For years when we were saving for early retirement, we were adamant: We do not want to have to work after we leave our careers.
Actually, a more accurate depiction of our feelings on the question would be to picture a toddler throwing a tantrum: “No more work! No! No! Waaahhhhhh!”
But along the way, two things changed:
1. We realized that having to work is a whole lot different from choosing to work. Work itself is noble, and acting like any work is bad is ridiculous. Sure, lots of work is overly demanding, harmful to our health or just boring, but some of it can be downright fun or come with nice perks – especially if it’s not forever.
2. We retired nearly nine years into one of the longest bull markets in history, making our likelihood of getting hit with a bad sequence of returns much higher than most. That could sink our retirement, or at least phase 1 of our retirement.
And so even though we saved beyond our original magic number (because we saved faster than expected, not because we worked any longer than we planned or preferred, Steve) ;-) we have still had sequence of returns risk on our minds in a big way for the last year or more. At the same time, all last year, the last year of my career, I kept feeling these pangs that, while I knew I still wanted to retire, I’d miss certain parts of the work. (Not of the job. Just of the work.)
And with that risk on our minds and those pangs on mine, some fun opportunities have come our way since retiring late last year that don’t involve shoving ads in your face here on the blog or pushing you to click on affiliate links. And we said yes. Because here’s the magical thing:
By taking on only a couple of small projects this year, we’re completely covering our expenses for 2018, allowing us to stretch our cash cushion and investments even farther. As far as I’m concerned, we’re now as close to sequence risk-proof as we could be without working for an unnecessarily long time.
I’m definitely sleeping well at night, knowing that.
And while I know a lot of us are just trying to make that work exit as quickly as possible, and don’t want to think too much about work later on, I have a case to make about why side hustling for only your first year or two of early retirement could be a super smart decision. Read on!
The Freedom of Working for Yourself in Early Retirement
Early on in our saving years, Mark was game to quit a little sooner if we could work a little bit in retirement, but I thought about it only in terms of the hourly rate we’d make through traditional employment, insisting, “We’ll never have as high an hourly rate as we have now. I’d rather work fewer hours now and then never need to again than have to work more hours at a lower rate later.”
It was sound reasoning on my part, but I was only looking at traditional employment, which I now realize was way too limited.
Whether you’re fully retired, semi-retired, mini-retired or just branching out into the brave new world of entrepreneurship, you have the potential to earn a much higher rate per unit of your time working for yourself than you do working for someone else.
Working for yourself comes with more risk and no safety net, and that’s one of many reasons we opted to stay with our traditional careers and traditional employers until we hit our magic number and magic date. We also knew we’d have to hustle like crazy to earn enough working for ourselves to replace the well-above-average income we were making in our careers. I’m more risk-averse than many, and so you may not feel the need to make the same choice, but there is a lot of comfort in knowing that you’re likely to keep earning about the same amount while you’re saving, perhaps with little bumps in pay along the way to help speed you along.
But, if you are diligent about saving and hit whatever number feels like your comfortable cushion, you no longer need the stability of a regular income, and dipping a toe into the world of self-employment or entrepreneurship isn’t really taking on any risk at all, assuming you don’t need to make a large upfront investment to get your business going. You don’t need to replicate an income large enough to let you save for early retirement, you only need to cover your living expenses, or perhaps only part of them.
It’s why I have started thinking of many early retirees not as retirees but instead as super conservative entrepreneurs, because what they actually end up doing in retirement is working on the things they find fun and interesting – for pay – but without putting any of their financial future on the line because they already saved their cushion.
(No, I’m not joining the internet retirement police. I still think you get to call yourself retired if you damn well feel like it, and here’s a thought experiment to read if you get caught up in whether someone “gets to” claim to be retired or not.)
So if you have a job or career now that you could potentially do, say, 10 percent of, but for a higher hourly rate because you get to subtract all the employer overhead (and you can do nearly all the work at home wearing a mouse onesie), would you consider doing that for a year or two in early retirement? If you would, keep reading.
The Benefits of a Side Hustle Year
The funny thing is that I’m on the record talking about quitting my side hustle, and lamenting that my side hustle of choice was in an especially exploited field. But then I was talking about side hustling while also working, and my part-time work was holding me back from advancing in my full-time career. By ditching my side gig after doing it for 10 years, I was able to commit more fully at work and climb the ladder faster, making it totally worthwhile in our last few years of saving.
But that’s not what we’re talking about here. We’re talking about when your main career is in the rear-view mirror, you have a cushion and don’t ever need to work again, but can make the choice to work in very small doses if you feel like it. Especially for a discrete time, not indefinitely.
