35, pondering ER

[canadian_guy]

First, I wanted to thank everyone for the informative and interesting posts on this forum.

Bit of background on myself -- I am 35, single, born/raised in Canada, lived and worked in the US the past 10 years in the video game business (programmer).

I've thought about ER for a few years now. There was a phase where I thought the answer was retiring to Ecuador or some other country with a very low cost of living. Over time I've changed my mind about that, and now I consider the US or Canada as retirement destinations.

My current financial situation:

520K: stocks (I invest myself through Ameritrade)
150K: HSBC direct (5% apy)
225K: 401K/IRAs
75K: home equity (still have 140K mortgage @4.75%)
25K: chequing
------
995K

I don't have any debt (I drive a 1995 Saturn). I am thinking about paying off my mortgage (which is why I have 150K in HSBC, but I prefer the flexibility of having the cash if it's a break-even situation).

Around Oct 2003 I had a net worth of 500K. My salary (~125K + bonuses) and the upturn in the market are the main reasons for my ability to double my net worth in three years.

My main concern with ER is health insurance. Even though I am very healthy, I don't want to be burdened with health insurance premiums. One solution is to return to Canada, but there are downsides to that as well (higher taxes, substandard health care).

I want to have a living situation where I don't have to own a car. I don't like big cities though, so it would have to be some place that allows me to get around on foot / bike year-round. Any thoughts on ideal places? Towns that are up my alley are places like Walla Walla WA (I've never been there though).

I'm sort of in a stream-of-conciousness mode here, so bear with me. Another idea is buy (or build) a house that is amenable to having renters. I've never done this, and it might be more trouble than it's worth, but it sounds like a good way to offset property taxes and other ongoing house costs. Any thoughts or horror stories are appreciated.

At the end of the day, I just want to live comfortably and simply. I want a swimming pool. I don't want to spit and hit my neighbours house. I want dogs and enough land so they can run around comfortably. I want to be able to walk or ride my bike and buy fresh vegetables at an outdoor market. I want to live somewhere that I can run each day and not dodge cars.

My cost of living is probably close to the 4% withdrawl rate from $1M. I could live cheaper if I didn't have a job though (i.e., not own a car, not eat out so much, become more focused about how I spend, etc.)

I guess I'm just looking for thoughts and opinions about myself entering ER at 35. I could continue to work and increase my net worth. One side of me says I should get to $2M, which I think I could do in another 5 years, sooner if the market does very well. I don't hate my job or what I do, but I think I could be significantly happier if I didn't have to work.

Thank-you for reading!

 

[Nords]

Welcome to the board, Guy.  Looks like you're teetering on the brink of ER.

My main concern with ER is health insurance.  Even though I am very healthy, I don't want to be burdened with health insurance premiums.  One solution is to return to Canada, but there are downsides to that as well (higher taxes, substandard health care).

Jumpin' Jehosaphat, that's the first time I've ever heard the U.S. "system" compared favorably to Canadian healthcare!  Wait until the other Canadians on this board hear you talkin' trash!!

There are many threads here about health insurance premiums, for which you can search by those keywords.
 

I want to have a living situation where I don't have to own a car.  I don't like big cities though, so it would have to be some place that allows me to get around on foot / bike year-round.  Any thoughts on ideal places? 
At the end of the day, I just want to live comfortably and simply.  I want a swimming pool.  I don't want to spit and hit my neighbours house.  I want dogs and enough land so they can run around comfortably.  I want to be able to walk or ride my bike and buy fresh vegetables at an outdoor market.  I want to live somewhere that I can run each day and not dodge cars.

That's a tough one.  There are some fairly rural areas on Oahu or Hawaii like that but the problem is having enough land without being so far out of town that you're always taking the bus or a cab.  Small-town Midwest?  South Carolina?  Maybe perusing the perennial "Best Places to Live" websites & magazines will give you the ideas you need to start a list and do some traveling.

Another idea is buy (or build) a house that is amenable to having renters.  I've never done this, and it might be more trouble than it's worth, but it sounds like a good way to offset property taxes and other ongoing house costs.  Any thoughts or horror stories are appreciated.

Your suspicious instincts are sound.  If people are making you tired now, wait until you get to know them as "tenants".  OTOH you may find it enjoyable and a good way to bring in a little cash flow.  If you want to learn more before diving in and taking your lumps, read (1) Investing in Real Estate, 4th edition or later, by Andrew McLean & Gary W. Eldred (who's taken over the new editions) and (2) Landlording by Leigh Robinson (7th edition or later).

