Author Topic: Anyone reach FI, keep working, but then ratchet down the savings rate?  (Read 4551 times)

NathanDrake

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Let's assume the following:

- You're young and reached FI the MMM way by saving 50+% of your income.

- You want to still continue working because you don't mind your job.

- Instead of saving 50+% of your income (because you don't need to), you decide to lower your savings rate while STILL maxing out retirement accounts (Max 401K, Max HSA, Max Roth IRA). But everything thereafter, you don't mind splurging a little bit. So you're still saving far more than average as a result.

- To reach FI takes a lot of sacrifice and you come to appreciate the lifestyle a bit, but after becoming FI do you really care about spending a little bit extra on phones, cars, entertainment, travel, food, etc..? These are all items that can be sacrificed again if need be, but since you're FI there's less worry on your part to save aggressively. And since you're still employed, you're not tapping into your nest egg which will allow it to grow and compound than if you had otherwise retired.

The only caveat I can see to this plan would be if you spend way too much on big ticket items like housing, but everything else seems like it could be a lot more manageable. You still have the FI/FU money, still have the option of RE, but now can live a little more relaxed lifestyle?

sheepstache

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #1 on: October 11, 2015, 12:41:49 PM »
I think the official answer is that you're not really FI if your stash wouldn't cover your current lifestyle. In other words, if you'd have to trim fat from your lifestyle to retire, it doesn't count, although there are exceptions like moving to a smaller home, not paying childcare any more, etc.

The way you're phrasing it, you're not "relaxed" at your current lifestyle, making it sound like you wouldn't be happy in retirement because you'd have to go back to austerity. However, I'd take your point that you sacrificed to get the security of potential independence and now you want to slow down. Or perhaps you are planning to go back to austerity at some point? Either way, you know your temperament best.

Gray Matter

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #2 on: October 11, 2015, 01:16:54 PM »
I think you can be FI if your stache won't cover your current lifestyle, IF you have made a well-thought-out decision to have a larger lifestyle because you don't mind/want to continue working, but are perfectly willing to scale back on that lifestyle should you choose not to, or be unable to, continue working. 

That is the situation we are in right now.  Neither of us feels like our career is over, though I'm closer to feeling that way than DH is.  I consider us FI with a NW north of 1.7 million (includes retirement accounts, other investments, land, college savings, home equity), but we like raising our kids in our big old house in a nice, safe neighborhood in the city with good schools, and we like international travel (took the kids to South Africa a few years ago, Europe is on the docket for next summer, China the year after).  After a number of years of a higher savings rate, we have chosen to scale back our savings.  We max out our 401(k)s and put 1k/month into college savings, but other than that, we are spending the surplus on travel and home repair/maintenance.  Plus I took a pay cut to move to the non-profit world to do work I'm more passionate about and cut my hours to 80%.

At any point if our careers are no longer rewarding, or our kids need us more, or we just want a change, we can downsize,  pay cash using the equity in our current house, and retire with a scaled-back, but still pretty darned nice lifestyle.  Now, you could argue that we aren't FI, having not proven we can live on less, but when you remove daycare (not needed if not working), mortgage, international travel, and higher property taxes, insurance, utilities, and maintenance costs of this house, we are already there.  So I feel pretty confident in saying we are FI.

I think even when we retire, downsize, etc., I can see us doing some consulting work or teaching the odd class both for fun and to fund things that are completely discretionary, but potentially outside the budget.


terran

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #3 on: October 11, 2015, 01:25:42 PM »
Here's what I would do: start spending as if you're FI by spending x% of your portfolio. Next year your portfolio will be bigger because you added your income, and now x% of your now larger portfolio means your spending can go up. Basically you're just trailing your spending behind your portfolio by one year and will always be spending just the right amount to remain FI without scrimping too much.

