The freedom to spend your time as you want

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I’ve written a bit about retirement providing the freedom to spend your time how you want. It really is a remarkable thing to consider each day separately and define it how you wish. This is something you dream about as soon as you make the decision to retire, of course. That’s not to say life doesn’t provide all kinds of “must do” activities and chores – reality still exists! Outside of those essential matters, time truly is yours to spend how you wish in retirement. There is no boss other than yourself. We all think we know what this will be like but experiencing it is a different thing entirely.

Only two months into this I have found the freedom to spend time as I wish can be overwhelming. Candidly, I didn’t expect that at all! I think some of that is just how I’m wired. I have many interests, some of which I’ve been excited to explore for years. If I’m not careful, I’ve found I can get myself wrapped around the axle of not knowing what to do next. As others have written, having routines can help with this. For example, I’ve started to block time for chores vs. learning and personal development. It’s not a schedule, but structuring the time helps me organize that vast space of the “what could be”. I’ve seen the positive impact of this already but I know I have to keep at it.

The other thing I’m trying to avoid is the peril of stretching myself too thinly. I am prone to feel like I need to make progress in multiple areas at the same time else I’m falling behind. I’ve been documenting my “idea funnel” of things I’d like to explore using Notion, while reminding myself it’s a wish list. There is no pressure to advance on these things today. I capture things that are truly tasks separately, and deadlines often apply. Right now, I am focusing on two areas for personal development and pleasure: this website and cooking. Reminding myself of that prioritization is helping me not feel guilty about lack of progress in other areas. We all need to define our critical few priorities, whether retired or not!

I expect my feelings on these topics will continue to evolve as I gain more experience in this new way of living. I’m looking forward to reading my posts six months or a year down the line to see just how much has changed. I am fully prepared to be very surprised!

[I’ve realized my initial posts have been a bit lengthy. This is my attempt to put a shorter article together to capture the kinds of things I’m thinking about. Please do share any feedback on the various article types and what is of most interest to you! Thanks.]

photo credit: “IMG_5353” by pockethifi is licensed under CC BY 2.0

Be not afeard! Embrace change

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This post is part two in a series about factors I have found best enable success in the workplace. Click here to see the others in the series.

Be not afeard. The isle is full of noises,
Sounds, and sweet airs that give delight and hurt not.

The Tempest; Act III, Scene II by William Shakespeare

Introduction

When I reflect upon my own career, I find that the times where I learned the most are those in which I took bold steps. By that I mean when opportunities for large changes presented themselves – by my seeking them out or when they just landed in my lap, I elected to accept them. I do not mean to say that one should be hasty and leap at everything presented to you. However, when considering the balance of being risk averse vs. moving ahead with confidence, I have found that erring towards the latter is the most productive and has provided the greatest growth opportunities for me.

My experience has demonstrated that the keys to enabling success are: never stop learning, align yourself with great mentors, embrace change, work hard, and leverage your strengths. To these I always add good fortune / luck, since like it or not, it has a role to play.

Embracing change accelerates your personal growth

I have worked at several start up biotech companies during my career. One of these comes to mind when considering this topic. I was in my fifth year at a mid-sized division of a large multinational corporation considering what my next career step might be. I was successful at this company but felt my pace of growth was slowing. I knew a couple of people at a very stealthy startup just a few miles away, and one made me aware of a job posting. The role was in product management, the same as my current position. I interviewed for that job and after several discussions, I was offered a completely different role at the company! This position would be to build and lead a customer service and support organization – something I had never done before. What to do?

I had good adjacent experience – I knew the field in which the company operated, I had some direct customer interaction from product management, and had handled escalated support cases while in R&D. But for sure, I didn’t know the ins and outs of how to put together and lead this kind of organization. After some consideration, I decided to take the plunge. Why? For starters, I assumed these obviously intelligent and successful people wouldn’t have offered me the job had they not believed me capable. I also knew I would learn a lot doing something I had never done before – experience had taught me this. Additionally, the few people I knew at this small company were confident in the technology (about which I knew nothing until my first day of work!) – so that didn’t seem too risky. Lastly, as my wife reminded me, should this job not work out, there wouldn’t really be a downside. If it didn’t work out I could find a new job when it was time to go. There were other opportunities around and I had about thirteen years of good work experience by that point. So I went for it!

