Author Topic: Side Hustles & Safe Withdrawal Rate Relief  (Read 9846 times)

arizonawildcats

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Side Hustles & Safe Withdrawal Rate Relief
« on: March 27, 2015, 09:47:05 PM »
There are many on this forum who may have a hobby that makes money (blogging, selling online, etc.).   You may choose to keep this income stream in place even after a decision is made to leave the 9-5 job.   

Let's say you are planning for a 40+ year semi-retirement and a 4% inflation adjusted withdrawal rate.   I like the idea of planning on a 4% withdrawal rate but taking income from the side-hustle first.  This decreases actual withdrawals to an amount that is less than planned.    The strategy in effect will increase the probability of the withdrawal rate holding up over the 40+ year time frame.   

Are any of you considering this approach?   

arebelspy

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #1 on: March 28, 2015, 12:17:41 AM »
Yup.  That means you aren't actually doing a 4% WR - if you can cover 25% of your expenses, you only need a 3% WR to cover the other 75%.

And if your expenses are only 20-30k or so, making 5k-7.5k seems pretty feasible.

When your expenses are low, even a little income can decrease your WR enough to make it easily sustainable.
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Gray Matter

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #2 on: March 28, 2015, 05:39:02 AM »
I'm contemplating a ramp down approach in general.  Work full-time or nearly for now, save as much as possible.  At some point, stop saving and go part-time or take lower-paying jobs, just enough to pay the bills and let the assets grow, at some point start drawing down on those assets, but still working part-time or consulting for those one-off expenses lhamo mentioned, then eventually stop working altogether if I want to.

MandalayVA

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #3 on: March 28, 2015, 06:05:00 AM »
Both Mr. Mandalay and I are planning side gigs/hustles when we FIRE--he'll probably get a part-time job while I'm planning to write.  Hopefully we'll make enough so that we can leave the stash alone and just live off the side gigs.

kpd905

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #4 on: March 28, 2015, 06:36:43 AM »
I always find some weird way to make money, my parents laugh every time I tell them about a new side hustle.  Without counting credit card churning, I think this will be the first year my side hustle actually makes over $3000 or so.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #5 on: March 28, 2015, 08:01:13 AM »
I thought we would need $1,200,000 to RE which would throw off 48,0000/yr.

Then I realized I could easily do consulting like I'm doing now to make $4,000/yr
Travel hacking cuts down the required "fun money" for travel by another $8,000/yr
Even some random paid gigs throughout the year will almost definitely earn another $1-2,000/yr

Now I only need $36,000/yr or $900,000 to RE. That is if I don't get into any kind of other passive income streams, real estate, etc.

I have a feeling I will be a SWAMI.  Life is great when you have choices.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #6 on: March 28, 2015, 05:12:54 PM »
Right now, I'm able to just take dividend income and actually leave my investment stash capital alone.

My wife has got herself a part-time side hustle that is throwing off way more income than she needs to meet her share of our basic living expenses... and then some.  So she also doesn't need to draw from her investment stash capital.

And in the background, I can always look into monetizing my blog if that starts making sense effort-wise.  (And she could always start selling some of that dozen-a-day egg production she's got going!!)

MsRichLife

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #7 on: March 28, 2015, 05:32:06 PM »
Yep, we are planning a few side hustles to keep a bit of cash trickling in post-FIRE, but also because we are entrepreneurial in nature and can't imagine not doing so.

andystkilda

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #8 on: March 28, 2015, 08:33:22 PM »
We have a few ideas of side-hustles or freelance work that we can 'turn on or off' as required after FIRE.

I think something that you can choose to do a few hours a day, a few hours a week, or not at all for a few months is ideal - that's what I'm aiming for.

electriceagle

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #9 on: March 30, 2015, 06:45:14 PM »
My idea is a little different from most: reach FI on core expenses, with only a little "fun" money in the budget, then split the money from side hustles 50/50 between additional "fun" money and additional savings/withdrawal reduction.

JLee

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #10 on: March 31, 2015, 09:33:50 AM »
My idea is a little different from most: reach FI on core expenses, with only a little "fun" money in the budget, then split the money from side hustles 50/50 between additional "fun" money and additional savings/withdrawal reduction.

I'm a long ways out, but that's similar to my plan. Get enough built up to live on fairly comfortably at 3-4% WR, then pick up side gigs / contract work to pay for toys, vacations/etc.

bzzzt

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #11 on: March 31, 2015, 11:05:28 AM »
My career will make for a great side hustle in ER. I'm an electrician. The industry gets harder to have good years as you get older because contractors generally want younger guys who can "run", but that just means I can choose the projects I do and won't have to take on crappy ones.

