Author Topic: Alternate Path to Retirement  (Read 22244 times)

Nancy

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Re: Alternate Path to Retirement
« Reply #50 on: March 10, 2014, 05:09:38 PM »
I'm thinking of doing something similar. High pay/high savings rate for 2-3 more years, then we want to downshift into lower paying jobs in a different country. What we make there has to cover our expenses. After that, I'm not sure if we'll go back to high paying FT jobs until FI, PT work in what we do now, or lower paying  enjoyable jobs.

I want to FIRE so I can travel, spend time with my SO, and try out a few jobs I've always been interested in, but that don't pay well. I feel like I can get all that by downshifting and don't need to wait till I'm FI. Part of me feels like I'm making excuses or something, so I'm trying to convince myself this is an okay plan.

bikebum

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Re: Alternate Path to Retirement
« Reply #51 on: March 10, 2014, 07:23:02 PM »
Nancy, I like the sound of that.

I've always enjoyed stories about people who just take off to another country and make it work, but I don't think I would be comfortable with taking a "plunge" like that. I like your idea because you would have something to fall back on if it didn't work out.

After I graduated college, my GF and I WWOOFed in Costa Rica for a month. We did fantasize about living like that for longer, but we both felt the need to come back to the US and build up some skills and stash.

Nancy

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Re: Alternate Path to Retirement
« Reply #52 on: March 11, 2014, 07:34:33 AM »
Thanks, bikebum! WWOOFing is definitely on our list of things to do once FI. Yeah, it helps to think of it as a 2-5 year period of living abroad with the understanding that we can always come back. Definitely is a plunge though!

dude

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Re: Alternate Path to Retirement
« Reply #53 on: March 11, 2014, 07:54:47 AM »
Hi everyone!

I've been thinking about a hybrid version of ER and traditional work til 55. The numbers are just examples. I purposely didn't include much detail because I'm just curious what people think of the general idea. Numbers can easily be tweaked for individual situations. It would go something like this:

Phase 1: Work full time with high savings rate, start a nice nest egg, say $200K by early 30's.
Phase 2: Work part time to cover all expenses, let nest egg grow, save smaller amounts if possible.
Phase 3: Retire when the nest egg has grown big enough. At 5% after inflation, $200K would become $600K after 22.5 years, with no additional savings from Phase 2. Pension and Social Security can be used as other legs of retirement stool.

Seems a person could retire at a normal age, but they would have worked part time instead of full time for most of their career.
This seems like a good path for someone who wants to keep their current job but would prefer to work less.

What do you guys and gals think?

In a way, I kind of backdoored myself into something like this -- sorta.  Enlisted in the military out of high school, did 6 years active duty. Enrolled in college after that, graduated in 4 years.  Went to law school after that, graduated in 3 years.  So basically, I didn't hold a full-time "job" for about 13 years (granted, I served at a time when we didn't have any active conflicts, though I was in harm's way in the Persian Gulf back in '88-'89 -- but I really didn't consider my 6 years in the military as "work" - it was more like a work study program with a lot of adventure thrown in).  Began my career as a full-time law enforcement officer after that.  Will retire with @22 years of service at age 55 with a pension and (hopefully) robust 401k, then embark on a part-time "hobby career" for the fun of it.  So really, will only have worked full-time for 22 years of my life.  Can't believe how lucky I've been.  Obviously, the choices I've made along the way had something to do with it, but really, I think luck has played a pretty significant role as well.

Bourbon

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Re: Alternate Path to Retirement
« Reply #54 on: March 11, 2014, 09:40:46 AM »
Some times it is hard to work part time. I don't know these guys exact situation but I know that for malpractice insurance, you don't get a huge discount for being part time. And if you have overhead (i.e. you run your own office), you have a fixed overhead that you need to meet. And you need to have the same number of CME hours no matter what.

Where I used to work, a bunch of use would have taken the work part time approach. But it doesn't work as well for the company having 2x as many people working half (heck most people would have been ok with just 4 day work weeks) as much even if they didn't pay benefits. Coordinating a large group is most harder than small ones. It really depends a lot on your field as to how well part time works out

These are good points. Although I've read some studies (OK summaries of the real studies) that suggest most office workers who "work" 8 hour days are only doing work for about 4-6 hours. One said as little as 2 hours! Kellogg (the cereal guy) at one point switched his factories to a 30 hour work week and they still produced 35 hours worth of work when compared to the original 40 hour work week. I doubt most of our brains are able to do 8 hours of intellectually demanding work in one chunk.