What was the outcome? In short, I learned more in the five years I was at that company than any other role in my career, without question. I took part in growing a company from a small, pre-launch startup to one with hundreds of employees, went through two acquisitions, helped establish and maintain a customer base of thousands, and facilitated a blistering pace of revenue growth. I learned how to build and lead a large global support organization (which came in handy in a future role), and how to be a better people leader. Being part of the company leadership team gave me exposure to numerous mentors from whom I learned a tremendous amount – more on the role of mentors in a future installment in this series! This role also taught me more about dealing with adversity and difficult situations than any other in my career. Importantly, I had the opportunity to work with hundreds of tremendously talented colleagues and customers, growing both my network and my knowledge substantially.

A case for staying put?

Should you always leap at what is put before you? Of course not. Consideration is warranted for any big decisions. If your current role and company is providing you great opportunities for growth and you feel strongly that “seeing it through” for a longer period makes good sense, it may be a great option at present. Balancing opportunity cost is certainly part of the equation when contemplating change. But I would recommend to always be evaluating if that calculus has changed.

On the other hand, I have had numerous colleagues who were unhappy in their role or at their company, and had been so for years. They were talented and well connected, so opportunities came their way. They often had little to no barriers to making a change, which is not always the case. However, they never budged for fear of change, electing to stay with what they knew, warts and all! That sounds like a pretty miserable way to spend the majority of your waking hours, doesn’t it? It is more common than you may realize, in my experience. If you aren’t growing, aren’t happy, and see opportunities to turn that around, I would assert that there is no time like the present to do that! There is also peril in staying put and waiting for “unicorn” jobs, those perfect opportunities that might come along once in a lifetime. As many have said in various ways, “perfect is the enemy of good enough”!

Conclusion

Considering my example, would I have continued to grow had I stayed at my previous company? Almost certainly. I had a good role there, was well regarded, and had opportunities at other parts of the larger corporation. However, I assert that my development was greatly accelerated by the choice I made to leave, setting aside the more comfortable or “safe” path and embracing the big change presented to me. Was it all sunshine and roses? Of course not – but what is in life? We grow the most when we stretch ourselves, and challenging times can provide the greatest catalyst for that growth. In summary, embracing change is a huge enabler of growth and my own experience suggests that if you align yourself with good people, use these opportunities to learn, and work hard, success will follow. What has your own experience been?

photo credit: Change by Nick Youngson CC BY-SA 3.0 Alpha Stock Images

When can I retire?

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Introduction

It’s hard to imagine a more exciting yet anxiety-riddled question, right? This is the big one! First let me start with some humility: I am absolutely standing on the shoulders of giants when it comes to this topic. I’ve been incredibly fortunate to find so many amazing resources from talented and knowledgeable people over the years. This area is the one that like most people, has provoked the most research for me. You’ve no doubt heard and likely experienced the fact that anything involving money can be among the most stressful things in our life. Contemplating pulling the plug on your income and employer-provided benefits certainly provokes lots of anxiety and warrants lots of research! My hope is that I can share a few things that I have found useful and point you to some excellent resources (section at the end of this article).

Before we dive in – a reminder that I am not a financial advisor nor should you consider anything in this post as investment advice. Best practice is always to talk with experts (financial advisors, tax professionals, etc.) about your specific situation before making any investment decisions.

