If you’re new to the whole early retirement concept, allow me to disavow you of one notion right away today: You won’t formulate your financial plan once and then stick to it forever.
We haven’t even retired yet, and we’re already multiple plans in. Today we’ll share our journey through a range of plans over the years, but most importantly talk about our big and recent epiphany: that as much as we say we don’t ever want to have to earn money again, we surely will earn money again.
Is this a game changing idea? For many of you it’s probably a Duh! moment, but for us this is an entirely different way of thinking about not just our time in early retirement, but also how we’re planning it all out financially.
Our Fuzzy Beginnings
For years we had a vague notion that if we saved a bunch of money, we maybe wouldn’t have to work forever. (I’m pretty sure this is what is just generally known as “retirement.”) We definitely didn’t want to work forever, and so the idea of any kind of exit was hugely appealing to us. But we didn’t know any of the details of how we could actually make this foggy notion happen.
So we socked away our pennies, but without a vision for how we’d use them down the road. Somewhere in all of that, we moved to the mountains and made up what we called our “10 Year Plan,” which basically consisted of a general aspiration that we’d figure something out before those 10 years were up. It was more like a plan to make a plan.
Making Plans… and More Plans
Then, like a lot of people, we heard about Mr. Money Mustache, we started doing actual research like reading the Charltons’ book, and we put together our first plan-like object. That plan would have had us retiring round about 2020, which would have beaten our 10 year plan by one year. We call it our risk-averse plan, because it had too many assets allocated in non-growing cash and bonds, and — more significantly — it was based on suuuuuper low estimates of what we could save. You know, because we wouldn’t want to fall short of our goals and feel sad and stuff. Womp womp. (Pretty sure those were the scars from the 2008 crisis talking.)
Fortunately, not long before we started this blog, we realized that we were consistently blowing through those goals, and we decided to step things up. We committed to quitting by the end of 2017 no matter what, we recalibrated what we’d need to save to do that, and we’ve hit or exceeded every target since then. No more sad trombone.
But throughout all of it, through these past several years of aggressive saving, and especially through the past several years of extremely demanding work and work travel — all things we’d rather not be doing anymore, or at least not at this pace — we had one very clear non-negotiable built into our plan: We never wanted to have to work, ever again.
We built our two-tiered retirement plan — a more bare bones existence in our 40s and 50s, with a good chance of getting to live larger in our 60s — to protect our 401k assets to give us peace of mind in our later years as a way to get to an exit date somewhat soon while still keeping our early retirement work-free.
And despite how much we feel our work affecting our health and at times our happiness, it somehow never occurred to us that we could exit sooner if we were willing to work a little in retirement. Instead we built more contingencies into our plan, including — ironically — the possibility of working some in early retirement, but only to hedge against sequence risk, not to get us to an earlier exit date.
That brings us to now.
The Epiphany: Have We Met Us?
Not long ago, a wise friend told us something that felt very astute, but that was probably just pointing out the obvious. To paraphrase, he said, “You really think you won’t earn any more money after you retire? I’ve met you. You can’t help but make things. You’re good at stuff. You’d have to try hard to not earn at least some money.”
Palm, meet face.
All this time we’ve been so dead set against having to work that we never considered that we might want to work, or that the things we might do purely for the love of them might net us some income. I am fully aware of how precious I am about keeping creativity and money separate, but there are about a gajillion other ways we could earn money that won’t violate that taboo. Continuing to consult in a very limited way in our current fields, for one. Helping friends who own businesses. Selling lift tickets in exchange for season ski passes.
Or, much more likely, starting something new that we have time to get excited about once we’re freed from our current full-time-and-then-some careers. As Jim Wang put it, once we decouple work and money, we’ll have a lot more freedom to explore the work we actually want to be doing.
We’re full of ideas… like that this might somehow not end badly (Always climb with a rope, kids!)
Because, yes, we’ve met us. We’re smart, we’re always filled with ideas, and we’re about to have a lot more time on our hands. I’d guess that virtually anyone actively pursuing early retirement could say exactly the same. So while we may not be able to bank on going back to work (for someone else, anyway), that doesn’t mean we have to assume we’ll never earn another cent after we pull the ripcord next year.
TL;DR? The Short Version
Long story short: We originally assumed we’d never work again after leaving our careers, we built an extremely conservative plan around that idea, and then we realized :::POOF!::: that was silliness.
Our epiphany: Duh! Of course we’ll earn some money in retirement.
Every Plan Is Based on Assumptions
We could all probably take a look at each other’s plans and learn a lot about one another. How risk-tolerant or risk-averse we are. How optimistic we are about the future. Whether we’re willing to gamble a little. Because every plan for early retirement or financial independence is based on a slew of assumptions that reveal much about us:
- Whether we’ll invest for growth or to hedge against risk
- Whether we’ll bank on market growth in line with historical averages, or dial it back to something more conservative
- Whether we think we’ll need to spend more or less in the future
- Whether we’ll tap into assets like home equity or tax-advantaged retirement accounts to fund our early retirement
And in our case, there was one more assumption included that might just be making its exit:
- Whether we’d have additional income coming in to supplement our passive income
So What’s Changing?
For now, nothing’s changing. We’re still in limbo on our timing until we know how our year-end bonuses shake out, and we’ll have that information in less than two months. Then we’ll likely do a full recalculation of everything:
- Budget for what we’d like to spend each year in early retirement, based on updated costs (updated utilities, insurance, ACA premiums, etc.)
- Estimation of how much of our annual income will be covered by dividends, based on recent averages
- Estimation of how much of our annual income will be covered by loan payments, for the first few years
- Assessment of realistic interest rates to bank on, based on our asset allocation
- Resulting “magic number” that spits out for phase one of retirement
We’ll certainly also look then at what assuming a little work income would do to our plans. At this point, as close to retirement as we are, it won’t buy us much of an early exit, but added work income could do a lot for us:
- Give us more breathing room in the budget in a given year
- Conserve invested assets because we can sell fewer shares in a given year
- Provide additional funds for big ticket purchases like an RV or splurgy trips
As always, we’ll keep you posted as our vision evolves!
What’s Your Plan Based On?
We’d love to know how you guys think about this! Do you plan to have income from work in early retirement, or are you in the “Just say no to work!” camp? What assumptions have you built into your FIRE plan? Have you had an epiphany like ours that of course you’ll earn money in the future? Let’s chat in the comments.