Good Time to Retire ?

[renferme]

So I finally pulled the trigger - retired about 4 weeks ago (age 57.5). We took a trip to Italy, a fun time. Now I'm home doing whatever to keep busy. Want to play more golf, but so far haven't done it. But, I will !
Question is: Is this a good time to retire. Seems like it might be year 2000 all over again, with the stock market seemingly tanking. Fortunately I won't make the same mistake my buddy did when he retired in May of 2000. He was 100% invested in the stock market and boy, did he take a hit. He's back to full time work now.
But now with inflation rearing its ugly head (oil based inflation), is now a good or bad time to retire. To late for me, I've already done it. I guess I'll just have to be careful about my expenditures. Of course, the wife still working doesn't hurt either.
A lot of people just don't understand this 'early retirement' thing. They seem to have a 'feel guilty' complex when they consider retiring. One guy told me that his wife would never accept him retiring at such an early age. Of course, maybe he isn't prepared to retire yet or maybe his wife doesn't want him loafing around the house every day, or maybe she would be jealous.
A lot of people talk about it, but few actually do it.
Oh well, so far, so good. I miss the B.S. at work with the guys, but I sure don't miss the crap that management puts everyone through.
Enough of this rambling,
Cheers, Ray

 

[unclemick]

Many a post has touched on the mental aspects/gear shifts going into ER. In 1993 after being layed off and looking for a job, it slowly dawned on me, I didn't need one. My view then was age 63 instead of 66 - constituted ER.

 

[Cut-Throat]

Oh well, so far, so good.   I miss the B.S. at work with the guys, but I sure don't miss the crap that management puts everyone through.

I have to admit that I did not enjoy the first 6 months of retirement. It was a big change! But after about 3 years now I have settled into groove.

You may experience this also. I think it's normal. It's anticlimatic. Something that you have been looking forward to for 20 years and all of a sudden you're there. But the garbage still needs taking out, the windows need washing etc. etc.

As far as being a 'good time' to retire. If you are talking investing, you should have a more long term outlook (like 30 years) - and as your friend proved - you should never be 100% invested in stocks. since you have some time on your hands now, if you have not read Berstein's "The four Pillars of Investing" - I would recommend it

 

[mickeyd]

I think that we all wind our way to ER in completely different ways (forced out, downsized, job elimination, tired-of-crap syndrome, restructure etc.) but once we get there and realize that we are indeed ER - man is it great!

You sound like you are well on your way.

 

[ESRBob]

Ray,
Congratulations and Welcome. Hope Italy was great. We went there right after I went ER, too.

My advice is make yourself a list if you don't have one already of all the stuff you've always wanted to do but never had the time. Let it get really long if you like. Put it somewhere you can read it if you ever find yourself staring out the window missing the guys at the office.

A few years in you'll wonder where your days disappear to, but the next 6 months are crucial to manage at the psychological level. You need to make sure you have projects, though you also want to have plenty of free time to relax. I bumped up my hobby (Sailing) which pretty much takes up whatever time you have, and did a bunch of home repair projects (telling myself I was saving money, which rarely was true when I had to call in an expert to fix my cockamamie plumbing or whatever, still it was fun and educational.) Speaking of educational, consider taking a class in an adult ed area if you are interested. Maybe something you know nothing about but have always been intrigued by. I also taught a class at a community college which got that out of my system. You might try an exercise class if you're not already doing something like that.

You may find your friends don't have that much time to go out to lunch with you since they are still working, but don't give up.

After a while, (don't rush it), you might consider starting a little S-Corp so you have the chance to do some little bit of something on the side and you'll find some pretty tasty deductions there, too. It will allow you feel like you are keeping a hand in and fend off fears about nuclear jitters trashing your portfolio etc on some of those bad days. If the going gets really tough in the markets, you can try to make a bit more income that way. Plus it can help keep your brain fresh, and provides beautiful psychological cover if anybody around you starts acting like you've become a vegetable or something. Just talk about your work at cocktail parties if you need to, but you don't have to actually do the work unless you want to!

There will be some bad days especially when the market tanks for a few weeks or months. Not much you can do except hold on. Make sure you are ok with your asset allocations (for the long run) or you might find yourself "changing equity allocations" at market bottoms when you panic and decide that you really want to be 40% in equities instead of 60% or whatever. (Did that, too-- it was smart the first time, which allowed me to do it really stupidly the second and third time, before discovering Bernstein).