The core concept

From a money perspective, you are ready to retire when you are financially independent (FI: the first half of FIRE!); that is, when you can securely cover your anticipated expenses for the duration of your lifespan without reliance on your current employment income. There’s a lot packed in there, right? This kind of planning is full of assumptions so let’s get that concept out there now. I’m a planner by nature as well as an optimist, and have many long lived relatives, so I’m assuming I make it to at least 95 – or a bit less than another 50 years. In addition to not knowing how long I’ll live, I don’t know how my expenses will change over time. So I chose to make a plan based on my current expenses, with a teenager still at home and paying off a mortgage. Many people explicitly plan on their expenses decreasing over time since they most often do, and also model in planned future income like Social Security, pension, etc. I prefer to keep spending flat, don’t have a pension, and ignore Social Security income given the uncertainty around it in the future – though this is a conservative position. It helps me sleep at night, OK? So the big nut to crack is determining what your spending looks like – and that is the next section.

Before I go there – the FIRE community rightfully tends to take this opportunity to point out that achieving FI does not mean you have to retire early (RE). It simply means you have the freedom to do so when you are ready. Stepping away from the workplace is a very individual decision. It needs to be “the right time” for you and your family. For us, FI came at a time when I was in a fulfilling job, working at a wonderful company surrounded by talented colleagues doing impactful work. In other words, there was no pressure from that side. The decision ended up being pretty easy from a personal perspective. Our daughter was finishing middle school and so knowing that we’d have to move due to housing prices in the Bay Area, the transition to high school seemed a good time to pull the trigger on retiring – the only other option being waiting another four years until she graduated. My wife and I didn’t want to do that. That was our path, and you will need to choose what’s right for you. It’s liberating having the freedom to retire once you hit FI. But many people elect to wait longer than that, or take other approaches like reducing their hours, changing to a less stressful/less lucrative field, etc. There is not one answer to the timing question!

How much money do I want to live on?

This is an essential question as I’m sure you agree. I’ll be honest – for most people this part of the equation takes some real effort, and it’s worth it. I’d hazard the first question to be answered is what are you actually spending right now! Few of us have budgets that we adhere to strictly, as many surveys point out. I had not really budgeted for years, rather looking at things flipped around: for most of my career, I took care of our fixed expenses, “paid myself” by putting away my targeted savings, and then considered the rest available for variable costs (i.e. the fun stuff for the most part). This meant that I didn’t have a great understanding of our true spending. Two years before retiring I started to work out a zero-based budget. At first I just roughed it out to get an idea of what we spent and what cuts we could (and probably should) make. About a year before retirement I got much more serious. I kept coming across mentions of software called You Need a Budget (YNAB) – there’s a really straightforward associated book as well, which I’d recommend. Honestly, this was the game-changer for me. It’s worth a whole post, really. Let’s just say I started explicitly tracking all of our expenses in detail using software, and “giving every dollar a job”. This allowed me to make a true zero-based budget and make adjustments as needed to determine our desired retirement “paycheck”. We then lived on this budget for nearly a year before my last day of work, demonstrating it was achievable even living in the Bay Area. This was another conservative approach as we knew that while we would have one new (large) expense in retirement – out of pocket health insurance (a topic for another time!), many of our expenses would be going down. It is this effort that truly gave us the data and the confidence to finally pull the trigger. No matter your timeline to retirement, if you like the idea of YNAB, please check out the free trial! Understanding your spending is critical to speeding up both debt repayment and increasing your savings. If you use that link and end up signing up, we both get a free month!

OK, but how much do I need to save?

This big topic warrants a series of blog posts so let’s start simply for now. First of all, many people in the FIRE community like to tout the 4% Rule that originates from the Trinity study. In brief, this states that if your annual spending is no more than 4% of what you have saved, you’re in the clear. So you take 25 times this annual spending and that’s the total starting amount you must save. Example: If you plan to spend $5K every month in retirement or $60K every year, you need to save $1.5 million. The truth is more complicated, since it has many assumptions built in. For example, the Trinity study contemplates a 30-year retirement period – too short for what many are aiming to do in early retirement. At the end of the day, it all comes down to calculating your safe withdrawal rate (SRR), which will lead you to how much savings you need to start with. In other words, how much can you withdraw from your savings each year without running out of money before you die. Your own SRR will be determined by the factors you choose to model for your own situation. Many bloggers have written on this topic and I’ve linked one of my favorites in the Resources section below. In short, you must come up with this number. For us, I determined that no more than a 3.5% SRR makes sense, so we needed to save at least 29X our projected annual spending. That assumes no other income is produced by my wife or myself after retirement – this is already not the case. But again, it’s about having the freedom to not need that other income.