NathanDrake

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #4 on: October 11, 2015, 02:30:47 PM »
I think the official answer is that you're not really FI if your stash wouldn't cover your current lifestyle. In other words, if you'd have to trim fat from your lifestyle to retire, it doesn't count, although there are exceptions like moving to a smaller home, not paying childcare any more, etc.

The way you're phrasing it, you're not "relaxed" at your current lifestyle, making it sound like you wouldn't be happy in retirement because you'd have to go back to austerity. However, I'd take your point that you sacrificed to get the security of potential independence and now you want to slow down. Or perhaps you are planning to go back to austerity at some point? Either way, you know your temperament best.

I understand that line of thinking, but achieving a baseline level of FI allows me to scale back if required. I think of Financial Independence more of a baseline level of standard of living that you can adhere to, rather than something that's rigidly fixed IF you continue to still work.

As another poster noted, while I continue to work and max out my retirement accounts my FI amount will continue to grow, and in the meantime I can make spending decisions that I would otherwise balk at previously.

I was just curious if anyone had actively switched their line of thinking after building up a large enough stache, provided they continued to work.

Setters-r-Better

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #5 on: October 12, 2015, 05:22:09 PM »
This would probably be my ideal path. I'm going to assume that if you had enough discipline to reach FI, that you would be able to plan accordingly and not get stuck in a housing situation you hadn't increased your stash to accommodate.

starguru

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #6 on: October 13, 2015, 07:32:25 AM »
When I reach a comfortable FI number I would either increase my spending or alternatively work just enough for cover my expenses and max my retirements accounts for the year.  Leave the summers open for trips and golf.

begood

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #7 on: October 13, 2015, 07:55:47 AM »
We're kind of doing this. My husband's maxing out his 403(b) and HSA, but we're not saving anything beyond that at the moment. My part-time pay goes toward taxes and travel. If we need the tax deduction, we'll fund my tIRA at year-end out of savings.

We've hit a comfortable FI number but anticipate big expenses in the next 10 years: private high school and college, and possibly housing. I'll have a much better idea of our bigger financial picture after the young'un is out of the house, so until then, here's our strategy:

1) Ride out the bumps in the stock market; stay the course
2) Set the savings on auto and let them do their thing
3) Live on take-home pay

lhamo

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #8 on: October 13, 2015, 07:35:15 PM »
We're also kind of doing this.

Theoretically we are FI, if you include the ridiculously high level of equity we have in our "lottery-ticket-in-the-sky" apartment in Beijing.   The minute we sell it, we no longer have to work.  Estimated stash projection if I live to 100 is anywhere from roughly 1.5 million (based on a projected annual return of only 4% and annual spending of $100k) to over 40 million (based on projected annual return of 7% and annual spending of 60k.

We cut back on our savings a couple of years ago to pay for more expensive/better quality private schools for our kids.

This year, we are temporarily living apart as DS was admitted into a special academic program back here in the US.  He and I have moved back, and DH and DD are staying in Beijing.  I quit my day job and am doing a minimal amount of PT consulting while shepherding DS through his program and also helping with my mom's medical follow up.  We have the extra expense of maintaining two households, plus ongoing schooling expenses for both kids (can't tap DS's college fund until he is officially admitted to the university next year).  We also needed to buy a car after I totaled the one my mom was loaning us.  So outgo has been higher than income this year.  Still, the stash has continued to grow -- even after the recent downturn our net worth is up more than $150k this year.

I am hoping DH will agree to quit his job and move back with DD next summer.  We will then sell the apartment and truly begin our FIRE journey together.  In the meantime, we're spending like the proverbial volcano.  But it is a temporary thing due to unusual circumstances.

If DH does confirm his willingness to retire next year then we will pad his 403b big time in the first half of 2016 and live mostly off savings.  I'm also planning to max out our Roths while we still have earned income. 

catccc

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #9 on: October 13, 2015, 11:57:10 PM »
I definitely think about doing this.  I guess it all depends on how I feel when that magical FI day comes. 

