Anyone Taking Early Retirement?

[QofQuimica]

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Interesting thread. One thing I didn't see mentioned is that retiring early (especially very early) isn't necessarily worth it. There are a lot of downsides to retiring early.

http://whitecoatinvestor.com/14-reasons-why-you-shouldn’t-retire-early/

Personally, I'm not willing to save 2/3 of my income when the alternative is to go to work a few days a month for a few more years and only have to save half that. Spending is fun too.

I've read that article (and most of the rest of your blog, so thanks for that, BTW), and ironically, that's one of the posts that helped convince me it was both possible and desirable for me to retire decades earlier than I had planned in the past. Just read through it again going, nope, don't care, nope, N/A, nope, N/A, nope....with the exception of health care, which I will have to buy, none of the rest of your list is an issue or applies to me.

In general, it's a straw man, this all-or-nothing thinking that people do about retirement. Who says that just because I can afford to never work again that I will never earn another dollar? I'm seeking financial independence, not decades of sloth. Medicine is already my second career; no doubt I'll move on to a third that I do for much less money, and on my own time at my own pace instead of showing up when and where someone else wants me to.

FWIW, I'm not including SS because it's more conservative to plan that way. I also assume my investments make zero return, which is obviously not the case most years. So my problem will likely be the opposite: more money than I could ever spend in retirement, especially once I do start taking SS. I am planning for significant charitable giving (both time and money) as well.

 

[Stroganoff]

Heh, I dropped the MrMoneyMustache link in the SDN finance forum in like 2013. Glad some of y'all got hooked. 😉

White Coat, I do love your blog, but on this topic, I almost want to say that "early retirement" is a misnomer. It plays on people's stereotypical perceptions of old people golfing or watching TV or dying. I call it more FI - financial independence nowadays... Extreme deferred gratification pays off in spades due to compound interest + the willpower and mental forbearance it instills. Then when you have enough principal to do whatever the heck you want, then you can spend like a rock star.

And still work as much or little as you want. I dunno. As long as I maintain good health, I don't mind delaying the "good life" for another decade or two.

I do agree in some balance. I'd hate for my dying thought as I get hit by a bus to be "Dammit! If only I had splurged more! Now my kids will blow all the monies on **** they didn't earn!"

Although... it's a good lesson in finding happiness without getting addicted to materialism. So quality of life can still be maintained without living in a dangerous ghetto for example.

 

[QofQuimica]

Agree. I certainly don't live in a dangerous ghetto. I look outside my window on this beautiful sunny day and see hibiscus flowers and palm trees waving in the gentle January breeze, which is pretty nice. I just don't live in Cali, which in and of itself is a huge boost in terms of cutting expenses. 😉

I was still a resident in 2013, so hadn't started reading this forum yet. And I didn't find MMM until a few months ago. But I was and am already on board with the general MMM philosophy, albeit not all of the specifics. (For example, I will never do my own house repairs, or likely even own my own home in the near future, since currently I value the freedom and flexibility to move and live wherever I want more than I value owning a house.) But I still agree with the general gist. And agree with you (and him) completely about the ER issue.

 

[The White Coat Investor]

I'm not yet financially independent, in that I couldn't live forever at my current lifestyle without ever working again. But if I cut my lifestyle dramatically, I could be financially independent right now. I could retire in 5 years at something very close to my current lifestyle. So we're starting to spend a lot more. The alternative is to start cutting back on work.

 

[Cooperd0g]

I will have the ability to retire at 50, only 12 years away, with $100,000 annual income from pension and investments. However, I will probably let the investments continue to grow because I'll likely be fine on the pension alone. I will also probably work a few days a week, or few weeks straight in stints doing locums, which will also make up the difference between pension and $100k. And my house may not be COMPLETELY paid off, but pretty darn close. Then 9.5 years later I would be able to withdraw even more per year from investments and be close to $125k annual income without working assuming I didn't even put anymore into those accounts. If I continued to max them out while working part time my retirement income by age 59.5 could reach $150k and that is before social security even comes into play.

