Barista FIRE with kids in Switzerland

[eurobogle]

We have chosen a seemingly novel "scenic route to retirement." I am a bit uncomfortable with the novelty factor and I am really hoping for feedback from somebody who has made similar choices. (If I'm honest I am also looking for some validation from strangers on the internet, even though I know how that usually ends!)

We are 40 years old and settled down in Switzerland with two preschool children. I am working as a contractor/consultant on an irregular project-to-project basis, currently working half-time. I split the remainder of my time between professional development (~10h/week) and taking care of the kids. (I'm focusing the details of this post on myself rather than DW.)

We have $1.2M in a balanced portfolio of index funds and our annual expenses are currently $100K/year but should decrease to $70-80K once the children start school. We we have a $200K mortgage on our home.

Financially we have accumulated approximately 60% of our FIRE number. In Switzerland our costs for healthcare and university are bounded and we have no major expenses/purchases on the horizon.

The big question in our lives is: How should we think about FIRE? On the one hand we could be "Mustachians" by moving to a less expensive country and FIRE tomorrow (easy for us as expats.) On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path that is reasonably responsible and allows us to enjoy working on our own terms, pursuing our own interests, taking professional risks with our time and energy.

What we have have decided to do is "Barista FIRE" here in Switzerland. We will start immediately withdrawing ~$50K/year from our portfolio (VPW method) to cover around half of our living costs. We will then work enough to cover the remainder of our expenses, which in practice requires about quarter-time engagement on average. This will leave us with a lot of free time that we will use for spending time with the kids and also pursuing our own personal and professional interests (naturally more of the latter once the kids are in school.)

We genuinely enjoy working, when we can do it on our own terms, and we have entrepreneurial spirits. My intuition is that our extra-curricular activities will generate enough irregular income to fill up our retirement accounts so that we can retire fully at 50-55. I also accept that this may not be the case, in which case we would have to choose between staying in the workforce for longer or moving to a less expensive country where we can FIRE.

My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?

Thank you, and apologies for the long rambling post!

 

[Dtail]

Welcome to our forum.
If you withdraw 50k for the next 15 years, that 750k from your 1.2m portfolio. Thus you would need to have savings/growth of ~1.5m over the next 15 years to reach your goal of 2m.
Is that doable?

 

[eurobogle]

Welcome to our forum.
If you withdraw 50k for the next 15 years, that 750k from your 1.2m portfolio. Thus you would need to have savings/growth of ~1.5m over the next 15 years to reach your goal of 2m.
Is that doable?

I am expecting the portfolio's value to be more-or-less the same despite withdrawals, based on not withdrawing a constant $50K but rather following the Variable Percentage Withdrawal method from Bogleheads: https://www.bogleheads.org/wiki/Variable_percentage_withdrawal

 

[REWahoo]

On the one hand we could be "Mustachians" by moving to a less expensive country and FIRE tomorrow (easy for us as expats.) On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path...

"Bostachians"?

 

[kimcdougc]

Welcome to the forum. I will not advise any but leave it up to the other experienced in this manner of retirement. Good luck with your search and I look forward to reading more posts from your adventures.

 

[samclem]

My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?

Welcome to the forum.

I suspect the practicality of the approach hinges on two things:
1) Your backup plan
2) The "engagement-to-income" curve of your employment

Backup plan: You will be exposed to sequence-of-return risk for quite a long time, and during this time if things don't go to plan (on the income OR investment returns OR expenses front) then you'll need to find a way to modify one or both of the other two factors to adjust. Do you have "fat" in the expenses that could be cut? Is re-engaging in more lucrative full time work a practical alternative once you enter the slow lane? Trying to bump up investment returns (by taking more risk) is usually not prudent.