Companies would not want to have to provide benefits for 2 people instead of 1. But I think we really want everyone to have these benefits anyway, not just the people who can get a full time job. Sorry, I'm drifting off topic. You are right that it can be hard to find a good part time job. The working world isn't very conducive to it right now. If enough of us want it, we can make it better.

As an illustration,

I'm currently 31,  using this estimator - http://www.socialsecurity.gov/estimator/

If I keep at my current salary and work until 62, benefits will be $1,915 a month.
If I keep at my current salary and work until 35, benefits will be $870 a month.
If I keep at my current salary and work until 40, benefits will be $1,184 a month.

If I keep at my current salary and work until 67(full retirement), I get $2,771 a month.
It doesn't give me a calculation for retiring early and not taking benefits until 67 though.

I had a pretty significant raise about 4 years ago, so that is probably factoring into it.  And this doesn't account for any part time income I would be making during FIRE.  If I remember back to the olden days I believe my first job was at 15, not sure that I earned enough for that year to count though.  I'd have to work to 50+ to even have a full 35 years of earnings, hoping to avoid that and give up some of my SS benefits.

bikebum

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Re: Alternate Path to Retirement
« Reply #55 on: March 11, 2014, 09:22:51 PM »
Hi everyone!

I've been thinking about a hybrid version of ER and traditional work til 55. The numbers are just examples. I purposely didn't include much detail because I'm just curious what people think of the general idea. Numbers can easily be tweaked for individual situations. It would go something like this:

Phase 1: Work full time with high savings rate, start a nice nest egg, say $200K by early 30's.
Phase 2: Work part time to cover all expenses, let nest egg grow, save smaller amounts if possible.
Phase 3: Retire when the nest egg has grown big enough. At 5% after inflation, $200K would become $600K after 22.5 years, with no additional savings from Phase 2. Pension and Social Security can be used as other legs of retirement stool.

Seems a person could retire at a normal age, but they would have worked part time instead of full time for most of their career.
This seems like a good path for someone who wants to keep their current job but would prefer to work less.

What do you guys and gals think?

In a way, I kind of backdoored myself into something like this -- sorta.  Enlisted in the military out of high school, did 6 years active duty. Enrolled in college after that, graduated in 4 years.  Went to law school after that, graduated in 3 years.  So basically, I didn't hold a full-time "job" for about 13 years (granted, I served at a time when we didn't have any active conflicts, though I was in harm's way in the Persian Gulf back in '88-'89 -- but I really didn't consider my 6 years in the military as "work" - it was more like a work study program with a lot of adventure thrown in).  Began my career as a full-time law enforcement officer after that.  Will retire with @22 years of service at age 55 with a pension and (hopefully) robust 401k, then embark on a part-time "hobby career" for the fun of it.  So really, will only have worked full-time for 22 years of my life.  Can't believe how lucky I've been.  Obviously, the choices I've made along the way had something to do with it, but really, I think luck has played a pretty significant role as well.

"Luck occurs when preparation meets opportunity."

One of my favorite quotes; don't remember where I heard it. Thanks for sharing your story.

bikebum

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Re: Alternate Path to Retirement
« Reply #56 on: March 11, 2014, 10:12:43 PM »
Some times it is hard to work part time. I don't know these guys exact situation but I know that for malpractice insurance, you don't get a huge discount for being part time. And if you have overhead (i.e. you run your own office), you have a fixed overhead that you need to meet. And you need to have the same number of CME hours no matter what.

Where I used to work, a bunch of use would have taken the work part time approach. But it doesn't work as well for the company having 2x as many people working half (heck most people would have been ok with just 4 day work weeks) as much even if they didn't pay benefits. Coordinating a large group is most harder than small ones. It really depends a lot on your field as to how well part time works out

These are good points. Although I've read some studies (OK summaries of the real studies) that suggest most office workers who "work" 8 hour days are only doing work for about 4-6 hours. One said as little as 2 hours! Kellogg (the cereal guy) at one point switched his factories to a 30 hour work week and they still produced 35 hours worth of work when compared to the original 40 hour work week. I doubt most of our brains are able to do 8 hours of intellectually demanding work in one chunk.