I'm also a fairly good mechanic. I occasionally spin wrenches for friends/family already.

I'm also getting my CDL since my employer will cover most of the cost, but I don't really want to drive a truck anymore than I have to do it.

Worst case scenario, it's fairly easy to start a lawn service and equipment is relatively inexpensive and/or I already own it. The best benefit to this is the exercise and I get to be outside (I hate offices).


retired?

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #12 on: March 31, 2015, 12:33:47 PM »
My idea is a little different from most: reach FI on core expenses, with only a little "fun" money in the budget, then split the money from side hustles 50/50 between additional "fun" money and additional savings/withdrawal reduction.

My stash can cover core expenses.  My concern is that my wife's definition of "core" is different than mine (she paid $25 to have "Happy Birthday ______" on our daughter's school's outdoor sign.....Call me cheap, but.......)

I did a calc to determine reasonable expenses (prior to quitting, I focused on savings rather than a full budget).  I subtracted from that the amount my wife earns from a part-time job, divided by 12 and have that transferred from savings each month.  That is about 4% of financial assets.....retirement and non-retirement.  After a year, so far, so good.

But, with markets on a good long run.......I am wavering b/n going back full-time, being a teacher, and doing the side hustles.

It is sometimes hard to convince my wife that "we don't have the money for xyz" when clearly the bank account shows we have money.

I'm thinking lawn service or pool service as well.  You said it bzzzt!  Outdoors and paid to move around.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #13 on: March 31, 2015, 12:42:12 PM »
I have an informal goal this year of bringing in $1,000/month in side hustles. I didn't even realize how close I got to that number last year until I added up income/expenses in January. Most of the income last year was from building furniture and other woodwork, selling lumber, fixing up and selling used tools on eBay, and yard sales. So far I'm up $4500 in lumber sales this year, so it's looking achievable. I don't see any reason why I wouldn't continue to do this -  and probably more - in retirement. I plan to shave several years off my journey by transitioning to a partial reliance on my side income.
« Last Edit: March 31, 2015, 12:51:56 PM by Mississippi Mudstache »

dude

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #14 on: March 31, 2015, 12:45:27 PM »
Yes.  While I don't think it will be necessary, because I'm pretty confident I won't have to work another day in my life, I want to do it (a) for fun, and (b) to let compounding do its thing with the stash for an even greater feeling of security going forward, and even then, probably just the first 5-7 years or so of FIRE, then no more.

ShaneD

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #15 on: March 31, 2015, 01:57:48 PM »
I've downshifting with exactly those thoughts in mind: choosing to work less but work longer (in years), thereby delaying full-on FIRE.

But


I thought we would need $1,200,000 to RE which would throw off 48,0000/yr.

Then I realized I could easily do consulting like I'm doing now to make $4,000/yr
Travel hacking cuts down the required "fun money" for travel by another $8,000/yr
Even some random paid gigs throughout the year will almost definitely earn another $1-2,000/yr

Now I only need $36,000/yr or $900,000 to RE. That is if I don't get into any kind of other passive income streams, real estate, etc.

^I've been trying to do this kind of math for my spouse and I, but I keep hitting a sticking point: how do you calculate in the eventual end of side-hustle work (say, due to age)? Wouldn't the above assume part-time work every year until death? I just can't figure out how to do the math that takes # of years working part-time into account. (Additionally complicated for us in particular because spouse and I are different ages.)







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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #16 on: March 31, 2015, 02:21:58 PM »
Currently I'm toying with the idea of leaving work a little bit too early, drastically reducing my expenses and taking on fun side jobs for the first 3-5 years.

Like this:
I think something that you can choose to do a few hours a day, a few hours a week, or not at all for a few months is ideal - that's what I'm aiming for.

Ideally I'd like to make enough to cover living expenses, but as long as I'm only withdrawing 2% max for the first few years while the stache grows I'd be happy. Then after 3-5 years I can continue, or reassess.

MDM

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #17 on: March 31, 2015, 02:32:46 PM »
^I've been trying to do this kind of math for my spouse and I, but I keep hitting a sticking point: how do you calculate in the eventual end of side-hustle work (say, due to age)? Wouldn't the above assume part-time work every year until death? I just can't figure out how to do the math that takes # of years working part-time into account. (Additionally complicated for us in particular because spouse and I are different ages.)
You'll need something such as Quicken's Lifetime Planner or www.cfiresim.com to handle start/stop income streams in a comprehensive manner.