Engagement-to-income curve: This is highly dependent on your skills and the market for them. In my particular case, the $/HR were much better with a full-time gig (really, more than full time). Staying current, maintaining required qualifications, maintaining personal contacts and professional reputation, etc all were important, and if I'd scaled back a lot I would have been less valuable and the fixed "overhead" hours and hassle factor would have been spread over fewer working hours. It just made more sense to keep the pedal to the floorboard for a few more years than to scale back. Also, I found that once I had achieved sufficient savings to permit jumping off, my tolerance for minutiae and craziness declined a lot. But, every situation is different, and in other cases going to part-time can make a lot of sense.

 

[Rianne]

Welcome to the forum. It seems HC is a huge obstacle to FIRE. Some of us are lucky to have great ACA plans (but have to keep income < $61K. School/college another obstacle for the younger RE's. You're in a place where you can decide how you spend. What is the $100K spending based? Taxes? Vacations? Food? Utilities?

Posters here have wide varieties of spending habits. Honestly, I'm amazed at the accuracy and stealth spending we have on this forum. Of course, depends on HCOL or LCOL areas but most easlity adjust.
DH has a sideline consulting LLC that allows us to keep our portfolio untouched for 3 more years. We vacation as we please, eat out and so on...enjoy life. Again the obstacle is healthcare. That is the biggest worry on our plate.

 

[ivinsfan]

Your post is somewhat contradictory. Right now you work half-time and spend 40 hours a month on professional development. Are these the skills and job you will transition with to a partial ER. Or will you literally work in a coffee shop?

I can't see the trade off a being a good one financially, especially with young children. If you're going to work it should be for maximum money per hour. Half time to quarter time is about 10 hours a week. And your income with drop by a half..

 

[MichaelB]

Welcome aboard, eurobogle. I had to look up “Barista FIRE”. Work a little, just enough, but keep lots of free time.

 

[ExFlyBoy5]

Welcome aboard, eurobogle. I had to look up “Barista FIRE”. Work a little, just enough, but keep lots of free time.

Had to look it up? Oh boy...you need to go spend some time in the Reddit forum on early retirement so you can "get with the times."

Personally...I would avoid that place like the plague.

 

[MichaelB]

Had to look it up? Oh boy...you need to go spend some time in the Reddit forum on early retirement so you can "get with the times."

Personally...I would avoid that place like the plague.

I don’t, and I do.

 

[eurobogle]

Thanks for the detailed reply samclem.

Welcome to the forum.
I suspect the practicality of the approach hinges on two things:
1) Your backup plan
2) The "engagement-to-income" curve of your employment

Currently we are living the median lifestyle (+ expensive part-time childcare) in a HCOL country. There is not too much fat to trim here. However, we could halve our living costs by moving to another "Tier 1" country where we are citizens and where we could live happily. I see that as a realistic backup plan and would be fine with moving if we wanted to retire and our income had been disappointing.

I would also be fine with returning to more-or-less full-time work once the kids are settled in school. I may even choose to do this willingly for the right project. I feel that we are currently in the middle of an atypical 10-year period of our lives when we have kids are home pretty much all day every day (childcare is scarce and expensive in Switzerland.) However, I prefer to see a full-time job as a backup plan rather than an assumption.

Engagement-to-income curve: There are a lot of unknowns here but experience so far is that I make better money contracting/consulting than I did when I was salaried, I'm able to work from home and manage my own schedule, I can negotiate time-bounded contracts (X hours per week for Y months), and my reputation is strong enough that I'm not exposed to managerial BS. There are risks: I've turned 40 now (gasp!) and my part-time output is less impressive than full-time, but for now this seems manageable especially with discretionary time for speaking at conferences etc.

I believe that I'm in a really privileged position that I seem to be able to choose which months of the year I will work, and how many hours per week, and be paid well for the time that I spend. This seems like something to take advantage of -- especially if it might not be this way forever.

 

[eurobogle]

Your post is somewhat contradictory. Right now you work half-time and spend 40 hours a month on professional development. Are these the skills and job you will transition with to a partial ER. Or will you literally work in a coffee shop?