I don't know if this is a good or bad time to ER -- my guess is it's not bad since there are so many people predicting gloom out there. Reading some gnarly contrarians is often good therapy.

Don't worry about what your friends think -- most of them are probably envious. I had one friend's wife tell me under no circumstances was I to speak about ER to her husband because she was terrified ... Terrified! ... that he would try to follow in my footsteps. Latest I hear is he's taking shots of whisky before getting on the train in the morning. Might need to give him some advice after all...

At some point you'll assemble a new set of interests and activities that give you the right blend of challenge and pleasure and downtime. You'll discover new interests, make new friends, find new ways to contribute in your community. But for now just be nice to yourself, don't make any major financial commitments or changes, don't worry if you feel a little blue or discombobulated some days, and most of all, don't panic!

Anyway, Ray -- welcome and good luck. We're not going anywhere-- so we'll be here for you in the months and years ahead.

ESRBob

 

[cute fuzzy bunny]

Congratulations and Welcome. Hope Italy was great. We went there right after I went ER, too.

I just ate a lot of italian food instead.

The rest of the advice is right on. I did two things. First was write up a list of "things to do on my summer vacation". This was composed of reasonable and simple stuff that I usually would do on a summer vacation - ex: take the dogs to the beach - and silly things like jump out of a perfectly good airplane with a folded tablecloth strapped to my back. I also made up a list of projects large and small. Especially a lot of small ones. Whenever I felt the need to be productive, I did some stuff off the project list. Usually "make coffee and drink some" and "read the paper", crossed those off my list, and I felt damn productive. When I felt the need to be fanciful, I did someting off my summer vacation list.

Three and a half years later, I still have both lists. I've only done about 20% of the stuff on my summer vacation list. I had to can and redo my things to do list for my new house, but I'm proud to say that many things I put down to do a year ago are still on there waiting to be done.

One last thing. Someone explain to me what an s-corp is and why i'd want to start one.

 

[Nords]

Re:  I don't think there's EVER a bad time to ER

However Business Week has noted that the lowest interest rates in four decades have maximized the size of lump-sum pension payouts. So maybe today is a great time to try to ER sooner. And Bennevis, the market turbulence may be alarming but the U.S.'s economic foundation is way better than 2000. We keep a couple years' expenses in cash but the rest of our retirement portfolio is 100% stocks and we're only down 7% amid all the moaning & wailing. Stay your course, whatever allocation you've chosen, and this too shall pass.

Lists are a great idea. You can't constructively blow off responsibilities & projects unless you know exactly what you're NOT doing. If you want to enjoy the evasion then you need to keep track of what you're getting away with. And exercise is essential. Even just a walk around the neighborhood will keep your brain going for a couple days, and our bodies certainly need it. I'm glad I never tried surfing & tae kwon do while I still had to show up for work.

I hope all the other stuff works for you, ESRBob, but I sure wouldn't try it. I prefer Terhorst's "change nothing for two years" advice. But S-corps? Adult education?! No way.

If the short-term market can seriously affect an ER's quality of life, then perhaps the ER was undercapitalized in the first place and shouldn't have been attempted. But many of us still worry over situations that we've already intellectually analyzed, and overanalysis can help calm those fears as long as it doesn't degenerate into hyperactivity. I worked through my July & Oct 2002 stock-market angst by reading & experimenting, and two years later I'm still enjoying the process more than I'm caring about the profits. And we don't need the tax deductions when we don't have any earned income. Fully retire or don't retire or call it "part time", but retiring to start an S-corp sounds suspiciously like a Freudian lack of commitment.

Having spent a few years in adult education, I think retirees should be forcibly ejected (with no refunds!) from any programs they've infiltrated. As ERs we have plenty of time to figure out how to teach ourselves for free without paying someone to do it for us. It's time we cut the cord and learned to think for ourselves, especially with all the free material on the Web.

Because ERs are the world's worst students. We spend way too much time thinking and asking thought-provoking questions instead of letting the instructor get through the lecture outline. Then we go overboard with our "extra" time on homework & presentations, which causes a lot of friction with the rest of the study group and makes the other students look bad. Then we overprepare for the next lecture and our persistent pointed questions put the prof even further behind, which leads to a vicious academic bureaucratic death spiral. When you consider that the majority of adult students have full-time jobs, families, no spare time, insufficient sleep, and are only there to punch a career ticket for a higher salary, then it's understandable that most judges would dismiss the inevitable result as justifiable homicide.