You could approximate things by calculating
1a) stash needed for 4% SWR when still working part time, and
2) stash needed for 4% SWR when not working
 
In your case, #1 happens first and requires the lower stash.  You would want the actual stash #1 (call it #1b) to be large enough that it would grow to match the stash needed for #2 within the desired time, so you need to have the larger of 1a and 1b at time 1.

KCM5

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #18 on: March 31, 2015, 03:08:21 PM »
I've downshifting with exactly those thoughts in mind: choosing to work less but work longer (in years), thereby delaying full-on FIRE.

But


I thought we would need $1,200,000 to RE which would throw off 48,0000/yr.

Then I realized I could easily do consulting like I'm doing now to make $4,000/yr
Travel hacking cuts down the required "fun money" for travel by another $8,000/yr
Even some random paid gigs throughout the year will almost definitely earn another $1-2,000/yr

Now I only need $36,000/yr or $900,000 to RE. That is if I don't get into any kind of other passive income streams, real estate, etc.

^I've been trying to do this kind of math for my spouse and I, but I keep hitting a sticking point: how do you calculate in the eventual end of side-hustle work (say, due to age)? Wouldn't the above assume part-time work every year until death? I just can't figure out how to do the math that takes # of years working part-time into account. (Additionally complicated for us in particular because spouse and I are different ages.)

You could assume that the side hustle income is replaced by social security at 62-67. Or a small pension if you have one coming in.

ShaneD

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #19 on: March 31, 2015, 04:34:55 PM »
You could assume that the side hustle income is replaced by social security at 62-67. Or a small pension if you have one coming in.

That's a good point, KCM5. No pension, but will remember to include SS.


^I've been trying to do this kind of math for my spouse and I, but I keep hitting a sticking point: how do you calculate in the eventual end of side-hustle work (say, due to age)? Wouldn't the above assume part-time work every year until death? I just can't figure out how to do the math that takes # of years working part-time into account. (Additionally complicated for us in particular because spouse and I are different ages.)
You'll need something such as Quicken's Lifetime Planner or www.cfiresim.com to handle start/stop income streams in a comprehensive manner.

You could approximate things by calculating
1a) stash needed for 4% SWR when still working part time, and
2) stash needed for 4% SWR when not working
 
In your case, #1 happens first and requires the lower stash.  You would want the actual stash #1 (call it #1b) to be large enough that it would grow to match the stash needed for #2 within the desired time, so you need to have the larger of 1a and 1b at time 1.

Thanks for that link, MDM, and the thinking. Very helpful. Maybe trying to squeeze it all into a single calculation is where I've failed. Riffing off your thoughts, I think I might even need a third phase:

Phase 1: stash needed for 4% SWR when both still working part time
Phase 2: stash needed for 4% SWR when one still working part time
Phase 3: stash needed for 4% SWR when both not working

Not to be morbid, but I guess there's likely (statistically) also a need for a Phase 4: stash needed for 4% SWR when one surviving not working.

The one thing I'll say for going full-FIRE: the math seems so much easier!


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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #20 on: April 01, 2015, 06:16:24 PM »
I've been trying to do this kind of math for my spouse and I, but I keep hitting a sticking point: how do you calculate in the eventual end of side-hustle work (say, due to age)?...

Quote
You could assume that the side hustle income is replaced by social security at 62-67. Or a small pension if you have one coming in.

That's how I am figuring it for my wife.  She's doing a part-time consulting side hustle now but -- at her option -- she could stop at 62 and her earned Social Security payouts would pick up the slack.

ShaneD

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #21 on: April 03, 2015, 12:39:02 PM »
I've been trying to do this kind of math for my spouse and I, but I keep hitting a sticking point: how do you calculate in the eventual end of side-hustle work (say, due to age)?...

Quote
You could assume that the side hustle income is replaced by social security at 62-67. Or a small pension if you have one coming in.

That's how I am figuring it for my wife.  She's doing a part-time consulting side hustle now but -- at her option -- she could stop at 62 and her earned Social Security payouts would pick up the slack.

Great to know. Thanks, Retired to Win.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #22 on: April 03, 2015, 01:58:19 PM »
we're planning on the multi-pronged approach.  We'll keep contract and freelance work on the table for when we need or want them, we have a budget we could trim during a downturn, and we'd also like to rent out our home while backpacking - the rent alone from our place could pay for a year's worth of backpacking for us, effectively dropping our WR to 0% during this time.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #23 on: April 03, 2015, 03:06:39 PM »
Yes that is what we both are doing. WE both consult in our fields p.t. & I teach a uni class.  It is great. WE will quit when it stops being fun.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #24 on: April 04, 2015, 06:49:53 AM »
I have an informal goal this year of bringing in $1,000/month in side hustles.