I can't see the trade off a being a good one financially, especially with young children. If you're going to work it should be for maximum money per hour. Half time to quarter time is about 10 hours a week. And your income with drop by a half..

Sorry, I think I have used "Barista" in a misleading way. My intention is to continue working in my primary profession, for the maximum hourly wage that I can, but be satisfied with earning enough money to cover our costs when supplemented with portfolio withdrawals. I will "hope" to earn significantly more than this in some years due to projects that are "too good to refuse" and I will invest any surplus into the portfolio for future full retirement.

So I am only saying "Barista FIRE" as a keyword to indicate a brand of FIRE where only part of our living costs are covered by portfolio withdrawals and we need to work to cover the rest (and somehow accumulate for full retirement in the future too.)

 

[ivinsfan]

Sorry, I think I have used "Barista" in a misleading way. My intention is to continue working in my primary profession, for the maximum hourly wage that I can, but be satisfied with earning enough money to cover our costs when supplemented with portfolio withdrawals. I will "hope" to earn significantly more than this in some years due to projects that are "too good to refuse" and I will invest any surplus into the portfolio for future full retirement.

So I am only saying "Barista FIRE" as a keyword to indicate a brand of FIRE where only part of our living costs are covered by portfolio withdrawals and we need to work to cover the rest (and somehow accumulate for full retirement in the future too.)

I wasn't sure.. Barista is kind of buzzword for a lot of things, and your idea makes the most sense. You have the option of working anything from 20 to 0 hours according to your comfort level.

 

[eurobogle]

Had to look it up? Oh boy...you need to go spend some time in the Reddit forum on early retirement so you can "get with the times."

Personally...I would avoid that place like the plague.

Is there another name for a partial retirement in which you start withdrawing from your portfolio before you have reached your number? This seems like a reasonable approach to downshifting to me and so I am surprised that it is not more widely known. Maybe it is known by another name, or is such a dreadful idea that it doesn't get much discussion?

 

[ExFlyBoy5]

Is there another name for a partial retirement in which you start withdrawing from your portfolio before you have reached your number? This seems like a reasonable approach to downshifting to me and so I am surprised that it is not more widely known. Maybe it is known by another name, or is such a dreadful idea that it doesn't get much discussion?

I couldn't tell you. I have only heard the terms "barista, lean, etc" used in the Reddit forums which I stay away from because there tends to be way, WAY too much noise in the room. Personally, I have the belief that if you are still w*rking to bring in money, then you aren't retired...instead you would be "part time" but that isn't accepted these days for whatever reason. Or as another example, the term "side hustle"...uh, no. That is called a part time j*b.

 

[big-papa]

We have chosen a seemingly novel "scenic route to retirement." I am a bit uncomfortable with the novelty factor and I am really hoping for feedback from somebody who has made similar choices. (If I'm honest I am also looking for some validation from strangers on the internet, even though I know how that usually ends!)

We are 40 years old and settled down in Switzerland with two preschool children. I am working as a contractor/consultant on an irregular project-to-project basis, currently working half-time. I split the remainder of my time between professional development (~10h/week) and taking care of the kids. (I'm focusing the details of this post on myself rather than DW.)

We have $1.2M in a balanced portfolio of index funds and our annual expenses are currently $100K/year but should decrease to $70-80K once the children start school. We we have a $200K mortgage on our home.

Financially we have accumulated approximately 60% of our FIRE number. In Switzerland our costs for healthcare and university are bounded and we have no major expenses/purchases on the horizon.

The big question in our lives is: How should we think about FIRE? On the one hand we could be "Mustachians" by moving to a less expensive country and FIRE tomorrow (easy for us as expats.) On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path that is reasonably responsible and allows us to enjoy working on our own terms, pursuing our own interests, taking professional risks with our time and energy.

