A Thought Experiment for the Retirement Police // Where’s the Line on Retirement?

To me, the distinction between “early retirement” and “financial independence” has always seemed like a purely semantic one. Case in point: this semi-rant on the false dichotomy between the two. But I’ll save you some reading: Both give you the freedom to do work you are excited to do and the ability to walk away if it’s not fun anymore. Both allow you to support yourself without work. Essentially, the only difference (and not a meaningful one) is whether or not you quit your job after you hit some number. (But if you call it FI and you quit your job six months after you hit your number to go work on some fun project on your own, is that different?)

If I’ve learned anything as a part of this blogging community, and have I ever, it’s that lots of people disagree with me. Some, dubbed the Retirement Police, are quick to point out that doing anything in early retirement that remotely resembles our preconceived notions of “work” means you’re not really retired. Fortunately, I think those folks are pretty rare, and mostly serve to give Mr. Money Mustache something to complain about.

Much more common is the more subtle idea that earning some larger amount of money in early retirement disqualifies a person from being able to claim they are retired, even though traditional retirees do part-time or second act work all the time, and we don’t quibble with whether they are retired or not. (Age bias?)

After Monday’s post asking bloggers to be more transparent about how their blog (or other side hustle) earnings affect their finances, and whether that undermines their promotion of the 4% rule or passive income, a lot of your comments got me thinking:

Is the distinction we perceive between early retired and obviously not really retired like they promised more about the amount of money that someone is earning, or is it about the actions they’re taking?

In other words, do intentions matter? If someone is doing something with zero intention of earning money (or at least consequential money), and then happens to earn some anyway, is that the same as someone who actively tried to create a new income stream? Or, conversely, if someone is trying to make money, but is failing at it, are they still early retired, or are they just unemployed? Does it matter how old they are?

I’m not a big fan of labels, and am not looking to smack one on everybody. But I do like to dig into assumptions and try to pick them apart to find the real crux of what makes something what it is, or — conversely — what our internal bias stems from. So let’s ponder those questions above and think through a thought experiment, and then discuss it all in the comments. Let’s go!

Below are three examples for consideration in our thought experiment, each with some different intentions, earnings and mechanisms for those earnings. And with each one is a set of questions aimed at the retirement police (mostly to be funny) but also at each of us, to examine if we carry any biases around with us that we might not recognize.

Example 1: The Artistic Hobby

Let’s say that I am about to retire and I can’t wait to take up painting. I dive into my new hobby as soon as I leave my career behind, and I start cranking out a few paintings a week. (Apparently I’m a prolific painter!) I don’t do much with the paintings besides hanging a few on my walls and giving a few away to friends. I love my new hobby and don’t care whether I make money at it, because that’s not why I’m doing it.

Retirement police say: Retired, obviously.

Flash forward a few years. Now I’m still painting at the same pace, but those paintings I gave away to friends got into the right hands, and suddenly I’m a popular artist. My paintings go for several hundred dollars a piece, maybe over a thousand, and since I can crank out about a hundred a year, I’m now making a legit income just from doing the hobby I love, even though I never meant to make money at it.

Retirement police say: Not retired. You’re now a professional painter.

Plenty of non-police folks would say that’s still retired, since it’s a hobby, and since I still don’t care about or need the money, because I was FI before I started. Others would say that I’m no longer retired, because I now support myself with earned income, not passive income. Even though I am spending my days exactly the same way as I did when I was retired with a hobby.

(What do you think in this example? Share in the comments!)

But those are the extreme ends of the spectrum, and it’s easy to tell the difference between earning $0 and living off passive income and earning more than enough to live on. So let’s go into the real thought exercise:

The Gray Area

We’re back in the early days of my painting hobby. I’ve now painted enough paintings without selling a single one to be out of space. I have paintings everywhere, I’ve given one to everyone I know, and I can’t make space for any more. But I don’t want to stop my beloved hobby, so I decide to see if I could sell just a few at a local craft fair. I set up my table, display my art, and at the end of the day, I’ve sold a dozen or so for about $50 a piece, which thrills me because that will buy me plenty of paint.

What say you, retirement police? Am I still retired, as a hobby painter who just made a nominal amount?

