part-time position, so that might add several thousand a year to what we need already.