Author Topic: How much would you need to be FI if you kept working (for fun) and only lived off of that income?  (Read 27267 times)

ReadySetMillionaire

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2 notes:

1) One does not "get more time" by trading one full time job for another. Working 8 hours in an office or at meetings is exactly the same as 8 hours at Starbucks in terms of time. Actually, the "low stress" service industry job might fire you if, for example, you are 10 minutes late 3 times in two quarters, and that's how you end up leaving for work an extra 15 minutes earlier than necessary every day because you wanted more time and less stress.
 . . . snip

But so many decently paying salaried white collared jobs aren't 40 hours a week.  My company hires new engineers and coders with an expectation of 50 hours a week minimum and constant availability (and COVID has made this worse).

I think one of the real draws of barista-style FIRE is that when you are done, you are done. 30-40 hours and no expectations of more.

Going from a $100k/year 55 hour week engineering job to earning $25k/year as a 40 hour barista would certainly free up 15 hours a week and lead to a more enjoyable (although much more frugal) lifestyle, but the difference is that the 55 hour job could be retired from in 5-10 years starting from scratch, while the barista job will require, what?, 20-30 for people starting from scratch? For people starting with, say, $500k and going to $1M the engineer job delivers within 5 years but the barista job with zero savings takes more than twice as long.

The math says you spend more of your lifetime at work on the coast FIRE plan. The counterpoint is that time today is worth more than time in five years. For me, there would be regrets after spending five years in a menial paying job with no end on the horizon.

Rather than accepting an extra 5-15 years of menial work, why not strike a compromise such as earning the highest wage you can obtain in 40h/week? This would not be a barista job, it would be a low level professional job that allows for a 50% savings rate. Just don’t accept promotions. This would be budgeting time like we budget money. There’s always an offer to sell your whole life for money, but there’s a sweet spot between the downsides of workaholism and the downsides of earning wages so low your savings rate is only 5-10% and you never truly retire early.

Another alternative is to adopt the mentality of Jacob Lund Fisher over at earlyretirementextreme.com and find ways to live on almost nothing. Lean Fire strikes me as a lot easier than spending a decade of my days standing at a retail counter or bartending. The extra time commitment here consists of fixing your own stuff, cooking all your own food, learning, cleaning a very small living space and set of clothes more frequently, and very careful shopping. So maybe an extra 5-10 hours a week instead of letting Amazon solve all problems.

Yet another option is to just give it a go with a 5-8% withdrawal rate. There is a historical probability that one gets lucky and never runs out of money, particularly if for some reason life turns out to be short or if one is already older. In taking this path instead of coast FIRE, one trades the risks of job-dependence for a bigger slice of the risk of low market returns. However, depending on age, one also retains the option to switch to coast FIRE in 10 years if things aren’t working out according to plan. Thus, with this plan one front-loads free time to one’s “prime” years and gets to take a gamble on never working again. If we say the odds of being at a 4% WR in 10 years are 50/50, and that one agrees to work 5 years if that threshold is not reached at the 10 year mark, then the expected value is 2.5 years of work, to be done after one’s “prime” years.

I think you are conflating "CoastFIRE" with "Barista FIRE." Typing the words makes them seem silly, which they are, but they are different.

Barista FIRE is leaving high stress professional employment for an easier, low stress job that just covers the expenses. Barista, bartender, etc. Stuff you can unplug when you clock out. Generally, this also might include withdrawing from investment income to make up any income.

My understanding of CoastFIRE is (a) building up a solid retirement nest egg when you're young that you don't plan to touch until you're 60, and (b) earning enough, however you do so, to cover expenses (and because you've saved the nest egg, you no longer need to save for retirement). In my example, I'm an attorney that bills $200/hour. Once my living expenses are down to $3,000 per month, I basically need to bill 15 hours per month to break even, and that's excluding my wife's income.

That, to me, is coasting.

StarBright

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Going from a $100k/year 55 hour week engineering job to earning $25k/year as a 40 hour barista would certainly free up 15 hours a week and lead to a more enjoyable (although much more frugal) lifestyle, but the difference is that the 55 hour job could be retired from in 5-10 years starting from scratch, while the barista job will require, what?, 20-30 for people starting from scratch? For people starting with, say, $500k and going to $1M the engineer job delivers within 5 years but the barista job with zero savings takes more than twice as long.

I've never heard anyone describe CoastFI as leaving a full time job for another full time job. Most people are talking about leaving a full time job for a part time one to just cover expenses. And if you're starting from scratch with no savings, that's not CoastFI, that's just another working stiff.

In my personal situation, it will take us ~6 years to hit our full FI number if we both work. If we start coasting, it will take ~8. The difference is that we get to spend a ton more time with our little kids who won't be little forever. Those two years are a no brainer for us, but we're also not starting from zero, or taking a 40 hour per week job bagging groceries.

^ Yep - I thought the point of CoastFi is that you don't need to put anything substantial towards savings anymore because you've saved plenty to get you through to the traditional retirement age (or whatever retirement age you've set to "coast" to).

I've been noticing that a lot of people interested in CoastFI on this board have children and/or they have spouses uninterested in FIRE (they also seem to be inclined to pay extra towards their mortgage). CoastFi feels like a very natural thing to move to when you have reached a sizeable chunk of retirement savings.

I have about 25 years until I can take money from my retirement accounts, and yet we have a lot retirement savings. My husband is not really interested in early retirement. I have young children in elementary school. I have a very stressful job that occasionally messes with my health. I feel like the concept of CoastFi was made for me?

Do I think it is the right thing for everyone? Absolutely not! But I do think it can be a great way to disentangle yourself from the rat race.

