your first year after FIRE: income lost?

[MarieIG]

As far as the IRS was concerned it was pretty close to being a wash with increased dividends and Roth conversions.

Before I retired, I allowed myself very little funds for "discretionary" spending - it was all ear-marked, i.e. retirement savings, taxes, tuition, homeowner's insurance, etc.

 

[LateToFIRE]

Recently ER'd. Question is very open-ended (perhaps intentionally), so really depends how I look at it. In terms of one year of income, the "loss" would be upper six-figures. In terms of lost opportunity in wages, stock options, bonuses, etc. relative to working a handful more years (as had originally intended), the "loss" would be several million.

First few days my brain was kinda split:

Left Brain: "Whoa! Dude, what did you do? Did you really just walk away from that much money? WTF? You really need to consult me on those kinds of decisions"

Right Brain: "Hey, leave him alone. He's had enough. You know they weren't treating him very well and he needs to start living life and smelling the roses and stuff."

LB: "STFU, you don't know what you're talking about. He loved that career. Look at everything he's accomplished, now he's leaving all that on the table."

RB: "Well, he can't take it with him. That job probably already shaved a few years off his lifespan from the stress and sleep deprivation"

LB: "So, what. He's not gonna wanna live if he's poor anyhow"

RB: "He's hardly going to be poor. You're just being hysterical"

LB: "What You calling me hysterical? You gotta a lotta nerve. You do know I'm the left brain in this picture don't you."

 

[jebmke]

Recently ER'd. Question is very open-ended (perhaps intentionally), so really depends how I look at it. In terms of one year of income, the "loss" would be upper six-figures. In terms of lost opportunity in wages, stock options, bonuses, etc. relative to working a handful more years (as had originally intended), the "loss" would be several million.

First few days my brain was kinda split:

Left Brain: "Whoa! Dude, what did you do? Did you really just walk away from that much money? WTF? You really need to consult me on those kinds of decisions"

Right Brain: "Hey, leave him alone. He's had enough. You know they weren't treating him very well and he needs to start living life and smelling the roses and stuff."

LB: "STFU, you don't know what you're talking about. He loved that career. Look at everything he's accomplished, now he's leaving all that on the table."

RB: "Well, he can't take it with him. That job probably already shaved a few years off his lifespan from the stress and sleep deprivation"

LB: "So, what. He's not gonna wanna live if he's poor anyhow"

RB: "He's hardly going to be poor. You're just being hysterical"

LB: "What You calling me hysterical? You gotta a lotta nerve. You do know I'm the left brain in this picture don't you."

That is a conversation best had before retirement, not after. The whole point of retiring should be tranquil.

 

[LateToFIRE]

That is a conversation best had before retirement, not after. The whole point of retiring should be tranquil.

Yeh, but the problem was that left brain would always convince me to do OMY. so, I kinda just had to jump without looking too hard. The price of freedom was always going to be very high.

 

[Retiired]

If you are already FI, then no money is left on the table. You have met your goal. If the tank is full anything additional overflows. Time on the other hand..........

 

[Al18]

I retired just over 5 years ago, withdrawing just under 3% per year. Since retiring, my networth has increased 25%. It doesn’t feel like I’ve left anything on the table, yet all my time is now mine. I feel like I’ve won the game.

 

[Cayman]

DH was a high earner. I encouraged him to walk away at 49/50 because he was fried. I do care that we left alot on the table.... but not more than I value him. His mental health is much more important to me than $. Yes our assets would be several $M more today if he'd stayed in his corporate grind... but we have not one regret! Best Decision. It took about 4 years for him to fully decompress. He's happy, we're happy... so it's the best couple $M we'll ever spend. I'd do it again in a heartbeat.

 

[YVRRocketSurgery]

I generally don't regret retiring when I did as my quality of life significantly increased. And I generally don't miss my employment income as a means to pay for my share of our spend because of how I'm turning on the income taps from my savings now.
But I do miss the savings from my employment income giving my nestegg a bit of a shot in the arm when my investment returns are subpar. I missed out on some unvested stock options when I retired. And my megacorp did significant layoffs approximately a year after I retired. They normally give a 1.5 years of severance for employees with more than 10 years with the company. I hate leaving free company money on the table.

In the year before retirement, my income was roughly allocated as follows:
27% taxes, 23% spending, and 50% savings. While I feel we were in a state of Coast FI we were still pretty intentional with our spend and weren't splurging excessively.

Transitioning into year 2 of retirement, I've been slowly turning on the taps. Currently the dividends from my taxable account are more than double what my spending was pre-retirement which covers price inflation the last few years in addition to some lifestyle inflation. Taxes are much lower. I'll eventually start tapping into my different (tax-deferred) retirement accounts (which are more index etf focused) over the next few years.

So while it was kind of scary not having the safety net of a regular employment income stream, for me, having a steady dividend stream large enough to cover my historical share of the spend has been kind of nice to maintain a sense of familiarity and not miss a beat.

 

[big-papa]

It's kinda the point of retirement - you've chosen to "give up" income from employment and to replace it by cash flows from your savings, SS, Pension or whatever other passive sources you might have.

My own loose target was to replace my after-tax spending capacity 1:1. The reality is that I'm finding we have more spending capacity than I was expecting - at least so far. Some of that was because I underestimated the effect of our kiddo getting off our books when she graduated college and was launched. And some of it is because from the day I gave notice at work until the day I actually left turned into something like 15 months due to taking more time to find my replacement than expected. This got me through several more rounds of RSU's vesting, more rounds of ESPP and annual corporate bonus, all at a time when my former employer's stock was up...