A few months later, I’m into this craft thing, and I’ve decided to go to three or four craft fairs a year and raise my prices a little. (It’s also a nice excuse to get out of the house and meet some new people.) Now I’m selling about 20 paintings at each craft fair, every three or four months, and I’m making closer to $100 on each one. So in a year, I make about $7500, not counting the cost of my materials or traveling to the fairs. It’s a small dent in my retirement budget, but it’s nice to have a little something coming in.

How about now, retirement police? Still retired?

After a couple of years of the craft fairs, I decide that they’re too much work, but I still love painting, and I’ve interacted with enough buyers to know that they like my stuff. So I decide to see if my local artist collective will sell my paintings. They agree, I agree to provide them with 60-80 paintings a year, priced between $200 and $300 each. My first year doing this, I make around $17,000. I’m still relying mostly on my passive income, but I love having a good chunk of it offset by this new income stream.

Is this the tipping point, retirement police? Still retired?

A year or so later, I decide that it’s too tiring to transport my paintings to the local shop, and I was never in it for the money anyway. I decide to stop selling at the shop and just paint entirely for my own pleasure. But then a funny thing happens. People visit the shop looking for my paintings, they don’t see them there, and they ask the manager, who sends them to me. They’re now coming to me directly and offering more money than I would have ever expected to make. I sell fewer paintings, without intending to, but the price they’re offering is so much higher that it offsets the lower volume. That year, I make $30,000 on these direct sales, enough to cover a significant portion of my living expenses, but I’m still making withdrawals from my portfolio.

How bout now, retirement police? Does this amount cross the line?

Example 2: If It Looks Like a Business and Quacks Like a Business…

I deliberately used an artistic pursuit in example 1 because we tend to have biases about what can constitute a “hobby.” Painting, playing an instrument, dancing… we have a high bar about about what constitutes a “real artist.” And if we meet someone who’s into something artistic, we’re much more likely to assume that that’s a hobby, not a vocation. (Don’t ask me for data on this. It is based on my own observations. Feel free to disagree if you have actual data!)

So let’s do an example of something that raises the “business” flag in our brains instead of the “hobby” flag, even if it’s truly a hobby. Let’s take for example, oh, let’s see… how about blogging.

[Sidebar: This reminds me of the not-to-be-named blogger I met at FinCon who said, “Wow, your site has no visible ads. How are you monetized?” My reply: “I’m not.” (Also thinking, “What’s an invisible ad?”) He/she said: “Ohhhh, I get it. So what’s your long game?” Me: “Ummm, to keep blogging?” In this person’s defense, I guess most people who plan to blog entirely for fun wouldn’t pay to travel to a conference on it. Even though most people going to ComicCon aren’t there to boost their side hustle. But I digress.]

Blogging about plenty of subjects could feel like a hobby (painting, playing an instrument, dancing, fan fiction…), but blogging about something money-related raises that “business” flag. So let’s shortcut the explanations and then ask the retirement police.

A. Hobby blogging, no monetization, no income.

B. Still hobby blogging, but throw up a couple ads and drop in a few links. Tiny income that maybe covers expenses.

C. Get a few sponsored post offers, do a few, earn a few more bucks. Small income that covers expenses and a dinner out each month.

D. Get more popular so the ads and links start netting more. Do a few more sponsored posts and ask for a higher rate. Slightly larger income that covers 15-20 percent of retirement expenses.

E. Even more popular, so everything nets more. Now earning a medium income that covers half of retirement expenses.

F. Get featured on Good Morning America, traffic is through the roof, and now netting enough to cover all the expenses for the year, and can leave the portfolio alone.

G. Become the darling of Elon Musk, who tweets about the blog constantly. Crazy traffic, big revenue (and, grrr, higher hosting fees!), netting out to triple annual expenses, meaning standard of living goes up and the retirement fund gets a lot more padded.

Okay retirement police, let’s hear it. At what point in that process did our hobby blogger go from retired with a hobby to professional blogger? Or did she? Is she still retired, regardless of how much she earns, because she wasn’t trying to build a big income stream at all?

And would it matter if we took away the sponsored posts, which are a more active attempt to monetize? Let’s say our blogger started the blog with those basic Google ads up there, and just never took them down, and threw up a couple affiliate links from Personal Capital, Bluehost and Republic Wireless because why not, and then it all just grew in revenue along with the audience growing.

