The following is a post for my friend's guests, Jim, on Route to Retire.
When some readers here noticed that they had enough money to retire but were afraid of jumping and wanted a post on the subject, I knew Jim was the right man for this job.
Because? Because he is right at the limit. He is about to jump into retirement. And who is better to write about a problem than someone in the middle right now?
That said, let me give it to Jim …
There is a funny thing that seems to emerge in the FIRE (financial independence / early withdrawal) Community. You're on the right track, you really learn it is You can retire early, and then bust your hump to get to that point.
But then, once you reach that security number, you lose the courage to pull the trigger.
Some people continue to work for longer than necessary. It's not like he likes to work in their normal job – it's just that they're afraid of not having enough money even if math says they do.
Maybe they do not think they will have enough money to last until they die or want to have enough to pass on to their heirs.
So … they continue to work.
Just another year
It has become such a common occurrence in the community that has been dubbed "A year more." It's the business card for many people out there and it's not necessary.
ESI recently wrote a post titled "When Can I Retire? When I'll be financially independent? A retirement calculator guide" and received some interesting feedback from it:
It would be nice to know how others have had the courage to get out of the everyday world. This is my biggest barrier. Mathematics says something (next year) but I'm not sure I can figure it out.
"You're already there!" – yet, I just do not feel that way! I'm wired to worry. Overcoming the mental obstacle is the next challenge.
Exactly where they are. It would be nice to see a dedicated discussion on this subject – as others knew they were ready (not the financial part but the mental part).
Believe me – I know it's scary. The closer you get to achieving your goal, the more you're nervous about the unknown. Unless all you have is in certainties like annuities, thoughts of the stock market crash the day after retirement fill your mind.
Or maybe worse, and if the costs of health care increase even more!
Yes, these are certainly legitimate fears. But at some point, if you have tried your parachute you just have to stop going out on the plane and jump out. That's how you really live!
Who are you to tell me to pull the trigger?
Good question. I am the 43-year-old who has recently told his boss that I will leave at the end of this year. Besides all those same fears you might have, I have something else that some of you need to worry about: I have a wife and daughter who count on me. This means that if I could not plan properly, we could really be on a stream.
But you know what – I'm not so worried (More). In fact, they are exactly the opposite – I am confident that we will succeed in our early retirement. I am so sure I have continued to move the date of my FIRE in the last two years. It was a big surprise for my wife when I told her that I felt good that I would be able to leave the end of this year.
It is not that we have saved an excessive amount of money. I look at some of the bloggers out there who have retired early and who share their numbers and I absolutely would like to have so much money! For a family of three, we are planning to live rather modestly. You do not believe me? Check our net value page that I keep updated on my site.
And just to have a little more authority on the subject, I brought other blogger friends who retired early to make their contribution.
Each of us is in a different situation in planning our future. As for me personally, it was important to accept some realities that would help me understand why it was right to press the trigger on early retirement:
1) I do not like my job anymore and I need to do it. I've been in this company for the last 19 years and it's time. I am willing to take a calculated chance to move forward.
2) Every extra minute I'm working on means I'm missing out on other things. Call him FOMO or whatever you want, but I have many projects and hobbies I want to work on. In other words, I want time to be able to pursue our dreams.
3) We will make money. Yes, it's an early retirement and yes, we're planning not to have to work. But guess what – we're still young (no comment from the peanut gallery, please!). Even though our numbers have been analyzed in every way and we should be good, we will make even more money. It is almost inevitable.
It would be nice to sit on a beach seven days a week for the whole week, but I'll be honest – even this would be boring after a while. So remember those projects I mentioned that I want to do in # 2? I'm sure one or more of these will eventually introduce additional revenue. I'm not going to rely on this for my plan, but it will happen.
Moreover, it seems that opportunities seem to creep in from the void once you are no longer stuck in your daily routine. I saw it happen with almost all the pensioners I know. In fact, here's what Steve at Think Save Retire said:
[…] opportunities expand when you no longer have a full-time job to take up so much of your day. These opportunities can (and do) include gains.
I found a large number of options after calling the abandon that could almost replace what I was earning before. Of course, it's not what I want. I do not want to work so hard, and I'm fine taking a lot less.
But the biggest point is that opportunities exist. They are literally everywhere. But our minds had a way of ignoring those options when they were doing full-time jobs.