Cheers
Big-Papa

 

[scrabbler1]

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.

The part I bolded above was a crucial, unbreakable condition for me to ER. I don't spend a lot of money, but if I decide to go on a small spending spree once in a while, I know I can do it without disrupting my overall budget. This was the case both before and after I ERed.

 

[WhenIsItTime]

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

I knew I was ready to retire when the answer to that question didn't bother me.

 

[LateToFIRE]

DH was a high earner. I encouraged him to walk away at 49/50 because he was fried. I do care that we left alot on the table.... but not more than I value him. His mental health is much more important to me than $. Yes our assets would be several $M more today if he'd stayed in his corporate grind... but we have not one regret! Best Decision. It took about 4 years for him to fully decompress. He's happy, we're happy... so it's the best couple $M we'll ever spend. I'd do it again in a heartbeat.

Lol, you've clearly been talking to my DW!

 

[LateToFIRE]

I generally don't regret retiring when I did as my quality of life significantly increased...

THIS is the part I'm trying to focus on!

 

[jollystomper]

For me, retirement was less about "how much income are we losing?" and more about "how much can we spend?" If I was concerned about losing income, I would still be working .

Comparing the 5 years before (my income varied based on awards and bonuses) and 5 years after retirement, our income dropped 57% But in the 5 years before retirement, our savings rate was 36%, so we did not "need" all of that income to live. Our spending on ourselves (which does not count taxes, charity, and gifts) is slightly down between the two periods, primarily due to 2020. In retirement our assets are still much higher than we retired. So the "loss" of income has not impacted our desired living style.

 

[marko]

My ER was involuntary so I didn't 'give up' anything....it was taken away.

But I did have a 'platinum parachute' that softened the blow for a few years and I was making obscene money at the time so it was about 3X above our spending needs. We essentially were able to coast on that parachute for about 5 years.

Meanwhile, I tapped into a family fund that I hadn't touched for decades and we had our investments, so in the end, after cutting a few unnecessary things, we never really skipped a beat.

 

[Gumby]

As I may have described here before, I made that transition long before I actually retired. In 2007, I was making an incredible amount of money as a big firm lawyer in NYC, but I was physically and mentally worn out. After a vacation in Italy during which I spent almost all my time on the phone with people in New York, I decided that I just didn't want to do it anymore. So I went into public service. I took a 77% pay cut, but my quality of life improved immensely. We found that our day to day life was unaffected financially. In fact, we had some of our best foreign travel after that change, when we had more time and energy to enjoy it. We fully retired when our pensions plus social security could provide the same income as we had during my "step down" transition period. And after 5 years of retirement, we are still enjoying life as much as ever. I do not miss working one bit.

 

[socca]

... 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.

Yep. One option I have is to stay in the saddle awhile longer and spend all of the resulting labor and business pass-thru income on some much-needed house renovations (probably about $300k total). Considering my current portfolio income and advanced age this is a silly mental exercise but those of us cursed with a scarcity mindset might need to make incremental steps toward the spending associated with an abundance mindset.

 

[statsman]

I did not give up any income. I had it taken away from me by being laid off from a company I had 30+ years with.

 

[MC Rider]

I'm kind of glad the work dried up and we decided to retire and exit the big city. It's weird not getting a W2, but I'll get over it.

 

[scrinch]

I lost 5-1/2 workdays a week when I pulled the retirement trigger. That's about 250 days of work a year that I had to make up for with leisure. It was a tough adjustment to make, but I managed!

But seriously, we were saving over $20k/mo for the last few years before retirement. Losing that income took some getting used to mentally. It was only after reading about all the success stories on this board that I could get myself to walk away from that kind of money.

 

[audreyh1]

We spent way more the first year after retiring than we ever did while work. Lots of reasons: we finally had time to spend money, we traveled like crazy -serious pent up demand, we were no longer putting savings aside from our paychecks, we weren’t paying FICA taxes anymore, our Federal income taxes dropped too, etc.

 

[Koolau]

Yeah W-2 went to zero. No problem as I'd saved cash for that day and I did get a modest pension. As soon as I needed more cash, I took from the 401(k) as I was past 59 1/2 by then. It was relatively seamless and painless - especially with the freedom from w*rk as the prize for giving up the pay check.

 

[RetiredHappy]

We have always lived "large". I think we were spending $350K a year while we were working and about $240K now. We went from knowing that we would no longer have earned income to let's figure out to fund our retirement. We set aside a lump sum to pay us for about 7 years until all our income streams start to generate a sustainable $240K a year.

 

[Koolau]

We have always lived "large". I think we were spending $350K a year while we were working and about $240K now. We went from knowing that we would no longer have earned income to let's figure out to fund our retirement. We set aside a lump sum to pay us for about 7 years until all our income streams start to generate a sustainable $240K a year.

Very nice!



I look at our "stash" and divide by the number of years we might reasonably still have to live and think: "Why don't we spend more??"


We're w*rking on it!

 

[Andre1969]

Very nice!

I look at our "stash" and divide by the number of years we might reasonably still have to live and think: "Why don't we spend more??"

We're w*rking on it!

I've done the same thing. Now if I plan it out to a worst (or best, depending on how you look at it) case scenario of living to 100, it's not all that great. But, if I do it for just 30 years, I could definitely ramp up my spending.

Last time I ran my FireCalc numbers, it also showed that I could definitely jack up my spending as well

But, old habits die hard, I guess. The other day I needed a paper towel, and noticed the roll was one of those older types that doesn't have perforations for half-sheets. I didn't need a full sheet, so I just ripped off half of one.