I guess I'm just looking for thoughts and opinions about myself entering ER at 35.  I could continue to work and increase my net worth.  One side of me says I should get to $2M, which I think I could do in another 5 years, sooner if the market does very well.  I don't hate my job or what I do, but I think I could be significantly happier if I didn't have to work.

ER doesn't have a minimum age requirement, but it sounds like you don't have a compelling reason to make the leap.  The best test is to try to get at least six weeks off from work and live your ER lifestyle.  The next-best option would be to start cutting back on your hours.  Or you could take a more balanced approach like Bob Clyatt's "Work Less, Live More".

And keep reading here-- you'll figure it out.

 

[Arc]

Canadian-guy,
Looks like you got the finance thing down - congratulations - at 35 though, have you ever considered a wife and family. Some wins in there that money can't buy. ER at 35 leaves 45-55 of retirement - could get boring.

Or maybe I'm just extremely jealous! Welcome to the forum.

 

[lazyday]

I don't hate my job or what I do, but I think I could be significantly happier if I didn't have to work.

Current income is a significant fraction of net worth, so working just a couple years might improve quality of life for the rest of your life. Especially if/when have a family.

If it were me, I'd probably hang on until any one of these happens:
-hit 1.5M and markets don't seem crazy overvalued. (if don't want kids. higher number otherwise)
-hate job
-40

Then would resist temptation to set the bar higher.

To tell the truth, even if I hated the job, I'd probably stick it out a little longer than $1M with that kind of income. You say you want to live simple, but your partner may not, and you yourself might change your mind as you age. Better IMO to get the money now when it's flowing relatively easy.

 

[Sam]

One solution is to return to Canada, but there are downsides to that as well (higher taxes, substandard health care).

  the substandard health care?  No one I know in Canada complaints about it yet.  At least not as much as here in the US.

Anyway, congratulations.  You are doing very well at 35.   Since you like your job, but wonder about ER, how about taking a year off and see it for yourself?

 

[Cattusbabe]

I want to have a living situation where I don't have to own a car.  I don't like big cities though, so it would have to be some place that allows me to get around on foot / bike year-round. 

If I may ask whats up with not wanting a car? I recently got a moter scooter and love it for getting around town. I am leaving the car at home more and more. It may be a solution for you.

 

[canadian_guy]

Canadian-guy,
Looks like you got the finance thing down - congratulations - at 35 though, have you ever considered a wife and family.  Some wins in there that money can't buy.  ER at 35 leaves 45-55 of retirement - could get boring.

Or maybe I'm just extremely jealous!  Welcome to the forum.

I've indeed thought about starting a family, but that would delay any ER plans significantly. That makes me sound very selfish, but that's not the main reason what I am skeptical about marriage. To be brutally honest, I'm not sure if it's worth the potential risk/pain.

Now before you think I'm a cold and unfeeling person, I'm quite the opposite. My biggest concern with marriage is that it can fail -- the odds are against me (and everyone else) at having a successful marriage for life. I know everything is a risk, but I'm not convinced marriage is a risk worth taking. Maybe I just haven't met the right girl yet.

Kids sound wonderful, but that is fraught with risks as well. The best parents in the world can have children who turn out to be horrible people. What if my child dies or becomes permanently disabled? What kind of life-long pain would that bring? I can't imagine it, and the prudent realist in my says the way to avoid such pain is to not expose yourself to the risk.

If everyone was like me, the human race would probably die out in a few generations.

 

[canadian_guy]

To tell the truth, even if I hated the job, I'd probably stick it out a little longer than $1M with that kind of income. You say you want to live simple, but your partner may not, and you yourself might change your mind as you age. Better IMO to get the money now when it's flowing relatively easy.

Those are wise words. I shouldn't take for granted the opportunity I have to continue to grow my net worth significantly over the next few years.

 

[canadian_guy]

If I may ask whats up with not wanting a car?  I recently got a  moter scooter and love it for getting around town. I am leaving the car at home more and more. It may be a solution for you.
[/quote

Cars are expensive and dangerous. Besides the depreciation of the car, there are ongoing costs of insurance, maintenance and fuel.

I know they are also extremely convenient (and necessary for many people), but I'd like to have a way of living that didn't require a car.

 

[canadian_guy]

And keep reading here-- you'll figure it out.

Thanks Nords.

 

[canadian_guy]

  the substandard health care?  No one I know in Canada complaints about it yet.  At least not as much as here in the US.

Anyway, congratulations.  You are doing very well at 35.   Since you like your job, but wonder about ER, how about taking a year off and see it for yourself?

It's common for Canadians to travel to the US to get procedures done that they can't get done in Canada in a timely manner.

