your first year after FIRE: income lost?

[socca]

Question: How much annual income did you give up the first full year after you FIREd?

Background:

• I gave up six figures of annual income back in 2007 when I transitioned from full-time W-2 employment (megacorp) to semi-retirement. The drop in annual income was shocking but the improvement in my quality of life was enormous. This website was useful back in 2005 / 2006 when I was contemplating that decision. It’s hard to believe that 17 years have elapsed since that bit of drama in my life.

• Now I’m contemplating AGAIN giving up six figures of annual income by transitioning from semi-retirement to total retirement. I anticipate that once again there will be a huge improvement in quality of life (now that I’m in my early 60’s there's much less life left, I’m sorry to say ). Thanks to current portfolio income the percentage drop in annual income would be much less than I experienced back in 2007.

• there are a lot of moving parts here so extricating myself from the family businesses won’t be as easy as submitting a resignation letter and walking away. However, as a mental exercise it’s fun to contemplate being free of any responsibility for keeping the businesses afloat.

• I got a kick out of the HBO series Succession, but the story told there doesn’t match my family’s situation. There are some family businesses where the owners are maneuvering to have LESS responsibility and LESS power (let others carry that load ) so that they can sit back and collect delightful passive income while taking no responsibility and doing no work. In some cases (thanks to nature and/or nurture) the family members are simply incapable of doing the work - no maneuvering required (handing responsibility to those particular folks would be a disaster).

 

[TheWizard]

I targeted about the same net income in retirement as when I was working.
So my answer is zero.

In fact, I have excess retirement income most months which I move to my taxable account settlement fund, and eventually into various stock index funds.

I have what is sometimes called a negative withdrawal rate...

 

[brett]

delete

 

[brett]

It is not about what we gave up from a monetary perspective. No loss of income in the first two years because of a negotiated package.

It was all about what we gained from a personal perspective

 

[jazz4cash]

I targeted about the same net income in retirement as when I was working.
So my answer is zero.

In fact, I have excess retirement income most months which I move to my taxable account settlement fund, and eventually into various stock index funds.

I have what is sometimes called a negative withdrawal rate...

Similar story here but my withdrawal rate is not negative. Of course the OP is referring to W2 income. It’s hard not to laugh when someone asks “what’s your income?” because I always think “whatever I want it to be” (within reason). I just use the same figure I report for taxes.

 

[audreyh1]

I went immediately to 0 income from wages (or work related benefits).

Got used to it.

For many folks retiring early means leaving lots of $$ on the table.

 

[ShokWaveRider]

We did not target any income as such. We have a pie that keeps getting bigger, no idea by how much. We take out what we need when we need it. We have done this for ~40 years, even when we were wo$king. FF to today, we make (SS, Interest Etc.) about 3/4 of what we made as a couple when wo@king. Depending on the year we also tend to spend less now.

 

[jebmke]

Never thought about it. With bonus and additional stock options it would not be easy to answer since I don't know how the bonus system paid out or how large the grants were in the first year post ER.

I didn't retire for financial reasons.

 

[Which Roger]

I think most of us are in a situation where when we ERd, our income dropped dramatically but we still had sources of money that allowed us to maintain our desired lifestyles, and that's really all that matters.

 

[street]

I went immediately to 0 income from wages (or work related benefits).

Got used to it.

For many folks retiring early means leaving lots of $$ on the table.

I bet that crosses every ER person that ever has retired. Thats what makes it so hard of a decision for some/me to ER.

The one huge factor is what you value more at the time you are thinking of ERing.

I hated to give up that monthly paycheck, but I valued my time more. Any time you retire you will leave money on the table regardless of at 58 or 65 years old.

 

[Aerides]

I never thought in terms of income lost. It was about gaining time and freedom, both of which are worth far more to me. The whole point of FI was to no longer need a paycheck, and instead live off savings/investments.

 

[Surewhitey]

Similar to OP, I scaled back by becoming SE'd & went down ~50%. DW is still slugging away, but she'll be dropping by a considerable amount when she does. Both of us retiring 100% will be reducing after tax of ~$200k...we'll feel it, but our spending is ~$70k, so we can live fine without it.

We have enough to do it, DW has a home office j*b that is not bugging her yet & we already have an extensive travel schedule. She probably doesn't want to be around me that much more.

This year's taxes are opening her eyes to our situation as we have a considerable amount of interest income that raised our taxes (we're paying in this year). Probably going to be this way for another 4-5 years...

 

[Winemaker]

I planned that our net retirement income was equal to our net working income. So no "income" lost, we just stopped paying the higher income taxes andcontibutions to Roth, 401k and 403b.