When you consider things like having your mortgage paid off, no longer having to save for retirement because you are already there, not having to pay for life insurance or disability, I could theoretically expand my lifestyle significantly in retirement. I only make $120k now and save about $53k per year between dedicated retirement funds and future retirement home and I think my life is pretty good as it is. My wife only works 1-2 days a week because she wants to, we have a really nice apartment, a nearly new truck to pull a camper we paid cash for, bought some new rifles and other hunting gear, blah, blah, blah. I also don't have to pay for disability or malpractice, nor do I have to worry about medical insurance when I retire because I'm in the military. The fact that I live pretty frugal now and save a bunch, though not MMM or some of the others on this thread, also allows me to choose whatever specialty I want in the military without any concern for "what will I do when I'm out of the military" or "how much can this specialty pay me in the civilian sector?"

I have plenty of things to keep me busy in retirement like training a SAR dog, fishing, hiking, paddle boarding, kayaking, rafting, hunting, skiing, reading, doing some medical volunteer stuff like being the doc for local school sports games, rodeos, part time flight instruction, planning epic trips, making GoPro videos from all the cool/fun stuff I will be doing. People who are "bored" in retirement have a serious lack of imagination. Take care of yourself physically and cultivate some fun hobbies and try to live in an area where you can actually participate in those hobbies and life will be good.

 

[W19]

I met a physician who told me he was 'semi retired' in his late 30s... He is an FM doc who finished residency at 30s and worked in ED in a small town as a 1099. He said he was making 400k+/year working 60+hr/wk...His student loan was just a little less than 100k according to him... He said they (him and his wife) lived off his wife salary only, which was around 60k/year... They saved all the money he made--rarely touched his salary... After working for 8 years, they accumulated over $2.5 million bucks. They moved to Florida, purchased a bigger house and paid cash for it... Now he is working 24 hrs/wk and his wife works 2 days/wk as a RN and their salary combined is 120k+/year and they take 2 months vacation every year... That was the story he gave me... I have been to his house multiple times and he has a nice home... he and his wife also drive nice cars... I guess he is probably in his mid 40s now... The guy told me him and his wife are having the best time of their life now.

I plan to do the same thing once I am done with med school, but I don't if I will be able to resist the urge of living a lavish life once I start making money...

 

[sazerac]

Live like a resident, earn like an attending.

This is a lot easier to do if (1) you start doing it with your first paycheck as an attending, so you don't get used to the lifestyle boost, and (2) have that savings automatically transferred out of your paycheck, so you never see it nor feel like you have to write a check every month to the retirement fund.

The folks who followed those two rules during my first career were the ones who took early retirement.

 

[QofQuimica]

Live like a resident, earn like an attending.

This is a lot easier to do if (1) you start doing it with your first paycheck as an attending, so you don't get used to the lifestyle boost, and (2) have that savings automatically transferred out of your paycheck, so you never see it nor feel like you have to write a check every month to the retirement fund.

The folks who followed those two rules during my first career were the ones who took early retirement.

This.

It is totally doable if you make up your mind to do it, w19. I'm not a special genius when it comes to money; I'm just saving/investing a lot more than I spend. And good news: you don't even have to wait until you retire to move to Florida. 🙂

 

[KM Awad]

Sure there is. You just have to have a high enough savings rate and a low enough COL. Never mind "The Millionaire Mind"; are you familiar with the MMM blog? He takes things to a bit more of an extreme than most people would be able/willing to do, but it gives you a sense of what's possible if you're really serious about cutting expenses and retiring early. I spend quite a bit more money per year than he does (more like $30,000/yr and I don't have any dependents). However, my attending salary is also significantly higher than his salary was when he was still working, so I can still maintain a higher absolute savings rate than he did even with all of my "frivolous" spending. [If you're interested, MMM supports a family of three (himself, his wife, and one child) on ~$24,000/yr.]

You didn't tell me what your 529 investments were. Even though I don't have any kids of my own, I do have a niece whose college I'm paying for, so it's not an entirely academic question to me. Have bought her a prepaid tuition plan that will pay for her to attend any of our state universities here in FL, but I'm still thinking of doing a 529 (though Utah) to fund room and board/other education expenses for her.

MMM is a great blog and he does spend little. But I've even seen less spending like Jacob from early extreme retirement at one point he spent only $7000 per year! Granted he was living in an RV. I may have missed why are you pursuing early retirement?

 

[KM Awad]

I comp

Heh, I dropped the MrMoneyMustache link in the SDN finance forum in like 2013. Glad some of y'all got hooked. 😉

White Coat, I do love your blog, but on this topic, I almost want to say that "early retirement" is a misnomer. It plays on people's stereotypical perceptions of old people golfing or watching TV or dying. I call it more FI - financial independence nowadays... Extreme deferred gratification pays off in spades due to compound interest + the willpower and mental forbearance it instills. Then when you have enough principal to do whatever the heck you want, then you can spend like a rock star.