What we have have decided to do is "Barista FIRE" here in Switzerland. We will start immediately withdrawing ~$50K/year from our portfolio (VPW method) to cover around half of our living costs. We will then work enough to cover the remainder of our expenses, which in practice requires about quarter-time engagement on average. This will leave us with a lot of free time that we will use for spending time with the kids and also pursuing our own personal and professional interests (naturally more of the latter once the kids are in school.)

We genuinely enjoy working, when we can do it on our own terms, and we have entrepreneurial spirits. My intuition is that our extra-curricular activities will generate enough irregular income to fill up our retirement accounts so that we can retire fully at 50-55. I also accept that this may not be the case, in which case we would have to choose between staying in the workforce for longer or moving to a less expensive country where we can FIRE.

My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?

Thank you, and apologies for the long rambling post!

Hi there!
I communicated with you by PM and found the thread there that you posted asking the same question back in April over on bogleheads.

https://www.bogleheads.org/forum/viewtopic.php?f=22&t=279963#p4519846

Several questions
1. Will you have a pension or other form of guaranteed retirement income that kicks in later in life?
2. You didn't say whether your investments are all US index funds, a mix of US/International, etc., you also didn't state the stock/bond mix.

Let's start with your use of VPW. First, don't forget the "V" in VPW. You are not guaranteed to have $50K withdrawals every year, adjusted for inflation. So during those low withdrawal years, you have to work more to make up for the shortfall, if you're able to find such work. For example a 60/40 all US portfolio in VPW has you withdrawing $49,200 the first year with your $1.2M portfolio if you want it to last until you're 99. If you had started a retirement in 1966, then in 1982 you're withdrawal (accounting for inflation) would only be worth a little more than $23K. It climbs up from there but doesn't get back to where your first year's withdrawal was until 1996 or so. Can you live with inflation & a bear market eating away at your withdrawals & portfolio like that?

Second, unless you want to continue to make low withdrawals forever, you're going to need to have your extracurricular activities more than support you're shortfall - you're going to need to still be able to save additional money for a full blown retirement later on.

Summary:
- Near term, you'll need to be able to live possibly lower withdrawals than you might expect because you plan on using VPW and your withdrawals will move around based on your investment returns. And you have to think about what inflation might do to the effective value of those withdrawals over time. This might be somewhat mitigated if you plan on using VPW only on the $1.2M portfolio and only for a shorter amount of time, for example, 25 years to get you to age 65. Much higher withdrawals, but you still the possibility of significantly reduced withdrawals based on returns. And you'll still need to save for the eventual full blown retirement.
- In the longer term, you'll need to consider being able to save even more money beyond what your withdrawals and extracurriculars might generate in order to have a reasonable full retirement later on. And you need to factor any pensions and/or government social security type benefits on top of that.

Cheers!

 

[big-papa]

Is there another name for a partial retirement in which you start withdrawing from your portfolio before you have reached your number? This seems like a reasonable approach to downshifting to me and so I am surprised that it is not more widely known. Maybe it is known by another name, or is such a dreadful idea that it doesn't get much discussion?

Semi-retired is one such term, although it's usually applied to people doing this later in life, not at your stage. No matter, though!

 

[daylatedollarshort]

My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?

In hindsight, I think we could have retired in our 40s or at least just worked part-time, if we had watched our expenses closer when we were younger. We stayed in a high cost of living area after retiring in our 50s, but other than housing we find ways to make it quite affordable with sustainable living and low consumption as a lifestyle choice. I wish we had done that sooner because we really like being retired.

I guess for us the scary part was health insurance pre-ACA, but since you're not in the U.S., you don't have that issue.

 

[tb001]

Maybe instead of vpw think about a low ‘perpetual withdrawal rate’ that would be self sustaining with your asset allocation. Then you can look at the supplemental income needed per year. If your withdrawal rate is low enough, your assets should continue to grow.