Is our friend here a “professional,” and no longer retired, even though she’s fundamentally doing exactly the same thing she was doing when it was a hobby and she made no money, and when her intent was never to earn more than maybe what she was paying in hosting?

Where is the line, when did she cross it, and was crossing it solely based on income, or does it have to be based in action or intention? 

Example 3: The Failed Entrepreneur

In our last example, we have someone who early retired with plenty of financial cushion specifically to try out some of his entrepreneurial ideas. He really wants to build a successful business to create a legacy, to pad his nest egg so he can fly first class once in a while, and to give himself the ability to leave a big fat bequest to charity when his time’s up. He has no intention of working at the company he builds forever (he’s dedicated to early retirement), but he at least wants to get the thing off the ground and help it turn a profit.

He reads all the books on entrepreneurship, watches all the TED talks, and then starts pitching his ideas to investors. None of them stick. He goes back to the drawing board, invests some of his own money in actually bringing one of his ideas to life, and then he goes back to the venture capital guys. Still no bites. He makes some big changes, and then some more changes, and then some more. Still zero interest. He considers giving up. Total revenue: Negative a few tens of thousands of dollars.

Whaddya think, retirement police? Is this guy early retired? Is “not retired” defined by effort or by income?

Labels Are Harder to Slap Onto Gray Areas

I’ve never had a problem with these so-called retirement police, probably because I’m not retired yet. And even though we now accept that we’ll probably make some money in retirement, we hope to never be in a position where we’re choosing what we want to do based on needing to make money. That’s why we’re making sure we’re well beyond financial independence and well cushioned before we pull the plug on our careers.

We’re going to choose what we do based on what seems fun, what fulfills a revived childhood dream, or what gives us a creative outlet or a chance to make a difference in our community.

And who knows, maybe we’ll get accused of not really being retired if we’re doing something cool with our time that doesn’t involve sitting in a rocking chair. So many of the examples we’ve seen on early retirement blogs have been someone making a bunch of money now, or a person professing that we should work a super small number of hours each week suddenly having a million things going on, and there it’s easy to cry foul that someone has violated their own evangelizing.

But most of us in early retirement won’t be that lucky (sorry), or maybe just won’t want to hustle that hard anymore. And that’s where it’s all gray area.

Looking at Where We Draw the Lines… Or at Our Own Bias

So we have those three examples: an artistic hobby turned money maker, a more business-like hobby turned money maker, and finally an intended money maker turned expensive hobby. Extremes at the ends for two of them, but lots of gray area in between. We could make up a million more examples (and feel free to in the comments!), but we cover a lot of bases with those three. So now let’s ask:

Which of those folks still feel “retired” to you? Or not retired? Why is that? 

And which of these factors matter when you think that through:

• Whether they intended to make money or not
• Whether they actively took steps that netted revenue
• Whether they did what they were doing based on earnings potential vs. purely for the love
• How much they ultimately earned in relation to their annual expenses
• What the activity itself is (seeming “like a business”)

And then let’s add to that:

• For any cases where you deem them “not retired” in your mind, would it change if they had left their careers at 65, not 35 or 40?
• What if they gave all the active income to charity and still lived off their passive income?

Time to Share!

I love getting insights into how people think about things, and I bet you do, too. So let’s share where we each landed on this stuff, and chat about it. And a few other questions while we’re at it: Would your answer have changed if we’d said “financially independent” instead of “early retired”? How do you define “retired,” and does baggage around that work affect your answer? Any other biases you discovered while doing the thought exercise that surprised you? Anyone discover that, gasp!, you ARE the retirement police? ;-)

In fairness, I’ll go first (but not to sway your answer! I love differing opinions): I think all three people in the examples are still retired, essentially no matter how much they make. The failed entrepreneur is borderline, but if he wants to call himself early retired, great. Of course I define retirement not as playing shuffleboard or any other tired old images, but as leaving your primary career to do the things you’d rather be doing. If you don’t need the money, you’ve left the career behind that got you to financial independence and you’re now doing the stuff that fires you up, you can call yourself retired all day long as far as I’m concerned.

Your turn!