Of course given the tax man, the rules around when you can withdraw from pre-tax retirement accounts, etc. it’s not simply about how much money you need to save. There is much more to consider regarding investment strategy, asset location, maximizing tax avoidance opportunities, and so on. These are topics for another time, and another example of areas where resources abound! I’ve linked to a good post on this in the Resources section, as well as to an excellent financial podcast / YouTube channel.

One more (large) factor to consider: what does retirement look like for you? Is it a spartan lifestyle (see leanFIRE advocates like Mr. Money Mustache), a lavish one, or more likely somewhere in between. What do you want to spend your time on? What new things do you wish to learn? It is essential to ensure you know the answer to these questions and have worked through all the details with others in your family. It would certainly be tragic to pull the trigger on leaving the workforce only to realize that you have underestimated your desired spending in the interest of retiring sooner. Take your time, determine your priorities, and plan for the future you want to have!

In conclusion

To summarize, you can securely retire anytime after you have achieved financial independence. That means you have determined your desired (and achievable!) spending in retirement and have sufficient funds saved to cover those expenses for the remainder of your life, including whatever contingency funding your own comfort level requires.

This post is only a starting point; one introducing a few key concepts. I hope you have found it a useful introduction and jumping off point! As you see there are a number of individual factors that need to be considered to determine your own strategy. This doesn’t have to be scary – in fact it can be a lot of fun. Just do it at a pace that makes sense for you. These are very impactful decisions and therefore warrant taking time to really understand the landscape. The good news is just how much great information is out there to help!

Resources

Admittedly I need to put some effort into a categorized resources list for the blog. In the meantime, let me link to some sites pertaining to this article that I think you will find useful.

The Retirement Manifesto is an excellent blog. Fritz has written so much on this topic and I’ve learned much from him. One post I’d recommend is 5 Milestones You Must Reach Before You Retire. As you’ll see, I’ve only covered a couple of them here. Another great one is How to Build a Retirement Paycheck, which digs into some key issues in detail.

The Money Guy Show is a wonderful and entertaining financial podcast. I’ve been following Brian and Bo for eight or nine years I think – first as an audio podcast, now on YouTube. Full disclosure: their podcast eventually led me to sign up with them at Abound Wealth as my financial advisors. I get no compensation from recommending them! I just love the idea of paying it forward given all the benefits I’ve seen from working with them.

Early Retirement Now is a great blog and is perhaps most famous for Big ERN’s exhaustive series on Sequence of Return Risk (SRR). I won’t pull any punches: a 38-part series of SRR posts is not for the faint of heart. But reading it over weeks took me from extreme anxiety about what my SWR could be to a good understanding as well as confidence. This is highly recommended for the financial nerds among us!

ChooseFI is one of the most popular FIRE podcasts and for good reason: Brad and Jonathan have covered so many key topics and interviewed really great guests over the years. This one leans a bit more towards a leanFIRE approach at times but I find many of the topics they touch on valuable.

The financial independence subreddit is a very active community and one that I recommend (with the usual large boulder of salt associated with Reddit). There’s lots of great discussion here and even a weekly Q&A thread that can be very useful when you are getting started. You’ll find a lot of advocates of the 4% rule here so caveat emptor.

If you end up going with YNAB, you can’t beat Nick True’s Mapped Out Money YouTube channel. I have learned so much from his easy to follow videos and you will find tons of people referring to his channel. On a related note, there’s also a very active YNAB subreddit that I’d recommend.

photo credit: “Retired License Plate” by aag_photos is licensed under CC BY-SA 2.0