My big concern in your shoes would be the consulting income drying up or decreasing over time. It’s not always easy to stay in demand and gets harder during an economic downturn, when your assets are worth less as well. At 40, this is usually the age where you can put your foot on the gas and likely make the biggest $ for your time, so it’s a risk to step back, especially with young kids and a lengthy time horizon.

Just my two cents. We’re in a similar place in life, with young kids, though we’re a little older. Firecalc has us at 94% if we pulled the plug today, and 100% if we cut our spend by 10%. DH is consulting and I’m working PT, with the hope that market returns will get us to that 100% with a little buffer. Our income won’t cover all of our expenses, but gives us a pretty low withdrawal rate. When the market takes a nosedive, I can guarantee we’ll be stressed, but we also have a fair bit of fat to cut.

 

[RetMD21]

We have chosen a seemingly novel "scenic route to retirement." I am a bit uncomfortable with the novelty factor and I am really hoping for feedback from somebody who has made similar choices. (If I'm honest I am also looking for some validation from strangers on the internet, even though I know how that usually ends!)

We are 40 years old and settled down in Switzerland with two preschool children. I am working as a contractor/consultant on an irregular project-to-project basis, currently working half-time. I split the remainder of my time between professional development (~10h/week) and taking care of the kids. (I'm focusing the details of this post on myself rather than DW.)

We have $1.2M in a balanced portfolio of index funds and our annual expenses are currently $100K/year but should decrease to $70-80K once the children start school. We we have a $200K mortgage on our home.

Financially we have accumulated approximately 60% of our FIRE number. In Switzerland our costs for healthcare and university are bounded and we have no major expenses/purchases on the horizon.

The big question in our lives is: How should we think about FIRE? On the one hand we could be "Mustachians" by moving to a less expensive country and FIRE tomorrow (easy for us as expats.) On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path that is reasonably responsible and allows us to enjoy working on our own terms, pursuing our own interests, taking professional risks with our time and energy.

What we have have decided to do is "Barista FIRE" here in Switzerland. We will start immediately withdrawing ~$50K/year from our portfolio (VPW method) to cover around half of our living costs. We will then work enough to cover the remainder of our expenses, which in practice requires about quarter-time engagement on average. This will leave us with a lot of free time that we will use for spending time with the kids and also pursuing our own personal and professional interests (naturally more of the latter once the kids are in school.)

We genuinely enjoy working, when we can do it on our own terms, and we have entrepreneurial spirits. My intuition is that our extra-curricular activities will generate enough irregular income to fill up our retirement accounts so that we can retire fully at 50-55. I also accept that this may not be the case, in which case we would have to choose between staying in the workforce for longer or moving to a less expensive country where we can FIRE.

My question is really: does this make sense to anybody? Have other people taking the same approach? Are there better ways to take the "scenic route to retirement" for people who enjoy working but want to do it on their own terms?

Thank you, and apologies for the long rambling post!

I like the concept. If .25 work will cover half the expenses would you consider .5 work with minimal spending from portfolio? You would still have lots of free time.

 

[RxMan]

I think it isn’t a bad plan but as someone else has mentioned I’d be nervous about how much you can rely on getting that consultant work going forward.

 

[eurobogle]

I like the concept. If .25 work will cover half the expenses would you consider .5 work with minimal spending from portfolio? You would still have lots of free time.

This is hard to answer because we are living in the reality of having preschool kids at home all day every day. I have a lot of free time for activities with the kids but time for professional activities is scarce. The reason I am so concerned about minimizing the "mandatory" amount of work I have to do "for somebody else" is to make space for doing work "for myself."

I suspect that once the kids start school then "screen time" won't feel like such a scarce resource and I won't be so preoccupied with downshifting. However, since we're looking at a decade of total time having preschoolers at home, I am being conservative by planning as if this is the new normal.