And still work as much or little as you want. I dunno. As long as I maintain good health, I don't mind delaying the "good life" for another decade or two.

I do agree in some balance. I'd hate for my dying thought as I get hit by a bus to be "Dammit! If only I had splurged more! Now my kids will blow all the monies on **** they didn't earn!"

Although... it's a good lesson in finding happiness without getting addicted to materialism. So quality of life can still be maintained without living in a dangerous ghetto for example.

I completely agree with this. Financial independence is a very different mindset than retirement. People often equate retirement as the end of life. But I tend to think of it along Mr. MM in that being FI opens doors to other things. Moreover to your point, separating the idea that spending money must equate with happiness. I think mr. Money mustache wrote about this recently.

 

[KM Awad]

Interesting thread. One thing I didn't see mentioned is that retiring early (especially very early) isn't necessarily worth it. There are a lot of downsides to retiring early.

http://whitecoatinvestor.com/14-reasons-why-you-shouldn’t-retire-early/

Personally, I'm not willing to save 2/3 of my income when the alternative is to go to work a few days a month for a few more years and only have to save half that. Spending is fun too.

Jim, thanks for the link. I only started reading your blog recently and it's been great but I missed all your "back catalogue".

I think as it was mentioned later that it's not all or nothing in terms of early retirement. Financial independence is a better term. I personally don't envision never working but I do like the idea of being FI. And I agree the right kind of spending can in fact bring you some happiness.

 

[QofQuimica]

MMM is a great blog and he does spend little. But I've even seen less spending like Jacob from early extreme retirement at one point he spent only $7000 per year! Granted he was living in an RV. I may have missed why are you pursuing early retirement?

He does live in an RV, with his wife to share half the expenses, no car, and no kids. While he has some useful tips, as with MMM, I would argue that it is the philosophy of downsizing (and being more of a "renaissance man" as he calls it) that is helpful, rather than seeing what he does as a template to follow for one's own life. Put frankly, most people would not be willing to take things to his extreme. If MMM is a crunchy granola type (which he is), ERE is a rugged survivalist type. But most people do not want to live entirely off the grid; look at how much resistance even MMM's lifestyle gets. And the good news is that living off the grid is not necessary in order to achieve FI. Like MMM, I see the solution as being a combination of tactics: having enough passive income coming in to support oneself at a reasonable middle class level while not blowing large amounts of money on things rather than experiences. My goal isn't to avoid needing to spend any money on anything!

As for the answer to your question, I, like you, desire FI. Doing part time work you love on your own terms is very different than being a salaried employee (which I think most people who want FI dislike), or devoting your life to a business as someone who is self-employed but cannot afford to stop working. I wish to stop being a salaried employee and to not be dependent on an income from being self-employed. Ultimately, what achieving FI is all about is having choices in life.

 

[deleted547631]

I would like to be financially independent by 50. My target portfolio fund is $2 million with living expenses less than $70K per annum. I'm counting on PAYE / PSLF sticking around to help make this happen.


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[mostwanted]

32 now, part time by 40 and FI by 45.

One yr post fellowship, paid off all student debt plus other debt (125-150k)
Saving rate 250k plus /yr
No 401k investment as of yet.
Planning 1-2 investment properties per year and likely other ventures.
Definitely possible, need discipline and foresight.


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[deleted547631]

Saving rate 250k plus /yr

Very impressive!


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[Mman]

32 now, part time by 40 and FI by 45.

One yr post fellowship, paid off all student debt plus other debt (125-150k)
Saving rate 250k plus /yr
No 401k investment as of yet.
Planning 1-2 investment properties per year and likely other ventures.
Definitely possible, need discipline and foresight.


Sent from my iPhone using SDN mobile

I'd be curious about your job. Let's say graduate college at 22, finish med school at 26, 4 years anesthesia residency is now 30, fellowship makes 31. First year out pay off 150K of debt. How in 2nd year out are you saving 250K per year without a 401K? Do you not pay taxes? Even if you made $500K per year and married filing jointly you'd have nearly $200K in taxes per year between state and federal and local/property (depending on where you live). Does your spouse provide a significant income? Because I don't know anybody hiring people at $500K per year straight outta fellowship and I know people that make 7 figures.