I am going to officially make this my goal as well.  I'll be at $900 in checking account bonuses in a few weeks, plus right around $2000 in other online side hustles.


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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #25 on: April 24, 2015, 02:52:46 PM »
I have an informal goal this year of bringing in $1,000/month in side hustles.

I am going to officially make this my goal as well. I'll be at $900 in checking account bonuses in a few weeks, plus right around $2000 in other online side hustles.

Wow, that's awesome! I just got $250 from Chase -- do you have a convenient list handy?

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #26 on: April 24, 2015, 03:14:00 PM »
I have an informal goal this year of bringing in $1,000/month in side hustles.

I am going to officially make this my goal as well. I'll be at $900 in checking account bonuses in a few weeks, plus right around $2000 in other online side hustles.

Wow, that's awesome! I just got $250 from Chase -- do you have a convenient list handy?

Here was a Share Your Badassity post about it:

http://forum.mrmoneymustache.com/share-your-badassity/bank-account-churning-how-to-make-$1600-in-a-year-by-being-organized/

(Mod Edit: Fixed URL.)
« Last Edit: April 24, 2015, 03:17:18 PM by arebelspy »

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #27 on: April 24, 2015, 03:23:28 PM »
If you require yourself to maintain a side gig for income in FI, are you really FI? I thought the whole point was freedom from the need to work for income. I understand that most people will do things they enjoy and bring in income as a consequence, but making a plan now to do things in your retirement is not complete freedom. You should be able to do what you want, and that means side gig or no side gig. If you aren't comfortable with the SWR why not just work a few more years? Being tied down to a job out of retirement is the same thing as being tied down by a side gig in retirement.

arebelspy

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #28 on: April 24, 2015, 03:29:40 PM »
If you require yourself to maintain a side gig for income in FI, are you really FI? I thought the whole point was freedom from the need to work for income. I understand that most people will do things they enjoy and bring in income as a consequence, but making a plan now to do things in your retirement is not complete freedom. You should be able to do what you want, and that means side gig or no side gig. If you aren't comfortable with the SWR why not just work a few more years? Being tied down to a job out of retirement is the same thing as being tied down by a side gig in retirement.

Some would rather get out sooner and do side gigs they don't mind.  Others would rather work longer.

It's just a personal preference thing.

I agree that if you have to have the income, you probably aren't fully FIRE, but are semi-ER'd. 

/shrug

Whatever.  :)
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Eric

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #29 on: April 24, 2015, 04:05:06 PM »
If you require yourself to maintain a side gig for income in FI, are you really FI? I thought the whole point was freedom from the need to work for income. I understand that most people will do things they enjoy and bring in income as a consequence, but making a plan now to do things in your retirement is not complete freedom. You should be able to do what you want, and that means side gig or no side gig. If you aren't comfortable with the SWR why not just work a few more years? Being tied down to a job out of retirement is the same thing as being tied down by a side gig in retirement.

There are many stages of FI though.  You can be barebones FI, some luxuries FI, lots of travel FI, fly your own plane FI, etc.  I don't see an issue with stopping full time work when I hit barebones FI, with the intention of picking up some part time work to fund some luxuries (in my case, travel).  If I didn't travel, I'd be FI.  If I worked for travel money, I'm still FI.

It's a trade off between delaying freedom for luxuries that we all make.  If I could be happy with an ERE type budget, I'd be FI right now.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #30 on: April 24, 2015, 04:09:43 PM »
I don't think it matters if you are doing something you like. Even if you had a ton of $ you may decide to do something you enjoy which also makes $. It depends on what brings you  happiness.

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Re: Side Hustles & Safe Withdrawal Rate Relief
« Reply #31 on: April 24, 2015, 08:04:27 PM »
I have an informal goal this year of bringing in $1,000/month in side hustles.

I am going to officially make this my goal as well. I'll be at $900 in checking account bonuses in a few weeks, plus right around $2000 in other online side hustles.

Wow, that's awesome! I just got $250 from Chase -- do you have a convenient list handy?

Well this is $900 for my fiance and I, so maybe not fair to count it all as mine.  So far this year just $300 from PNC, and $300 for each of us from Chase.  This ties up a total of $8000 for 6 months to keep it all fee free, so a 22.5% annualized return on that $8000.

I am trying to find more.  There are some $200 ones, but some of them require debit transactions and I don't feel like screwing around with that.  I can very easily change my direct deposit at work, so I plan to do a few of these a year if I can find them.