Hard to know what the future holds. Swiss society is engineered around the assumption that families have stay-at-home mothers, and so e.g. children can return home from school to eat lunch with their families, and since we are sharing childcare responsibilities 50/50 in our family this might mean that we'll never be able to both work full-time.

 

[eurobogle]

x

Hi there!
I communicated with you by PM and found the thread there that you posted asking the same question back in April over on bogleheads.

[...]

1. Will you have a pension or other form of guaranteed retirement income that kicks in later in life?

I have not been counting this in my retirement planning but the answer is yes. We have both been paying into mandatory social security systems for our whole adult lives (though not always in the same country...) and according to an online estimator we could expect $25K/year (combined) from the Swiss state pension. Our expenses would also be reduced because part of our current expenses is making mandatory contributions to this system. [EDIT: The $25K/year is based on the assumption that we keep contributing to this system at "minimum wage" level until reaching the standard retirement age.]

I have not been counting state pensions as part of our portfolio but rather treating them as an off-the-books safety margin. (The same is true for DW's professional activities. She may well end up earning more money than I do but for planning purposes I want to suppose that we are living on income from my activities. Currently it is much easier for me to find interesting and well-paid work during our "downshifted with kids" years.)

2. You didn't say whether your investments are all US index funds, a mix of US/International, etc., you also didn't state the stock/bond mix.

Our portfolio is 65% world-diversified stocks (VWRL) and the rest in Swiss bonds.

First, don't forget the "V" in VPW. [...] Can you live with inflation & a bear market eating away at your withdrawals & portfolio like that?

If the market dived and I could not find work then that would be stressful. Maybe we would be forced to move to another country with a lower cost of living. That is something we have talked about doing occasionally anyway and so it would not be a nightmare scenario even though we prefer to stay where we are.

If the market dived and I was still able to work as I do now then I would see that as a golden opportunity to "step on the gas" and earn money to buy discounted stocks. I would see it as a valuation-based rebalance from free time into equities.

Second, unless you want to continue to make low withdrawals forever, you're going to need to have your extracurricular activities more than support you're shortfall - you're going to need to still be able to save additional money for a full blown retirement later on.

I feel at peace with this situation. On the one hand I am confident that our extra-curricular activities will generate surplus income to fill out our portfolio. On the other hand I am also confident that we could retire abroad on our current portfolio if we can preserve its purchasing power.

 

[eurobogle]

Maybe instead of vpw think about a low ‘perpetual My big concern in your shoes would be the consulting income drying up or decreasing over time. It’s not always easy to stay in demand and gets harder during an economic downturn, when your assets are worth less as well. At 40, this is usually the age where you can put your foot on the gas and likely make the biggest $ for your time, so it’s a risk to step back, especially with young kids and a lengthy time horizon.

One aspect of this plan that I have trouble articulating is that "stepping back" for me is really more like do more "professional development." I want to make more time for my own interests which are closely aligned with my profession and should improve my earning capacity better than simply head-down working.

So to me "downshifting" is not so much about spending my time tending the garden as spending my time on more interesting and speculative projects. So the calculation I'm making here is similar to if I were considering leaving a steady job to join a startup. I would be accepting a lower floor on my income but I would still be moving my career forward.

Just my two cents. We’re in a similar place in life, with young kids, though we’re a little older. Firecalc has us at 94% if we pulled the plug today, and 100% if we cut our spend by 10%. DH is consulting and I’m working PT, with the hope that market returns will get us to that 100% with a little buffer. Our income won’t cover all of our expenses, but gives us a pretty low withdrawal rate. When the market takes a nosedive, I can guarantee we’ll be stressed, but we also have a fair bit of fat to cut.

Sounds like you are in a great position. If we would stick with paying our bills 100% from income, and delay our portfolio withdrawals, then we should be on track to catch up with you. I suspect that this would work well for us too, but it is just hard to visualize how life will be once the kids are in school and whether there will suddenly be enough time to juggle both boring/conservative work and exciting/speculative projects.