4) We are in the stadium with our numbers. Let's talk about this for a second. At this moment, you might think, "Jim, are you crazy? !! Ballpark will not cut it with 30, 40 or 50 years of retirement!"
Yes, well, guess what? If that black swan event occurred and the # $% ^ really hit the fan, that's how it is really what a big deal?
Honestly. Think about it. It's not like we're retiring with $ 25,000 in the bank – we've come to the point where we're pretty sure we'll be good even if things get complicated.
But let's say I'm leaving a little bit, and for some reason, our hobbies are not making any money (hard to believe). What is the worst scenario? Do I receive a part-time job at Home Depot to bridge the gap? Or work part-time at Starbucks to get the benefits of health care?
Actually I'm fine with that. I do not think it will ever happen, but if it is really the most unpleasant or serious thing that could happen, um … ok. I can live with that. Hell, I could even enjoy it!
Jim at Wallet Hacks had similar thoughts when he decided to quit his job:
I have seen my collateral affairs like buying me years of "non-work" for an employer. Once I was about ten years old, I was confident I could understand something in the next 10 years so I did not have to go back to work if things implode.
It's all about perspective
In other words, it is important to put all this into perspective. Just because you're running your numbers on 11 different FIRE computers out there and they all come back saying that there's a 7% chance of being without money before you die, does not mean you're in reality running out of money.
The odds of this happening are scarce – well, technically 7% in this example. If you're good at math or know something about the gambling game, you'll soon realize that this is a bet you want to make. The odds are definitely in your favor!
More importantly, these calculators have difficulty taking into consideration the "Factor people". And by this I mean that no one in their right mind will lose their money.
If every bad scenario starts to manifest and is crushing your nest egg, I suppose you will adapt. Either you will begin to reduce what you are spending for a short time or start earning some money in one way or another.
This is not a bad thing! This is not traditional retreat: you should not sit in a rocking chair for 40 or 50 years. As a retiree, you have the freedom to be a little more flexible.
In any case, excessive planning will not always be the right answer. Even if you have 10 more "a year more" guilt and you find yourself working for a decade longer than you presumably need to do, something is about to pull off a wrench in the works.
He always does it.
It is not possible to plan every 100% detail. Things happen. Things change.
However, as long as you are flexible, you will be fine. Doug "Nords" Nordman from The Military Guide told me that he knew years before his next retirement:
I retired from the US Army in 2002 after 20 years of active service, and I had no interest in a bridging career. We had already reached the 4% safe rate of the safe sampling rate, I had a small pension for our bare-bones expenses and I had burned myself.
When I asked him if he was worried about making it happen, he said something that I thought made a lot of sense:
The best you can do is believe that your FI skills will help you succeed better than a 4% SWR robot.
Vicki from Make Smarter Decisions has understood that sometimes you just have to pull the trigger because you never know if you can do it long enough to enjoy every minute of happiness:
My big "aha" – a woman I hired at school, who was my age, died of a brain aneurysm that looked at one of her children in a cross country meeting. Then my neighbor (another woman of my age) had a severe stroke. They thought she would die – but she managed to make it. He has help with her almost all day because of his disability now. They were happy and healthy women who both had children at school with my children. $ success happens.
And sometimes things happen that tell you to pull the trigger if you're ready or not. Mark from The Retirement Spot shared his experience:
For me it was not me who decided, it was a neurological disorder that decided for me, but I had saved enough to not have to worry about the finances. I have always had my finances in order and prepared for unforeseen circumstances.
I was a little nervous. I think I'm more worried about losing my network of colleagues. I was not sure what I would do. One of the first things I did was repay the rest of my mortgage. I tend to be more concerned by nature. So, yes, I was a little nervous but it worked out.
He's making a list and double-check it …
Now, with all that he said, do not abandon work immediately. If you plan to retire early, you must still do your due diligence first.
Remember that ballpark I was talking about? Yes, well, make sure you're inside.
If you have been in the personal finance community long enough to understand a game plan for FIRE, you probably already know some of the important concepts:
- Keep track of your expenses. Know what you're spending now and also what are you waiting to retire. Do not forget to consider considerations about health care costs.
- Earn, save, invest (ESI). I swear I know the acronym somewhere! This is the most important part of the transition from A to B. You wisely and you will get to where you need to be even faster.
