Have you failed (financially) at ER and returned to work?

[FIREd]

Our plan was always to retire in a low to average cost of living area with a large surplus. We ended up retiring in a high cost of living area with much less room for error. So look out next time the market corrects! Actually, since we are trying to live on the interests and dividends generated by our assets, it would take interest rates going much lower than they already are and wide cuts to equity dividends to really get us in trouble. So expenses increasing faster than our budget allows is a more likely source of "failure". Of course, we'd move to a cheaper location (pretty much anywhere else in the world) well before the point of actual failure.

 

[cranberryjoe]

A former co-worker retired from a software career in early 2008 at age ~54. In 2010 I ran into her at Home Depot wearing an orange apron. She told me her husband, who had planned to continue working for a while, was laid off during the crash. She continued working at HD for about 2 years before retiring again.

 

[papadad111]

I would call many of those posted here "false starts" rather than out and out failures.

You will see some real retirement failures in the next decade - primarily from those dependent on SS entirely and/or very little retirement savings.

Broke at 60 or 70 or 80 and no hope of donning an orange HD apron or a posting at the entrance to a box retailer like Wal-lyworld ...

The sad fact is that when they "fail" we will all get stuck to foot their bill one way or the other.

Fuego, do you consider your case success or failure having to rely on blog (and spouse income ) at this stage ?

Can you manage without the blog income indefinitely given kids ages and inflationary cost of higher education , risk of ACA subsidy disappearing, etc? Your specific case always intrigues me !

 

[papadad111]

I always watch to see the ages of the people who work in retail stores, such as Walmart. Many are clearly in their late 60's and working in positions such as cashiers, that require long periods of standing. At the same time, they are obviously there because of need. Men and women who had been in positions of much greater responsibility in their younger years, but for whatever reason... health or financial reverses, must supplement their SS or Pension income with part time work. In most cases they could not go back to their previous profession... in any position.

It is very easy to categorize people who cannot retire as poor planners or being financially irresponsible, except to note that the US median income has dropped 8% since the year 2007. A person who was 58 years old in 2007 and is now at a 65 year retirement age, has not had an increase in wages, during a time when the cost of living has risen by 12%. An empirical observation, but an indication of the times.

We consider ourselves very fortunate to have come through the past 25 years without suffering a financial disaster due to health, investment losses, or the necessity of providing for the care and sole support of loved ones.

Planning is important, but no amount of planning can foresee the vicarious twists of fate.

Very well said.

 

[Fermion]

I'm not sure that I'd say we failed, but we attempted RE back in 2007 with a much smaller portfolio. We were 38 and 40, both with toxic jobs. We had 1M portfolio and a paid off house and annual spending of about $24k. One very small pension that had already started, and two slightly larger ones to start at 65. Maybe it could have been done, but about 6 months in I realized that was way too tight for my comfort. This was also before the ACA. We would have committed ourselves to a very small budget with no wiggle room for any big unexpected expenses. We also probably didn't put enough thought into how we would access those funds - did we really have enough in taxable funds to tide us over?

So I went back to work first and DH followed the following year. In 2014 we retired for good with a SWR of 1% and fewer years to fund. So maybe it was a close call. I'm glad we sorted things out right away while we were still employable in our fields.

2.4% SWR, three pensions, and you decided to go back to work?

Well, I can understand the ACA making the difference though. Healthcare could change a 2.5% SWR to a 4% or higher SWR in a heartbeat (without ACA).

If ACA gets totally destroyed along with the pre-existing condition exclusion coming back, then we also may need to return to work. I do not think I would be comfortable paying $3000 a month for healthcare on our portfolio if one of us developed a serious condition that made us practically uninsurable.

 

[FUEGO]

Fuego, do you consider your case success or failure having to rely on blog (and spouse income ) at this stage ?

Can you manage without the blog income indefinitely given kids ages and inflationary cost of higher education , risk of ACA subsidy disappearing, etc? Your specific case always intrigues me !

Certainly successful so far.

I never planned on the blog income and I don't rely on it to any extent today. Icing on the cake, so to speak. Last year it was about 40% of our budgeted ER expenses, but I dumped all of the blog earnings into a solo 401k (didn't need it; didn't want to pay tax on it).

This year it will be maybe 50-65% of our ER budget, so we are in the ridiculous and uncontemplated position of not needing to touch our portfolio a whole lot if the income remains constant going forward.