If you're over the age 50 qualification then Elderhostel might work for you. My parents-in-law do a half-dozen of them a year and they seem to enjoy them. My father hikes 40-50 miles a week in the Colorado Rockies updating wildlife counts for the National Park Service. And I really like another poster's idea of participating in archeological digs, as long as all the other starving grad students have already been hired.

"Friends" have "commiserated" that I'm too young to be put out to pasture, especially when I could earn enough in a couple years to upgrade the family to (whatever). I point out that this is one of the few times in our lives when the pasture's grass really is greener.

I've ditched the "survivor guilt" and I'm done apologizing for my apparent indolence. I guess I should stop short of active gloating but it's hard sometimes. As that great American philosopher, Joe Walsh, has pointed out, "They say I'm lazy but it takes all my time." and "I can't complain but sometimes I still do. Life's been good to me so far..."

 

[cute fuzzy bunny]

Re:  I don't think there's EVER a bad time to ER

Lists are a great idea. You can't constructively blow off responsibilities & projects unless you know exactly what you're NOT doing. If you want to enjoy the evasion then you need to keep track of what you're getting away with.

Egggggzactleyyy!!!

 

[renferme]

thanks for all the great responses.
I , too, would like to know what an S-corp is ?
What have I done since retiring ? After the Italy trip,
I've been cutting grass twice a week ( lots of rain in PA and grass just keeps on growing), cleaned the garage (with the misses help), bought a king size bed to accomodate the dogs and made a head-board for it, playing golf twice a week and would like to up it to 3 times a week and had a colonoscopy (like that's fun).
Still meeting the wife for lunch twice a week and going to the Montour Trail for 2 mile walks, surfing the internet too. Thought that maybe I'd find a part-time job , but just not ready to work for anyone right now - had enough of that the past 35 years. Maybe next spring I'll try to get a job as an usher at Pirate's games, make a few tips, and see all the home games for free.
As far as the stock market, I'm less than 30% in stocks right now and most of it is in dividend paying stocks that will provide a decent return regarding of the ups and downs of the market. Also, I'm in the middle of reading Bernstein's book,,, actually I read the last few chapters first and now I'm starting at the beginning.
Ray

 

[sgeeeee]

So I finally pulled the trigger - retired about 4 weeks ago (age 57.5).    . . .

Of course it's a good time to retire. It's not a good time to be a wage slave, so it must be a good time to retire. Congratulations and have fun.

 

[cute fuzzy bunny]

bought a king size bed to accomodate the dogs and made a head-board for it

Funny, we had to upgrade my fiancees bed from queen to king sized to accommodate our dogs as well. Now we need another king sized bed for the dogs. I just had to take a reciprocating saw to the bed legs and shorten them as one of our dogs is nursing a partially torn acl and cant make the jump up to my big big big big big big big big bed.

 

[trumpeting_angel]

Um, gentlemen, I think a new thread is indicated, actually. Something along the lines of "Ratio of Bed Width to (number of dogs x dog weight)." Perhaps that's too long for a topic title. "Dogs and Beds: Modifications, Injuries, and [this from my house] Bones Buried in the Blankets."

Oh dear, that wasn't any shorter.

Anne

 

[Saver to Spender]

An "s-corp" is an abbreviation for Subchapter S corporation. It's essentially a corporation that pays no federal taxes (and sometimes no state taxes). The income or loss flows to the shareholder and the tax is paid at the shareholder level, thereby eliminating double taxation.

In most cases, you won't need an s-corp if you decide you want to be self-employed in your own small business when you ER. I plan on ERing in my early 40s and also plan on continuing working in my extremely scaled down home-office as a sole proprietor (1 to 5 hours per week on average) until i'm 45 or 50. This will not only give me some extra spending cash, but I think it will keep reminding me how great retirement is.

I like my job, but I love doing so many other things too.

 

[David K Drews]

All I can say is congrats...
As for is it a good time to retire...I say it depends on the election.

David

 

[cute fuzzy bunny]

Um, gentlemen, I think a new thread is indicated, actually. Something along the lines of "Ratio of Bed Width to (number of dogs x dog weight)." Perhaps that's too long for a topic title. "Dogs and Beds: Modifications, Injuries, and [this from my house] Bones Buried in the Blankets."

Oh dear, that wasn't any shorter.

