Monday, May 08, 2017

More Thinking About Early Retirement

On the last post, bethh commented:

"I'm curious how you decided to set whatever goal it is that you have for retirement - is it salary times x, or spending times 30 years, or what? I feel pretty sure that if I were in your shoes I'd be retired already!" 
This kind of got me thinking about whether I could indeed be retired already. With about $1.2 million in assets and no debt, I already have a lot more money than many people do when they retire. But I'm still under 50, so I have a long window of time that money has to cover. At some point years ago, I had a somewhat arbitrary number of $2 million as my retirement savings goal, which I guess I had calculated would cover what I thought would be my desired retirement lifestyle. I can't remember exactly what math I did at the time-- maybe I should search my own blog archives to help my memory!
Some people use the rule of having at least 25x what your annual spending will be, on the theory that you can safely withdraw about 4% of your savings each year without eating into it too much, since it would hopefully have investment gains of more than 4% each year.
You also have to think about what "retirement" really means-- does it mean you don't work at all? Are you going to want to fill all that spare time with expensive hobbies and travel? Or are you willing to downshift to some other sort of work that will bring in some income, even if it's not much?
I've played around with lots of scenarios in a retirement calculator-- retiring now, retiring later, having a low income now and retiring in a few years, etc. I always felt like I was more or less on track but retiring early never seemed comfortably within reach based on my current lifestyle.
But here's something that I never added to the scenario: Sweetie.
One night when I was noodling around with all this, Sweetie said "does it let you input another person? You know, we're in this together..."
It's not that I didn't think we were in it together, but actually running the numbers this way made a huge difference. Sweetie owns real estate, and has savings, and a small mortgage. After being unemployed for a couple of years, Sweetie got a job that pays a low salary that covers some of our expenses. More importantly, at age 65, Sweetie will get a good old-fashioned defined benefit pension. And someday, Sweetie will most likely inherit a few hundred thousand dollars unless the family circumstances drastically change.
Plug all that in, and boom, we can both retire now.
Of course, this does not make me totally comfortable. We've talked about getting married at some point, but we aren't yet. Our finances are totally separate except for a token joint checking account with $2000 in it. And I just have this independence thing ingrained in me somehow-- the idea of being supported by someone else is just bizarre! But given how miserable I've been at my job, this is now making me think A LOT about quitting.  That may not be "retirement" just yet, but it's pretty amazing to realize that I may have the freedom to just walk away and not worry too much about what my next source of income is. I could try a new career, try doing consulting work, or just step back into a lower level job with way less responsibility. I haven't had more than a 2 week vacation since I was 22, and the idea of just having some time off is very appealing. Once you get this kind of thing in your head, it's hard to stop thinking about it...
So much in the world is uncertain right now-- would it be insane to just walk away from a secure six-figure job??


Anonymous said...

I'm curious how health care/health insurance is factored into the retirement calculators you're looking at. Since you are not yet eligible/old enough for Medicare, you would need to pay for your own insurance. Without an employer-sponsored plan available, the open market can be super expensive. I haven't looked carefully at retirement calculators, so I don't know if health insurance is factored in. For me, health insurance is probably the primary factor when evaluating at what age I would feel comfortable retiring.

bethh said...

Oh my, if you're so stressed out, a sabbatical at least sounds like something worth pursuing!! I'm glad that my comment was food for thought for you. Health insurance IS the grand wild card but I hope that when I'm ready for early retirement, I don't let that hold me back - or at least that I use that requirement to find something I can enjoy that also has health coverage.

My hope/dream/plan is to early retire approximately 10 years from now (mid-50s). By that time I will have paid off my home (this is aggressive but likely doable) and I will have saved up enough in non-retirement accounts to fund 3-4 years of living expenses until I hit 59 1/2. At that point I will withdraw from my retirement accounts and will try to hold off on filing for Social Security until I hit 70.

Assuming health coverage is still accessible to non-employees (big assumption), I'll have to fund health care for +/- 10 years, until I can get Medicare. I feel I'll be able to withdraw more than 4% knowing that I'll have a Social Security top-up coming when I hit 70. I'm not worried about leaving an estate, I just don't want to be super stressed about money as I age.

I don't have a Sweetie to factor into my plans, but I'm fairly hopeful about my path as laid out (barring, of course, many things that could go wrong).

It sounds like you've done a great job of taking care of yourself, AND you have a super solid backup with your sweetheart around! It sounds to me like you have a lot of options in front of you!

Jewel of Toronto said...

What about a leave of absence? That could give you a taste of "retirement" without the permanency.

Anonymous said...

This question is an active discussion topic over at and I'd suggest that you have a look at the forums there to get an idea of the ins and outs of this decision process. As you suggest there are a lot of moving parts and it's easy to forget about or misjudge what could become important factors. They have a hundreds of members from many walks of life and are well-moderated to keep the discussions focused on early-retirement issues (and away from noise if you know what I mean).

T'Pol said...

If you are enjoying your work, why not do it for a few more years? You can always slow down later on. Due to weird social security laws in my home country, I am retired since 2012 and I collect Social Security. If I wanted to live on that money solely, it would be very tight with not much wiggle room for vacations or splurges. I have a rental apartment which generates a small rent so, that would help the social security check. After I retired, I worked as a consultant for a few years. Now I am back to full time and I am making a very good salary. Technically, I am financially independent but, every new month that I work adds to the quality of life that I will have later on. I am almost 50 and single. I like my independence too but I believe in joint finances as a couple. I think, that works the best if both sides are open and honest about their spending.

MrMoneyBanks said...

Hey. Great little article. For my two cents: it seems to me that if you're not enjoying your job and have no immediate requirement to be there then just go for it! Good luck and keep us updated!