I may also get bored with the blog and drop it all together. I never expected to make much more than the hosting fees, but it turns out I was very wrong on the income potential. If blog and freelance writing income dropped to zero tomorrow and the market dropped 30%, I'd still be feeling okay (but a little shocked!).

If ACA subsidies go away completely across the whole nation, I'm not sure what I would do. The easiest for the family would be to go back to work and stay in Raleigh. DW is still technically working (on a paid sabbatical till August), so she might keep working longer. She could go to half time and still cover all of our expenses too.

Moving overseas is also an option to take care of health care issues. We're in our 30's with zero major health issues for us or the kids. If I was 50 or 60 I would be more concerned about health care.

To summarize, our moat is pretty deep. But going back to pre-ACA health insurance markets with zero subsidies would stymie our plan somewhat. I figure there will be a fix or a Republican alternative that might not leave us sitting quite as pretty but will still allow us to stay early retired. Though I won't hesitate to hustle and make money somehow if we need it. In that case, I would declare myself to have suffered an ER failure due to financial reasons.

If I ever ramp up my blog and freelance writing efforts to the point where it becomes real work and do so primarily because I need the money, that'll also be a failure of my ER financial plan. Right now I spend very little time on freelancing and just a bit more time on the blog (posting photos, trip summaries, and interesting tidbits from our Mexico trip for the next couple months probably ).

In the future, I give myself a significant chance of doing something that pays at some point in my life. Probably after the kids are out of the house. I have no clue what that might be and it may never happen. Definitely won't be a regular 9-5 job unless it's incredibly interesting to me or I really need the money.

 

[papadad111]

Great insight Fuego!

Agree Overseas living for the sake of affordable healthcare is indeed an option - (typing this from a quick vacation in Thailand myself). It's not for everyone though and my 25 years of intl experience tells me that it may not always work into the future... Cheap places are becoming expensive as the rest of the world and emerging markets develop.

I have FIREd this year but I always had a backup plan of sorts. Plan a is to do some teaching at USA university this fall. Also like to start a blog about my global life journey.

My plan has been to find something that covers half or two thirds of our expenses for approx 10 years, just for sake of a financial cushion and to occupy our brains. The financial Buffer to ensure kids launch etc etc

Before jumping back in I have taken advice and been totally off for approx 6 months post-FIRE and find I am becoming a real human again.

I actually think early retirement is not an all or none situation. I think for early retirees in their 40's or younger, we all have to be flexible and respond to the environment - be it an interesting opportunity, a market setback, etc etc. For me, foolish to say I will stay on this path for the rest of my life. Historically speaking, I adapted and changed circumstantially along the way... Expect to continue to do so

 

[athena53]

The late 50's / early 60's secretary at my former j*b took an early retirement package during a downsizing that occurred a couple of years after I left. She probably had only about 10 years at the company the time, so neither the base pension nor the incentive would have added up to anywhere near income replacement.

<snip>Within a year or so after the layoffs, I heard she was sniffing around about getting rehired.

I was at a sub of the Prudential in the late 1980s when they started offering early retirement incentives. I was surprised at the number of people in their late 50s with modest jobs who took the offer and announced plans to travel and spend time with grandchildren, and wondered how many would be back. Worse, I wondered how many would realize in 20 years that they should have worked longer.

One actuary I know retired to do day trading and after a market downturn he came back part-time. He did that for years so maybe the balance of part-time work and day trading worked for him.

I retired a year ago and don't see myself going back. We're just about to move to a smaller house so many of our fixed costs will decrease and that's been my plan. Withdrawal rate will be less than 4% this year (hopefully 3%) but that's with a pretty relaxed spending style. In a market downturn we could cut out major travel and save a bundle right there. Our charitable giving is a bigger line item than our mortgage so that's also discretionary. If we're totally desperate I could file for SS but I'm 62 and hope to hold off, at least till I can get Spousal at 66. In the meantime, DH's SS and my $10K/year pension would cover bare necessities.

 

[Independent]

If an individual has unusually high long term care costs, and ends up on Medicaid, is that "failure"?

If so, I'd say there are a lot of "failed" retirements, but they don't result in people going back to work.

 

[athena53]

If an individual has unusually high long term care costs, and ends up on Medicaid, is that "failure"?