Anne

As any dog owner will tell you, bed size is irrelevant. The 65 pound one is roled up on my hip and the 110lb one is rolled up on my shoulder. I have about 7.5" of the left side of the bed to hang off of. The mattress could be 30' by 20' and the situation would be the same.

The usual situation is the large dog at the bottom of the bed laying on my legs, pushing them up, the smaller emergency backup dog under the covers pushing me to the edge, and the 25lb cat on the other side hoping I dont shove him off onto the floor when the dog crowds me off.

 

[ESRBob]

thanks for all the great responses.
I , too, would like to know what an S-corp is ?

Basically it is my way of Early Semi-Retiring (thus my moniker ESR Bob) as I am still not financially all the way home like the true ERs here on the list. (Mostly the shortfall is because of our decision to stay in place in a high-tax part of the world so my kids can go to good schools).

But even if I didn't need the $ (about 15% of my overall annual spending) I still think I would keep my S-Corp active. In my first year I thought I could use a 5% SWR and so had no plans to work ever again. By the end of the year I was going stir-crazy and arguably needed some way to participate in life besides hobbies and volunteer work, so a bit of part-time consulting worked well and kept my brain from going to mush. The S-Corp lets me deduct a lot of legitimate home office types of expenses making them about the last great tax shelter available to the common man in the US. Maybe because I was self-employed before, this feels right to me, but I take TH and Nords (?) point that having a little self-empoloyment activity on the side may be of no interest to a lot of ERs.

I will say that not needing to earn much from the company makes the work completely different from the 'bad old days' where you really needed every dollar. You take clients you like, if you feel like it, and only stay if you're appreciated. You have a lot of flexibility in hours. Good stuff tends to be available if you don't really need it.

As for 'adult education', I agree that it is pretty awful if you are doing the sort of community college stuff designed to help people get low-level jobs, but I rather meant the kind of hobby-focussed or community enrichment stuff -- learn to draw comics or how to repair your diesel engine. I take sculpture classes every week now and am having a blast making clay heads of people.

 

[wabmester]

Just curious, Bob -- why'd you choose an s-corp? I've been doing the same thing with a much simpler sole-propietorship. I've heard that the liability limitation usually offered by a corporate shield doesn't apply if they can easily pierce the shield and identify you as the responsible party.

 

[John Galt]

I've been hearing this stuff about "piercing the corporate
shield" for decades, but don't actually know of any time it was done. If you operate as a sole proprietor, then
there is no protection since there is no "corporate
shield" to be pierced.

John Galt

 

[Bob_Smith]

Regarding piercing the corporate shield - I set up an LLC a few years back. At the time it was my understanding that the piercing of the shield was usually accomplished when the corporation was under-capitalized (no corporate assets to be seized by an injured party) combined with extreme actions causing damage to another party. I was advised to carry sufficient liability insurance to cover the capital issue.

 

[wabmester]

Yep, that's what I've done -- maxed out my liability insurance and got an umbrella policy to cover my ass(ets).

Google will provide some examples of pierced corporate shields and why they get pierced, such as this one:

http://www.k2d2.com/newsarchives/year2001/may01.html

Summary: your shield is weak if you don't follow your formal bylaws, don't keep good corporate records, pay personal debts with corporate funds, comingle assets, undercapitalize, etc. I think I'll stick with my dirt-simple sole-proprietorship.

 

[John Galt]

GDER.........good post! MY situation is exactly the same
vis-a-vis working. My type A-ism will not allow just dabbling. I would be right back in the soup, like you said,
16 hour days and weekends. If you can do it and enjoy it, that's fine. I can't do it. It's all or nothing for me and I choose nothing.

Wabmester............ re. the corporate shield, I was not implying
it is not a danger, just that I never personally saw it happen. But, thanks for your "summary" as the reasons
given increasing the chances it will be pierced are exactly right to the best of my knowledge.

John Galt

 

[ESRBob]

Wab- you guys are probably right on the sole proprietorship -- I started quizzing my accountant after these posts, and he said we were only S-Corped because I had set up one years ago and as long as I had it, he was figuring out how to maximize some of the tax benefits once I decided to resuscitate it for some part-time work. He tells me that a sole proprietorship is just as good, especially in the short term.