 

[mostwanted]

I'd be curious about your job. Let's say graduate college at 22, finish med school at 26, 4 years anesthesia residency is now 30, fellowship makes 31. First year out pay off 150K of debt. How in 2nd year out are you saving 250K per year without a 401K? Do you not pay taxes? Even if you made $500K per year and married filing jointly you'd have nearly $200K in taxes per year between state and federal and local/property (depending on where you live). Does your spouse provide a significant income? Because I don't know anybody hiring people at $500K per year straight outta fellowship and I know people that make 7 figures.

What you said is pretty accurate minus the question marks and the last two sentences. I didn't save 250k this past year (paid off all debt, bought a car etc), but from here on out I should be able too. The only major expense I see in the near future is buying a house, I will buy cash and likely not exceed 300k. I am married, single income, and live in a state with no income tax. Renting for now (<$1500/month). My take home is close to 300.

 

[Mman]

What you said is pretty accurate minus the question marks and the last two sentences. I didn't save 250k this past year (paid off all debt, bought a car etc), but from here on out I should be able too. The only major expense I see in the near future is buying a house, I will buy cash and likely not exceed 300k. I am married, single income, and live in a state with no income tax. Renting for now (<$1500/month). My take home is close to 300.

The only thing I would say is the money you think you should be able to save rarely equals the money you do end up saving. If you will be buying a house in the near future, it will significantly cut into your retirement savings, not only saving the cash to buy it, but the upkeep. And if you live in a state with no income tax, you likely will pay a lot more property tax than those in states with income taxes.

I greatly encourage you to aim high with the savings as you are doing, but when planning life you should assume you will be saving a lot less than you hope to. And if you have kids at some point???? Oh boy. In other words, don't plan on working part time by age 40.

 

[mostwanted]

The only thing I would say is the money you think you should be able to save rarely equals the money you do end up saving. If you will be buying a house in the near future, it will significantly cut into your retirement savings, not only saving the cash to buy it, but the upkeep. And if you live in a state with no income tax, you likely will pay a lot more property tax than those in states with income taxes.

I greatly encourage you to aim high with the savings as you are doing, but when planning life you should assume you will be saving a lot less than you hope to. And if you have kids at some point???? Oh boy. In other words, don't plan on working part time by age 40.

I think you are absolutely right, will have to roll with the punches. Those are my rough estimates and I am hoping to have other streams of income in 10 yrs. Goal is more financial independence than retirement.

P.S. Thanks for your advice a few years back at beginning of residency on becoming an excellent physician.

 

[univlad]

Im putting roughly $120,000 per year into a combination of 401K and Profit Sharing programs as well as having another pension type plan (around $50,000/year) and buying around 1 rental property per year (hopefully, so far so good). My income is obviously quite generous.

What sort of rental properties are you purchasing? Do you maintain them yourself or hire a service to maintain and keep tenants?

LADoc00 said: ↑
I thought I was saving a lot as well, until very recently when I learned more than a few people I know are saving around $800,000 AFTER taxes every year...I had a near meltdown as I thought I was way ahead on the curve saving 175-200K/year only to find out I was a rank amateur at this.

Wow. What specialties are they in? Or maybe they are double income high specialty, no kids?

 

[dozitgetchahi]

What sort of rental properties are you purchasing? Do you maintain them yourself or hire a service to maintain and keep tenants?

LADoc00 said: ↑
I thought I was saving a lot as well, until very recently when I learned more than a few people I know are saving around $800,000 AFTER taxes every year...I had a near meltdown as I thought I was way ahead on the curve saving 175-200K/year only to find out I was a rank amateur at this.

Wow. What specialties are they in? Or maybe they are double income high specialty, no kids?

Yeah exactly. No way in hell this is actually happening unless they're dual income big money specialties or they have big income streams outside of medicine to work with.

They're apparently saving far more than 95+% of doctors are making in a year.

 

[deleted547631]

Yeah exactly. No way in hell this is actually happening unless they're dual income big money specialties or they have big income streams outside of medicine to work with.

They're apparently saving far more than 95+% of doctors are making in a year.

I know a few PP spine neurosurgeons hitting these numbers after taxes. None of them are saving that much, though! I agree, there's more than likely other income streams at play.