Funny, I had a dream last night as I approach my 10th year of retirement. Mega corp contacted me and offered a promotion and a salary of $200,000 and 10 years of back pay for the same amount. In my dream, DW said go for it you'll never get a deal like that again, look at all the money you'd get. I said only if she packed my lunch bucket. She refused and said she was retired, to which I said so am I !

 

[Fermion]

We had about $230k of income pre tax, but then figure $50k in fed taxes, $11k in SS tax, $40k in 401k/IRA contributions, $10k in work related costs (fuel, clothes), $50k put toward ER saving, and thus we were living on $69,000.

Healthcare was mostly covered by work but since ACA covers it nearly fully now, that is a wash.

We live today on about $60k but since it is a cheaper area, I would say no real income lost.

 

[freedomatlast]

At this point, after retiring once and going back again, the money isn't nearly as much of a consideration as is the question, what do I want to fill my days doing? What makes me happy? What makes my days exciting and what keeps my brain active and sharp? For some it's finding fulfilling hobbies, some travel, some volunteer and other are content doing nothing. For me, being asked to fill a position that let's me do all the fun things I enjoy without the ridiculous management corporate BS, works well. And the added benefit of promising myself to spend all the income on fun stuff that I would have never considered before 1st RE, without touching the nest egg for living expenses, is a combination that works for me.

 

[audreyh1]

Never thought about it. With bonus and additional stock options it would not be easy to answer since I don't know how the bonus system paid out or how large the grants were in the first year post ER.

I didn't retire for financial reasons.

I think most of us are in a situation where when we ERd, our income dropped dramatically but we still had sources of money that allowed us to maintain our desired lifestyles, and that's really all that matters.

+2

 

[old medic]

For me it depends on how you want to look at it.
My annual gross income dropped nearly $30K, monthly take home increase about $600/month.

 

[skyking1]

My change is going from ~3 weeks of wages per month to 1.9 equivalent weeks of pension, and eventually subtract a half week for medical for both of us.

 

[pacergal]

with pension and social security, we have more income monthly than when working.
anything we take from investments is added bonus.
retiring earlier than we thought we could has been a blessing beyond measure.

 

[Andre1969]

It's all subject to change, but right now, my plan is to retire sometime around April 2025, when I turn 55. I had been contributing the maximum limit to my 401k since probably around 2005, but once I hit 50, I never took full advantage of the catch-up. But, in late 2022 I started really ramping it up, and for 2023 did the max+catch up. I intend to do that for 2024 as well.

My main rationale for maxing out the 401k like that is to make my take-home paycheck fairly low, so that when I do finally give up work and that regular paycheck, it won't feel like such a huge loss. That is one thing I'm worried about, is just giving up the security of that regular paycheck. That, and health insurance.

 

[scrabbler1]

Because I had twice reduced my weekly hours worked during my 7-year part-time era, my annual wage income was already pretty low by the time I ERed in late 2008. I cashed out my company stock when I ERed and invested it into a bond fund which generated about the same in dividend income as the wage income it replaced, a key part of my overall ER plan. So, I was basically living on the same income I was living on during the last year I worked.

 

[TheWizard]

I planned that our net retirement income was equal to our net working income. So no "income" lost, we just stopped paying the higher income taxes and contributions to Roth, 401k and 403b...

That's exactly what my plan was before retiring in 2013.
Except my income taxes didn't go down. I just paid a bit over $35k FIT for 2023, filing Single...

 

[FLSUnFIRE]

I calculated the current value of my opportunity cost at about equal to my NW when I quit vice working to 57 (Gov't minimum retirement age). Not an insignificant amount!



My "income" was the same as several years prior I had my paycheck deposited directly to Vanguard and had an auto transfer from my Vanguard MM to my checking so the "paychecks" never ceased... day to day was transparent.

 

[HI Bill]

I was living on 51% of my w$rk income in my last year (saving 49%). The year I retired, I tripled my spending. This year (year 4 of ER), I'm at 5X. I would not retire if I could not match the standard of living I'd be happy with, unless health problems hit.

 

[SAinMinn]

Interesting question, but as with most questions of this type there are many nuances.

When I hit Coast FI at age 50, I went from $200K ($140K salary, $30K bonus and $30K in profit-sharing) to a $60K salary at a nonprofit, figuring they'd appreciate me for who I was, what I can do, and what I brought from the real world. It was a MASSIVE mistake.

After being terminated for nothing that had to do with my job performance, I returned to the for-profit world and made $135K a year consulting part time in 2022 and 2023. That work has dried up significantly in the past six months, so this coming week I'm interviewing for a government position that pays $80K but comes with good health insurance, etc.

I'm coming up on 57. I'm trying to make it to 59.5. I'm probably fully FI now, so I'm not sure I "need" the government job, but I am looking forward to the interview process. I have not gotten interviews for four other positions I applied for -- one in the private sector, three in government. I'd like to know where I'm at in the market.