I believe that's the "plan" for covering long-term care expenses for a majority of the population.

 

[razztazz]

I believe that's the "plan" for covering long-term care expenses for a majority of the population

It's the only practical way for most people. Even those with pretty substantial means. You might say it's what the marketplace driven us to.

 

[LinCella]

I failed in that I don't have much in savings for emergencies. I have a large amount for a specific purpose that I am not spending, expecting to be using it in 6 months or so. It will secure me a great place to live for not much output - a limited equity co-op.

But I paid part of my retirement account to buy years of service so I could retire earlier. I thought I could recoup it and then some but it was 2008 and my plans went wonky. I left with an amount that I was able to pay off debt and put the money aside for my co-op.

I should have SAVED way more in my liquid account. I know I am spender and I still went ahead and spent. I have a pension so I have enough money coming in to live and have spending money as well as savings but nowhere near what I would be more comfortable with.

My lifestyle has changed in that I don't spend wildly, but I have been hit with some car accidents, vet bills, that are stretching me now. So yes, I was stupid there but I am managing.

I am working on some options - part time work that I could stand, refi my car. I don't have an extravagant lifestyle, just a bit too spendy for me.

 

[Live And Learn]

If ACA gets totally destroyed along with the pre-existing condition exclusion coming back, then we also may need to return to work.

If this happens I would be back to work for certain. I get my HC from DH's plan and ACA is my backup. I'd be a nervous wreck without a backup HC plan. I don't know if this means I'd "fail" ER but if it does, so be it.

 

[Ed_The_Gypsy]

We shall see. IRA took a big hit since Nov and DW is resisting downsizing. I am looking for work. Not failed, but can see difficulties down the road.

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[pullmyfinger]

2.4% SWR, three pensions, and you decided to go back to work?

Well, I can understand the ACA making the difference though. Healthcare could change a 2.5% SWR to a 4% or higher SWR in a heartbeat (without ACA).

If ACA gets totally destroyed along with the pre-existing condition exclusion coming back, then we also may need to return to work. I do not think I would be comfortable paying $3000 a month for healthcare on our portfolio if one of us developed a serious condition that made us practically uninsurable.

Going back to work for a few years (6.5) allowed me to be able to sleep at night. The 24K annual budget was literally what we spent, it did not really have much padding for either fun stuff like travel or not so fun stuff like big house repairs or catastrophic medical bills. We are keeping our spending low this year and probably next year just to get a feel for ER. After that we will likely give ourselves the option of increasing our spending to 2 - 2.5% SWR. Yes, we are worrywarts.

The ACA made a huge difference for us both in terms of keeping the premiums from getting totally out of control and removing the pre-existing condition exclusion. Even though I keep myself pretty healthy (daily jogger, vegetarian, BMI 21) I have a couple of small health issues that don't require anything but occasional monitoring. I was afraid that if I ever got sick, I could be kicked off my insurance because of those conditions.

 

[Fermion]

My extreme fallback plan in the case where we were unable to get insurance because ACA gets revoked AND we are unable to find employment with coverage is to go without insurance and draw down only from non-retirement accounts.

In this way we could maintain our 401K and IRA nestegg and declare bankruptcy after medical bills pile up, then start taking small drawdowns from our retirement plans and declare bankruptcy again in a couple of years. I think in most states you have at least a million dollars protected from essentially all creditors (except divorce, IRS, and child support) if those funds are in a 401K.

This plan would at least keep us from eating the dreaded cat food in our 60s and 70s.

 

[Mulligan]

I failed in that I don't have much in savings for emergencies. I have a large amount for a specific purpose that I am not spending, expecting to be using it in 6 months or so. It will secure me a great place to live for not much output - a limited equity co-op.

But I paid part of my retirement account to buy years of service so I could retire earlier. I thought I could recoup it and then some but it was 2008 and my plans went wonky. I left with an amount that I was able to pay off debt and put the money aside for my co-op.

I should have SAVED way more in my liquid account. I know I am spender and I still went ahead and spent. I have a pension so I have enough money coming in to live and have spending money as well as savings but nowhere near what I would be more comfortable with.

My lifestyle has changed in that I don't spend wildly, but I have been hit with some car accidents, vet bills, that are stretching me now. So yes, I was stupid there but I am managing.

I am working on some options - part time work that I could stand, refi my car. I don't have an extravagant lifestyle, just a bit too spendy for me.