There is one 'on the qt' point about S-corps though: you can pay yourself as a shareholder for a long time and avoid paying the 'self employment tax' of 15.3% for SS and Medicare on your withdrawals. In a sole proprietorship, all your income automatically goes through the Self Employment Tax planer and comes out thinned down. You won't find this in the tax code anywhere so don't look, but it is one of those things that works out in practice: s-corp profits can be paid to shareholders (that's you!). At some point they might bounce on you and tell you it is really income but the line is fuzzy about when or if.

GDER -- yeah, I can see how work can be like an alcoholic taking one drink -- but fortunately for me it isn't a problem. I have been doing the 10-hour to 15-hour a week thing now for 3 years and have no problem ignoring the work and doing what I want, when I want. In fact, the problem may be that I starve the work stuff and keep it in first gear, but I do that to keep it all in balance. People I work with 'get it' or else I don't work with them.

Basically, work at those levels is just like one more 'activity' that an ER does to fill up his days. But I am not going to try to convert anybody on this point -- I am here out of necessity (I though a 5% SWR was sustainable 4 years ago, because I had never found the Cooley Hubbard/Trinity stuff or any other SWR analysis at that point), and I have found it very difficult to cut our spending by the requisite 20% to bring things back to a 4% SWR, so this has been a way to make it all work. I do enjoy the work, though -- I think it keeps my brain fresh and keeps my self-esteem up -- I am actually doing something useful for people out there on occasion -- and it gives me a reason to shave and shower from time to time.

"Work" for an ER is kinda vague, too. Some of my 'work' this year has been writing a book on ER which might find a publisher and might sell and might not, but has been a lot of fun. Was it work? I dunno-- its a lot like posting here, actually. "Work" for other ERs is rehabbing rental real estate or puttering around with little angel investments in private companies, or tutoring kids in math or teaching yoga classes or making some crafts and selling them at antique/craft fairs or whatever. If you only need to make 5 or 10k a year, then you can be in a completely different work mode and not get sucked back into the old rat race. Still, I've seen people make themselves miserable in seemingly ideal avocation/ jobs, (minister, naturalist, explorer) so I'll never underestimate our ability to screw up a good thing...!

ESRBob

 

[BigMoneyJim]

Re: Part time working for self.

This is something I've thought about for preretirment, or perhaps even a very long semiretirement. Usually when thinking about starting my own business I think it's too much trouble and that I'm bad at selling myself--although people quickly learn I'm good at what I do and appreciate me when I start working for them. By trouble I mean the extra bookkeeping and taxes and such--I hate paperwork and tend to procrastinate a lot.

But now I'm wondering if I can ratchet my working hours up and down as I desire. I'm not a workaholic, so my problem would more likely be I'd work just enough to pay my bills and travel but not enough to save and fully retire before 60 or later. But then the very early semiretirement may be worth it.

I'm a computer guy and would likely consult by supporting individual PCs, networks and small-to-medium business software and servers. If there is still money in it I would host web services, too. Any thoughts on the viability or paperwork toughness of working for myself in this manner?

By the way, my current idea is to move back to familiar territory (North Texas) with a "normal" job and start work on the side to build up experience and clients.

 

[ESRBob]

Big Money Jim;
Paperwork for a self employment company is not onerous. Your accountant (do you use one?) can easily add it on to your existing personal returns work. If you use software, I bet it isn't bad either, at least for a schedule C sole proprietorship.

There are some pretty good books on self employment corp options which it is probably worth browsing at your local bookstore (an old ER trick!) and then buying if you think it is really worthwhile.

Bottom line, though, is don't be put off by paperwork -- it really is not onerous.s

ESRBob

 

[gayl]

A few years in you'll wonder where your days disappear to ... you have the chance to do some little bit of something on the side and you'll find some pretty tasty deductions there, too.  It will allow you feel like you are keeping a hand in and fend off fears about nuclear jitters trashing your portfolio etc on some of those bad days. ...At some point you'll assemble a new set of interests and activities that give you the right blend of challenge and pleasure and downtime.  You'll discover new interests, make new friends, find new ways to contribute in your community.  

I TOTALLY agree! Within a few weeks {not years}, I was left wondering how I ever managed to find time to work! Your days will fill up and you will redefine yourself as a person instead of the job that you hold. The only work I do is as a paid tax preparer from home about 10 wks a yr. Not an S-Corp, just a registered / bonded tax preparer. And definitely not my 'identity.'

My biggest disappointment was when all the 'old' friends continually asked me what I did all day, like I have time to sit around watching TV eating bonbons. New friends who are also RE are filling that void. We have plenty to do:!