Taking a year off is a good idea, although in my business even a year off can result in a significant degradation of skills. I think if I were to take a year off, I wouldn't want to go back... although I'm sure there are examples of people who tried ER and returned to work due to boredom.

 

[REWahoo]

...that's not the main reason what I am skeptical about marriage. To be brutally honest, I'm not sure if it's worth the potential risk/pain.

...the odds are against me (and everyone else) at having a successful marriage for life. I know everything is a risk, but I'm not convinced marriage is a risk worth taking.

Kids sound wonderful, but that is fraught with risks as well. ...and the prudent realist in my says the way to avoid such pain is to not expose yourself to the risk.

Two questions:

1. How difficult is it for you to work up the nerve to get out of bed each morning?

2. When you registered on the forum, how disappointed were you when you discovered the username "riskaverse" was already taken?

....just kidding

 

[canadian_guy]

Two questions:

1.  How difficult is it for you to work up the nerve to get out of bed each morning?

2.  When you registered on the forum, how disappointed were you when you discovered the username "riskaverse" was already taken?

....just kidding

Actually, I don't consider myself being unreasonably risk averse. I fly in airplanes, I've run marathons, I've shorted stocks... in general I don't worry about anything really unless it's a substantial risk.

 

[Sam]

I've indeed thought about starting a family, but that would delay any ER plans significantly.  That makes me sound very selfish, but that's not the main reason what I am skeptical about marriage.  To be brutally honest, I'm not sure if it's worth the potential risk/pain.

For a relatively young person, you appear to have a sound mind and both feet firmly on the ground.

Making a living is hard, maintaining a sane marriage is even harder.  I've been doing it for 20 years now.  There are highs and lows, but somehow the lows seem to last longer, and more painful.

 

[donheff]

For a relatively young person, you appear to have a sound mind and both feet firmly on the ground.

This is kind of a Rorschach Test of our approach to life. Some people see a 35 year old worrying that marriage is too risky and prefering immediate ER as "feet firmly on the ground." Others of us would see that as a problem to work on.

 

[Sam]

So you are in the "others of us" camp?

 

[Arc]

I've indeed thought about starting a family, but that would delay any ER plans significantly.  That makes me sound very selfish, but that's not the main reason what I am skeptical about marriage.  To be brutally honest, I'm not sure if it's worth the potential risk/pain.


Kids sound wonderful, but that is fraught with risks as well.  The best parents in the world can have children who turn out to be horrible people.  What if my child dies or becomes permanently disabled?  What kind of life-long pain would that bring?  I can't imagine it, and the prudent realist in my says the way to avoid such pain is to not expose yourself to the risk.

Canadian-guy - it took many years to adopt a philosophy that discarded worry - it goes like this - 95% of what I fear will never occur and the other 5% will never be as bad as I imagine. (certainly not an original thought on my part) - but when made part of your life, it's a whole new ball game.! Try it!

 

[kramer]

Hi CanadianGuy,

I am in a similar situation to you except that I am 5 years older. If I were you, I would definitely keep working for awhile. Your budget/SWR combination looks marginal to me, at best.

Remember that the 4% SWR number is not only based on past returns (most agree we will probably not have 7% real stock returns going forward) but it is based on a 30 year time horizon. You are probably looking at a 50+ year retirement. And living standards will probably increase significantly during that time period.

I'd love to have a no-car situation, too. I have positioned myself in a downtown area with lots of public transport so I do not have to use a car much. But it is difficult to go 100% no-car without some sacrifice. Even thought I may go carless for a period, mostly out of principle and adventure and perhaps because I am traveling out of the country a lot, owning an old car is actually pretty cheap when I put together the budget for it. The cost of car ownership for the frugal guy buying just transportation and not luxury continues to drop in real terms over the last decade due to amazing price/performance/reliability improvements in auto vehicles.

I am considering bailing in the next couple of years and possibly doing a stint teaching English overseas (which is not necessarily easy work). And possibly doing taxes part-time when I move back to the states. I have a passion for both of these things. This has the side benefit of reducing the financial risk of retirement. I think that the earlier you retire, the more important it is to consider the possibility part-time alternatives. I figure I might only withdraw 5% of my portfolio in the first 5 years of retirement. This enables me to retire a little earlier.

I lost much of my enthusiasm for software over the last few years. One thing that has kept me going is realizing that my career is not meant to be fulfilling. I think lots of people have such high expectations for their career. I simply lowered my standards for what I expect from my work life. And my employer treats me well and this helps me continue. Also, knowing that the next layoff (with package) would probably mean I am semi-retired is a great feeling. Just today, my boss told me that his boss remarked to him how I am reflexively honest about serious problems or product shortcomings. I told him that I appreciate my job and never complain about it, but that I have no fear of losing my job so it is very easy for me to be brutally honest about issues.