Another thing I think about often is hitting FI and then just continuing to plug away for a few more years, allowing for some additional nice-to-haves in retirement.  Well, that just sounds like not being FI, but it's really about choices.  FI means you can RE... but you don't have to.  Like, I've made it, I'm FI!  But if I keep this up for another year, my stash will provide a $4K vacation for the rest of my life.  Obviously it depends what your FI numbers look like, and returns, etc.  I'm aiming for $1.2M, another year with 7% earnings ($84K) and $30K stashed away, would bring me up to $1.314M. I mean, at that point, it seems so damn easy to stash up to some extra wants.  I guess this is what one more year syndrome is all about.

I think the ability to pull this off really depends on individual personalities.  I could see someone finding these little extras becoming addictive, or becoming the new norm.


PFHC

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #10 on: October 14, 2015, 01:19:35 AM »
For me, life experience would lead me to say hell no. Every time I have loosened up and spent more money, I have not found anything but discomfort and distress.

I've watched my parents do the same thing three times. Loosen the purse strings and the shit hits the fan. They were able to retire at 55 and now live a very mustachian lifestyle 5 minutes from the beach in Hawaii. They are happy, secure, and able to fully enjoy life.]

Don't get sucked into the consumerist bullshit. It leads nowhere but down a sad empty pit.

I think you would find a more actualized life by reaching FI, then using your extra money to fund something worthwhile that enriches the lives of others.

patrickza

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #11 on: October 14, 2015, 08:50:24 AM »
The only thing I can think of spending extra money on is travel and experiences, and I can't do that if I keep working, so this doesn't quite work for me. More stuff really does just make me less happy. The other day I struggled to get stuff out of my cupboard because my wife bought me clothes she thought I needed, and it made me a tad bit sad.

catccc

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #12 on: October 14, 2015, 10:23:37 AM »
Don't get sucked into the consumerist bullshit. It leads nowhere but down a sad empty pit.


Spending more isn't always about consumerist bullshit, though.  If I did this, it would likely be specifically for travel, which can be, but isn't always, about consumerist bullshit.

PFHC

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #13 on: October 15, 2015, 02:14:22 PM »
Don't get sucked into the consumerist bullshit. It leads nowhere but down a sad empty pit.


Spending more isn't always about consumerist bullshit, though.  If I did this, it would likely be specifically for travel, which can be, but isn't always, about consumerist bullshit.
Agreed. Travel done right I do not feel qualifies.

The OP is referring to increasing their spending on horseshit like nicer phones, cars, and food. That is consumerist crap and it leads nowhere but to discontent. I'm sorry, but I'm not going to help justify that kind of emptiness.
« Last Edit: October 15, 2015, 05:31:32 PM by PFHC »

Guesl982374

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Re: Anyone reach FI, keep working, but then ratchet down the savings rate?
« Reply #14 on: October 15, 2015, 03:01:35 PM »
To a certain extent, this is what I plan to do. I want to reach a baseline FI amount before I take more risks with my time (read: start or buy  businesses and/or flip real estate) to ensure that my family is fed with a roof over the house. Itís inconceivable that my wife and I won't continue to earn some level of income post FIRE in our late 30s so anything beyond FI (paid off house, real estate cash flow > base expenses) will be gravy. We will have to make the decision between what luxuries we want to splurge on and what will get donated to charity. For example:

-I want a classic car but refuse to buy on before FI. Once FI I will work a little longer to buy it.
-My wife and I also want to start a scholarship fund, we will work longer to set up and fund a scholarship that will pay out indefinitely long after we are gone (think 4% rule for a charity fund).

PFHC - While we can agree that most of what people buy is consumerism crap that doesn't lead to true happiness, everyone's value system is different. Some people can't stand travel (I personally love it) and would rather spend money on 5 star dinner experiences or a nicer car. My opinion is figure out what makes you happen (your values) and spend accordingly.