Companies would not want to have to provide benefits for 2 people instead of 1. But I think we really want everyone to have these benefits anyway, not just the people who can get a full time job. Sorry, I'm drifting off topic. You are right that it can be hard to find a good part time job. The working world isn't very conducive to it right now. If enough of us want it, we can make it better.

As an illustration,

I'm currently 31,  using this estimator - http://www.socialsecurity.gov/estimator/

If I keep at my current salary and work until 62, benefits will be $1,915 a month.
If I keep at my current salary and work until 35, benefits will be $870 a month.
If I keep at my current salary and work until 40, benefits will be $1,184 a month.

If I keep at my current salary and work until 67(full retirement), I get $2,771 a month.
It doesn't give me a calculation for retiring early and not taking benefits until 67 though.

I had a pretty significant raise about 4 years ago, so that is probably factoring into it.  And this doesn't account for any part time income I would be making during FIRE.  If I remember back to the olden days I believe my first job was at 15, not sure that I earned enough for that year to count though.  I'd have to work to 50+ to even have a full 35 years of earnings, hoping to avoid that and give up some of my SS benefits.

I think if a person retires early and waits til 67 to take the benefit, the SS payment will be calculated as if the person "retired" at 67; they will just have less income in their years leading up to it. It gets confusing, "retire" can mean when you stop working or when you start collecting benefits. I guess for most people it is the same.

I tried playing with the calculator but I don't have enough credits for it to give me an estimate. Here's a document that explains the calculation though: http://www.ssa.gov/pubs/EN-05-10070.pdf

You take the indexed monthly average of your highest 35 years of income and apply a regressive rate with these brackets:

90% up to $816
32% from $816 to $4,917
15% above $4,917

So if you've already made enough to average over $816 a month for 35 years, you don't end up getting that much by earning more. Unless I messed up, please point it out if I did.

A lot of people seem to think there is a good chance the politicians will change how it works; I have no idea.

How can you get an SS payment at 35 or 40? I thought 62 was the minimum age unless you become disabled.

Bourbon

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Re: Alternate Path to Retirement
« Reply #57 on: March 12, 2014, 12:34:52 AM »
Quote
How can you get an SS payment at 35 or 40? I thought 62 was the minimum age unless you become disabled.

Sorry, wasn't clear, that is the amount if  I started benefits at 62.

ch12

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Re: Alternate Path to Retirement
« Reply #58 on: March 12, 2014, 05:37:12 PM »
Definitely a valid route.

I wonder how I'm going to feel about working when I have FU money but not FIRE money. For this definition of FU money, I mean you have enough money to quit your job and live without really cutting back for years (maybe 4 plus?)

I have 4+ years saved up now, so under that definition of FU money, I could quit my job and go travel a bit.

I'd rather power through and get 25+ years before I pull the plug. I don't really want to have to go back. I plan on making it optional. Almost everyone in the FIRE community does something which pays a bit during retirement, and I plan on doing the same. I think that we become our own patrons, because floating around on our assets/passive income means that we have the time to do things that we dream about, like composing music or writing books. Those things don't pay for most people, but they are wonderful to do.

I think that the OP's plan is completely valid.

I don't think that Social Security will be what it is today. At the very least, it's going to be pared back a bit. I wouldn't try to work 35 years just to make my SS income bigger. As someone else said, getting 4 credits a year is a very low bar, and I'm sure that by the time I'm FRA, I'll have 40 credits at least.

nawhite

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Re: Alternate Path to Retirement
« Reply #59 on: April 10, 2014, 03:13:47 PM »

I tried playing with the calculator but I don't have enough credits for it to give me an estimate. Here's a document that explains the calculation though: http://www.ssa.gov/pubs/EN-05-10070.pdf

You take the indexed monthly average of your highest 35 years of income and apply a regressive rate with these brackets:

90% up to $816
32% from $816 to $4,917
15% above $4,917

So if you've already made enough to average over $816 a month for 35 years, you don't end up getting that much by earning more. Unless I messed up, please point it out if I did.