Then, a side hustle for only a year or two might be a great thing, for a whole bunch of reasons:
You can earn better money – Assuming the economy is booming (not always true, of course), there is good money to be made working for yourself. If you can eliminate employer overhead and offer your services directly to clients, you can save them money by costing less than a larger company but still keep a higher percentage of the billings for yourself. Plus there’s that whole hard-to-get factor: if they know you’re retired and don’t need the money, they might be willing to pay more to get you. (I have seen enough cases to believe that this is very real for many folks. I’m not talking about bloggers.)
You get a great sequence risk hedge – Which would you rather do to head off sequence of returns risk: work one more year, or work a tiny fraction of your first retired year? That’s your call to make, but if you think in basic four percent rule terms (though you know I think there are problems with that), holding off on spending any of your assets for a year gives them a year to grow (or to avoid getting further depleted in a down market, if you hit a bad sequence right out of the gate). And that could mean either having more to spend in subsequent years if you keep your withdrawal rate the same, or being able to use a lower withdrawal rate when you do start tapping principle, which increases your chances of your money lasting.
You avoid creating a resume gap – While any early retiree who intends to truly stop working is going to face the resume gap at some point, it’s smart to delay creating a gap for a little bit while you figure out if you’re actually cut out for this early retired life after all. I’ve heard from a lot of people over the years who’ve ended up going back to work, and if you do some side hustling for yourself while you feel things out, it would make the re-entry to traditional employment much easier than if you make a clean break.
It could let you beef up your cash cushion – This didn’t apply to us because we went into early retirement with nearly three years worth of cash already in place (which seems a little high now, knowing what we know about this year’s income, to be honest), but if you didn’t want to divert some of your accumulation funds away from investments and into cash savings, you could use your first year of retirement side hustle as an opportunity to pad your cash stockpile.
You can tailor it to replicate the aspects of work you’re best at – Because you don’t need the money, you’re in total control of what kind of work you’ll take on. And that means leaning into those areas or tasks where you know you rock, or that make you feel most fulfilled. Like speaking and presenting was always my favorite part of work, so I can say yes to a select number of those opportunities now and no to work that I know will not play to my strengths.
You can be picky and only take work that’s fun to you – Whatever that looks like! Work that is truly fun feels like a scam. “Really, they want to pay me for this?!”
It could involve travel or other perks – If you’re lucky, and we have been, the side hustle work could involve some nice side benefits like travel or the chance to do something you’ve always wanted to do. I didn’t quite make it to United million miler before we retired, and so every mile that someone else wants to pay for to get me there is money we don’t have to spend.
Our Side Hustle Year
It was important to me to specify earlier that the side hustles we’re doing this year to cover our expenses aren’t about monetizing the blog. Rightfully, FIRE blog readers are beginning to question whether the confidence many bloggers have in early retirement is justified, or is the result of those same bloggers having a much larger hedge than “normal” early retirees in the form of their blog income, especially if they don’t disclose it, and most especially if that income comes from pushing certain products or services that may or may not be in readers’ best interest. It’s a critical question to ask, and I’ll have a lot more to say about this on Wednesday. (Heads up: It will be feisty. This one’s been brewing for a while.)
Instead, we’ve each taken on very small projects related to the careers we just left, and together those are all we need to cover us for the year. But it has all been on our terms:
It’s extremely limited in scope – Anything open-ended is a hard no for us. But something that’s very part-time for a month or two and can be done on our own time? Great.
It’s fun work – Clients we like and interesting problems to solve make for good side hustle work.
It’s work we feel awesome at – We’ve turned down projects that we could technically do but that aren’t in the areas of our expertise where we really shine. But when opportunities arose that would let us feel like rock stars, it was easy to say yes.
It comes with perks – The projects we’ve said yes to have involved travel to places we’ve been stoked to visit.
It fits our high school rule – It’s work that’s fun and that we feel good at, and that doesn’t come with a lot of busy work or logistical headaches. Easy yes.
The best part is: while we already achieved a point at which we’d never have to work again under all but the worst sequences of returns, we’re now rock solid for good. After these projects wrap, we’ll feel fine about embracing a big resume gap. I’m sure we’ll work again, but it might not be for a looooong time, and it won’t ever be because we have to.
Share Your Thoughts!
What do you think about doing a side hustle year to begin early retirement? Or are you a bigger fan of the entrepreneur life and going for a longer-term side hustle (or main hustle) to get out of traditional work sooner? For folks who’ve already retired, have you found yourself wanting to work more than you expected? Have you parlayed that into a profitable short- or long-term side hustle? Let’s discuss it all in the comments!
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Categories: we've learned