I realize (as do you) that it will probably not be possible to make this kind of money again after throwing in the towel. That definitely helps me get out of bed and to work everyday.

Another thing -- at 35 it is quite possible that you will get married. It is good to have at least some margin above and beyond what a single would absolutely need to account for this possibility.

Oh yeah -- one more thing -- I started taking month long vacations to a different country each year. I love to travel and this is getting me warmed up to ER. I do this travel on the cheap. As I get within 18 months of ER, I might just hoard up vacation to retire a little sooner.

Kramer

 

[cmy1176]

I haven't been married for very long, so some may say I'm naive, but I've had my share of very painful break-ups. But, the growth and joy I've gotten out of my marriage I would not trade for anything. It's taught me more about myself than anything else, and made me want to improve who I am. I find a lot of personal satfisfaction in working to be a better person and I owe most of my improvements to my wife Seems like you are very young to rule out a wife or kids.

I would think children would be even more reward.

The things in life that seem to bring the most joy also seem to have the most risk of pain. The most painful experiences I have had have made me appreciate what is good in life and made me grow as a person. So maybe that's just me, but I wouldn't shy away from love for fear of the hurt or you will miss out on some of the best parts of life.

 

[amy]

...well...34, less than 200k saved, completely inadequate to your awesome tale.

But agree that relationships/kids shouldn't be exempt from the same risk/reward evaluation we give everything else and yeah there's the possibility you just haven't found the right person, if that right person is the one who quiets your mind.

I've been in and out of relationships and have never seen any sign that they're evaluated with the reasoning mind once you're in them. So the best/only time to examine them for risk/reward is when you're not in one.

As for ER, sounds like you could play at it for a while before making up your mind.

 

[Khan]

I haven't been married for very long, so some may say I'm naive, but I've had my share of very painful break-ups. But, the growth and joy I've gotten out of my marriage I would not trade for anything. It's taught me more about myself than anything else, and made me want to improve who I am. I find a lot of personal satfisfaction in working to be a better person and I owe most of my improvements to my wife Seems like you are very young to rule out a wife or kids.

I would think children would be even more reward.

The things in life that seem to bring the most joy also seem to have the most risk of pain. The most painful experiences I have had have made me appreciate what is good in life and made me grow as a person. So maybe that's just me, but I wouldn't shy away from love for fear of the hurt or you will miss out on some of the best parts of life.

On the other hand: a relationship can crash and burn and seriously mess up your health and finances.

 

[uncledrz]

  the substandard health care?  No one I know in Canada complaints about it yet.  At least not as much as here in the US.

See the film Barbarians at the Gate, I think is the name. Interesting story, well done, in French (but English subtitles) about the
Canadian health system's lack of rescourses to treat serious illness.

Have heard the same thing from Doc friends. Many Canadians coming to US to get procedures that not readily available in Canada.

I personally have had no dealings with the system so this is all second hand.

 

[donheff]

This is kind of a Rorschach Test of our approach to life. Some people see a 35 year old worrying that marriage is too risky and prefering immediate ER as "feet firmly on the ground." Others of us would see that as a problem to work on.

So you are in the "others of us" camp?

Yeah. That sounds like 60 years of angst ahead, ER or no. If the OP was saying he didn't want to get married because he prefers being on his own I would say go for it. But avoiding a lifestyle chosen by 90% of the world as "too risky"? I don't think so.

 

[mountaintosea]

I've indeed thought about starting a family, but that would delay any ER plans significantly. That makes me sound very selfish, but that's not the main reason what I am skeptical about marriage. To be brutally honest, I'm not sure if it's worth the potential risk/pain.

I'm not sure why remaining single is such an issue with some people. I've had quite a few realtionships but they were always too much drama for me. I've been happiest single and not involved. As for kids they can be a heart breaker and expensive. In my job I witness parents trying to
work with their wayward kids.
Looks like you are in a good place. Congratulations on obtaining that lofty goal at age 35!
As for being a landlord? Lots of work. Tough to find good tenants that don't tear up the place etc.

 

[Sam]

Yeah.  That sounds like 60 years of angst ahead, ER or no.    If the OP was saying he didn't want to get married because he prefers being on his own I would say go for it.  But avoiding a lifestyle chosen by 90% of the world as "too risky"?  I don't think so.

I'm not disagreeing with you.  90% or more of the world population believe in a religion too.  But it's "too risky" for me.  So, I believe in a supreme power, but not in religion.