- The rule of 4% … of the thumb. If you're not familiar with this, you'll want to learn more about this. Research shows you should be able to withdraw 4% of your portfolio each year (corrected for inflation) without running out of money for at least a period of 30 years. Upside down, it basically says you should have saved your annual expenses 25 times. There are arguments on both sides as to why this will work or not. Regardless of what part of the discussion you are proposing, it is still a good start for you to enter the realm of what you want to have saved.
- Understand the difference between taxable, non-taxable and deferred taxes. Find out which accounts will be taxed when you withdraw from them and which ones you do not. This can greatly affect how much you want to be trampled on.
- Do not be afraid to have a second opinion. Some people are able to understand every nuance of personal finance and to know all the accounting rules and strategies. I'm not one of those guys and I'm not ashamed to admit it.
I understand a good sum, but I'm not a financial planner or a CPA. Those are the people who can give you more confidence in your plan. In fact, a fantastic financial planner was the one who helped to confirm that we could retire a year earlier than planned. He gave me some strategies and ideas that really consolidated the idea.
Skip, the water is beautiful
Overall, if you've eliminated those steps and the math is added up, what prevents you from trying?
Joe di Retire di40 suggested me this idea if you're still nervous about the fact that it happened:
We did a test for a year so my wife can feel comfortable for my early retirement. We have saved all my income and lived only with passive income, income from my wife's blog and income. The test run worked beautifully. We did not need my income and this made a big contribution to our money.
However, if you are not yet sure of the idea of quitting early, you can sometimes make it work with other more structured forms of income. Ms. Groovy of Freedom Is Groovy said this on their release from 9-5:
We planned our retirement for two years, with the goal of October 2016 as the time when we both would be out. It was then that Mr. Groovy turned 55 and became eligible for a small pension. We knew we would feel a little strange when our salaries suddenly stopped and we wanted the psychological impulse to know that we would have a small but reliable flow of incoming cash.
You understand that pulling the trigger on FIRE is not the end of it all. If you feel you have made a mistake after a year or two, you can go back and get another job. Call it a mini-retirement if you want. I never plan to do it, but if I ever need it, it's an option.
The "One More Year" syndrome is not something that will allow me to fall into this life. I want to enjoy every minute of time I have and waste it in the race for success will not do it for me!
If you are "There" financially, but you're still nervous to jump the ship, leave your job, I hope this has helped you see a different perspective on things.
Your turn – what are your thoughts on how to push the trigger for early retirement?
This is ESI again, with some post-wrap-ups of mine.
If you are worried about retiring, here are some suggestions:
- Take a test as suggested by Jim. No full retirement of one or two years is required. Just see if your job allows you to reduce two or three days a week. So if it looks a little scary or unpleasant, you can easily go back up again.
- Build in different safety margins. These should give you even more confidence that if something goes wrong, you have backups to cover yourself.
- Consider seriously one side of the bustle. It's one of the best security margins you can have because it makes you earn money! And if you choose something you like to work on (which you should) it will not even look like a job. You have to do something in retirement, why not make it something you love that earns extra money?
- Remember that you can always go back to work. Even if it's Starbucks or McDonald's, the probability that you can find some kind of work is very high.
In the end, the Vicki stories above were really resonant with me and I'd suggest you think about it.
Here are some that I will add to the mix:
- One of my college classmates recently passed away from cancer.
- One of our wonderful neighbors who was just a few years older than me had a brain tumor and died of a heart attack.
- Many friends and relatives of my age have had cancer attacks, heart problems and the like – serious problems that could have gone either way.
People often ask me to retire early saying, "What if something goes wrong with your health?"
They are insinuating that it will be bad for my finances if I get sick.
But I turn around and say: "If something goes wrong, I get sick and I do not recover, at least I will be grateful that I retired when I did it … I do not want my last good day on earth to be spent in the office . "
I will probably write a post about this one day but I will allow to share part of a story as I close.
One of my bosses from several years ago disappeared at the start of this year. He was a great guy in many ways and only a few years older than me.
A few months later he passed a mutual friend and I had a coffee. I noticed that I did not even know that my former boss was ill and my friend said that not many did – he was a private boy and did not want people to know.
Then he said the words that have haunted me since then, not for me personally but for those who are able to retreat and still do not:
"He was at work on Friday and died on Sunday."
I do not want this to be told by ESI Money readers if I can help.