I recently found that pdf and did the math and every additional year that I work at my high-pay/shitty office job is worth $80 per month in retirement benefits. Really made me give up this reason to stick around "just one more year."

I'm also planning this form of "retirement." In about 2 years, I'll have all my student loans paid off and about $150k-200k in retirement accounts with another $50k in home equity and cash. Then I'm going back to being a raft guide/kayak instructor part time. The "phase II" of only need to make enough not to starve or freeze really entices my wife and I. She might keep her job or might become a yoga instructor or something. Lots of options for jobs when a couple only needs to make $25k/year.

Gray Matter

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Re: Alternate Path to Retirement
« Reply #60 on: April 10, 2014, 07:31:40 PM »
I recently found that pdf and did the math and every additional year that I work at my high-pay/shitty office job is worth $80 per month in retirement benefits. Really made me give up this reason to stick around "just one more year."

At this point, an extra year of work will add about $320 in monthly income in retirement (about half inflation-adjusted returns and half extra savings).  The income our current assets would generate is too small to retire on, so at this point, it's a no brainer.  But I could see this being an issue down the road with OMY setting in.  I find it difficult to weight the value of time vs. money/security.

bikebum

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Re: Alternate Path to Retirement
« Reply #61 on: April 10, 2014, 07:52:34 PM »

I tried playing with the calculator but I don't have enough credits for it to give me an estimate. Here's a document that explains the calculation though: http://www.ssa.gov/pubs/EN-05-10070.pdf

You take the indexed monthly average of your highest 35 years of income and apply a regressive rate with these brackets:

90% up to $816
32% from $816 to $4,917
15% above $4,917

So if you've already made enough to average over $816 a month for 35 years, you don't end up getting that much by earning more. Unless I messed up, please point it out if I did.

I recently found that pdf and did the math and every additional year that I work at my high-pay/shitty office job is worth $80 per month in retirement benefits. Really made me give up this reason to stick around "just one more year."

I'm also planning this form of "retirement." In about 2 years, I'll have all my student loans paid off and about $150k-200k in retirement accounts with another $50k in home equity and cash. Then I'm going back to being a raft guide/kayak instructor part time. The "phase II" of only need to make enough not to starve or freeze really entices my wife and I. She might keep her job or might become a yoga instructor or something. Lots of options for jobs when a couple only needs to make $25k/year.

That sounds great! For my Phase 2, I'd like to work part-time, or do something totally different like get back into playing the sax, or do a bunch of awesome things to make a little cash. Would love to mix in some travel, like you can do as a raft guide. My lady is 4 years younger than me, and she is still working on her degree and will probably want to get her career going after. So I'll have to see how long term traveling will fit into our plans, but it is a goal of her's too. I kinda hope she works for a school, so she can have summers off during my Phase 2. Thanks for the story.

little_owl

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Re: Alternate Path to Retirement
« Reply #62 on: April 12, 2014, 04:57:25 AM »
My Phase 2 would be consultancy rather than part time work. That way I can take off for 3 months or so at a time and travel.

Also, I don't know how practical it is to get a part time job unless you had the same part time job for a long time at the same employer. By that, I mean employers don't want to hire vagabonds that have had multiple part time jobs over the years (A vagrant or a vagabond is a person, often in poverty, who wanders from place to place without a home or regular employment or income.) The mainstream thinks there's something wrong with you if you have an intermittent employment history since you might feel the need not to work for several weeks to several months out of the year. I'm thinking the construction industry would be the perfect cover for an early retiree. Wait, I think I know someone who does that.

This is so true!  I was speaking with a co-worker who wants to retire early....at 60.  To me, that is late.  Funny how information shifts perspective.

In response to the original post, I personally am not interested in being only part-FIRE (which is what working part-time feels like to me).  To me, part time work still has the downsides of full-time work.  Set schedules, long stretches of work with little time off, etcetera.  I do plan on doing some consulting work when FIRE, because I do love what I do...I just do not love the scheduled, continuous nature of full-time employment.

It sounds like the OP is very new to working (3 yrs in)...I am 10 years in, and do wish I had known about FIRE earlier! Good luck with whichever plan you pursue OP!