I retired similarly in the fact that I stole a huge chuck of my money (almost 100k) to buy 4 service years to retire earlier. I told myself however the punishment was you had to find other gigs to repay it. I mostly did these past 5 years and I have saved way better than I thought I would. Plus I havent had too many financial disasters except for paying for an unplanned roof a few years ago.
Instead of belaboring the fact the tax man will collect a disproportional toll on a small paying job (thanks to the pension), you may want to think of it this way. Lets just throw out a number and say you have $500 disposable dollars after pension. If a PT job nets you $500 after taxes you have increased your disposable income dollars a 100%. That is a big increase in disposable dollars despite the tax implications. You always mentioned a desire to spend. Maybe thinking about the tremendous upside in disposable income not taxes or total net income increase can motivate you to a PT if this is the direction you want to go.


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[daylatedollarshort]

We semi-ERed (no more group health insurance rates) and budgeted for ~$1K a month for premiums, our COBRA premiums. Then we got a letter one day our COBRA premiums were more than doubling for less coverage, and we already had a high deductible. The post COBRA plan was even worse. With pre-existing conditions we were pretty much stuck. Pay the rates or get a full-time job with group coverage, possibly taking a job away from somebody else who might have really needed the paycheck and not just insurance coverage.

ACA rates have been a pleasant budget helper. I hope they stay. At least if we lost them now it will probably be just the two of us to insure and we'll be closer to Medicare age.

The whole idea of losing health insurance when you leave a job makes no more sense than losing your car insurance or cable TV. Plus for people unemployed involuntarily, they get a double whammy - no job and no affordable health insurance.

I hope we never go back to having health insurance tied to employment again.

 

[Mulligan]

My extreme fallback plan in the case where we were unable to get insurance because ACA gets revoked AND we are unable to find employment with coverage is to go without insurance and draw down only from non-retirement accounts.

In this way we could maintain our 401K and IRA nestegg and declare bankruptcy after medical bills pile up, then start taking small drawdowns from our retirement plans and declare bankruptcy again in a couple of years. I think in most states you have at least a million dollars protected from essentially all creditors (except divorce, IRS, and child support) if those funds are in a 401K.

This plan would at least keep us from eating the dreaded cat food in our 60s and 70s.

Ugh...Your extreme scenario fall back plan would scare me as I would not even have that option. I have been screwed every which direction from ACA from its beginning. It would be fitting this scenario would hit me too. I guess my only choice is reading medical books from the 1700s to maximize the use of leeches and whiskey for any malady that would hit me.


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[papadad111]

We shall see. IRA took a big hit since Nov and DW is resisting downsizing. I am looking for work. Not failed, but can see difficulties down the road.

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Why was IRA impacted since November ? Whats your asset allocation and asset class ? Hopefully not Greek bonds or Rouble FX swaps ...

 

[papadad111]

. I have been screwed every which direction from ACA from its beginning. It would be fitting this scenario would hit me too.

Why /what did you get impacted by as result of ACA ?

 

[Mulligan]

Why /what did you get impacted by as result of ACA ?

Was told [mod edit].....Leeches and whiskey here I come!


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[REWahoo]

Leeches and whiskey here I come!

I understand the medicinal value of whiskey, but I don't get why you'd want to associate with annuity salesmen....

 

[Mulligan]

I understand the medicinal value of whiskey, but I don't get why you'd want to associate with annuity salesmen....

They only charge a 2% yearly fee of portfolio value for unlimited use of leeches. Cheaper than a $15k a year policy with 5k deductible!


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[Walt34]

I "failed" in that I went back to work when a low stress gig fell into my lap that's just a few miles from where I live.

That's what I did too. Easy job, 3.4 mile commute, it was rare that I couldn't get a day off when I wanted and pay was way over normal for the job. When it went south I was happy to be in a position to quit. Out of 48 people 19 quit. I felt bad for the ones who had no choice but to stay because when I say it "went south" it was really bad, I would have quit then anyway even without the pay cut.

We banked ~70% of the money and are now slowly drawing down on that to put off applying for SS which I will do next spring at FRA instead of 62 as originally planned and we'll still have most of it left. So it's all good.

I wouldn't call it a "fail" though, more like a change in plans. Keeping the post-retirement job was always optional, I could quit when I wanted, and when I wanted to I did.