ETA- hmm  @ReadySetMillionaire - I've definitely used the terms interchangeably. I have also always had an understanding that Barista Fire is a chill job that also has health insurance (like Starbucks or Trader Joes). So you would coast while working a barista-style job for the health coverage. Your definition makes more sense though.



« Last Edit: October 27, 2020, 02:43:30 PM by StarBright »

ChpBstrd

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Do Trader Joe’s and Starbucks type employers offer *real* health insurance plans to part-time workers? This would be news to me.

Are they real health insurance plans or the sort of plans that offer access to a PCP, discount coupons, and a low-five-figure annual max that they’ll spend on you? Even temp agencies and fast food restaurants paying $10/hour offer these, and they still result in a financial wipeout for those who go to the ER or need a recently patented drug.

Given that a full family, original-ACA-compliant health insurance plan costs my employer well over $15k per employee, I’m curious about how many employers offer such an expensive plan to PT workers earning $15-20k per year. Enlighten me.

All that said, this is a uniquely U.S. concern and Barista FIRE or Coast FIRE are probably a lot easier in countries with a less archaic healthcare system.

StarBright

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This has kind of gone into the weeds, but just to answer the previous question, I have family members who work at both Starbucks and TJs and both offer pretty good insurance. My SIL had a baby while working 30 hours a week at Starbucks and paid less for giving birth than I paid  w/ the insurance from my fancy job for a small engineering firm (and she got medical leave too).

Trader Joe's also puts in a 401k contribution.

My understanding of Barista Fire is that it is actually based on Starbucks, specifically because they offer good healthcare coverage (which I understand has always been a part of the company platform).

FWIW - Other places that offer good benefits for that type of work are CostCo and Aldi.

arebelspy

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Do Trader Joe’s and Starbucks type employers offer *real* health insurance plans to part-time workers? This would be news to me.

I can't speak to Trader Joe's, but Starbucks does. When former longtime CEO Howard Schultz was a kid, his dad fell and broke his leg and hurt his hip. Had no health insurance. Howard vowed to take care of people if he was ever in a position to do so, and he has stuck to that.

They spend more on healthcare than they do on coffee ingredients (and have since at least 2005), at the cost of corporate profits.

Here's information on what types of plans they offer.

They also offer a 100% match of 401(k) contributions up to 4 to 6% of the employee’s salary (decided by the board each Nov for the following year). So a good way to still take some tax benefits while side-gigging.

Schultz was pressured to cut healthcare benefits by shareholders (he owns about 3%) in 2008, but did not. Pretty neat.
« Last Edit: October 27, 2020, 10:26:13 AM by arebelspy »
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2Birds1Stone

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Trader Joes offers amazing health insurance to employees averaging at least 32 hours a week, over a period of 6 months. It's re-evaluated every 6 months. This is basically FT, because their shifts are 7.25 hours a pop. So you need to do a 5th day every few weeks fairly consistently to hit the threshold.

Interesting thread and discussion.

I had a high paying and stressful job, which I left over a year ago to travel (joke's on me, huh?). The problem with this job (and others before it) was that the "working hours" were blurry, I would be thinking about work in the middle of the night, on weekends, when in the company of family and friends, and it never felt like my time was my own. When I started off my career in retail, I would punch in and out, and even in a management position I felt like I could leave the work, at work.

Ultimately I chose to leanFIRE on a <$15k/yr budget, which obviously is not enough to live off of comfortably for 60+ years. A few failsafe's in the plan;

1) $15k is @ 3% WR, jumping to 4-5% increases available spending to $20-25k/yr
2) I planned to take a year or two off to travel and decompress and find a second calling so to speak
3) Even a PT job at a place like Trader Joes, earning $15/hr would cover 60% of my spending, working only 2 days a week
4) There is a very high likelihood that by leanFIRIng @ 32 years old, I will fall into some other paid work which will bring my WR to 0% or even have a few years where I add to the $500k stache.
5) DW is still planning on working another 5-10 years
6) As @ChpBstrd pointed out, ERE type approach is extremely resilient. With a WOOF/Workaway/housesitting stint, I can easily get my expenses below $15k/yr for a year or two of bad economic times without having to find professional work
7) Getting back into the workforce is my worst case, by working more years at my high stress and high paid job I was guaranteed to take years off of my life.

Tig_

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Very interesting thread so far.  Is it just me, or is this topic jumping up more often these days?

I am in the phase of evaluating if this is the right move for me to make next summer myself - sort of a combo of 2B1S and StarBright - partner not interested + my desire to spend some extended time WWOOFing and hiking and such to decompress + partner is 25% through a two year contract 12 hours away - would get to spend time with him and then job search for something with less stress once his future job location is determined.  So, could turn into CoastFI, could turn into just a sabbatical, but need to think through it for more than 24 hours.

Does anyone know if we have a modified sticky somewhere about things to think through before pulling the plug if you want to shift to CoastFI/with or without a sabbatical in there? I know I've seen one about prepping for FIRE that I could just adapt, but unsure if there were some differences I hadn't thought through.

arebelspy

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Is it just me, or is this topic jumping up more often these days?

Stress and burnout is real. When you have FU money, semi-ER becomes a tempting option.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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Evgenia

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Stress and burnout is real. When you have FU money, semi-ER becomes a tempting option.

^ This. In retrospect, knowing we'd end up choosing to do sporadic part-time work (and that said work would add up to a decent income), I wish we'd gone FIRE sooner. We were just scaredy cats and waited until we paid off our SF Bay Area mortgage (not representative of today's astronomical home prices, as we bought a VERY small house near the bottom of the Great Recesssion/late 2012).

We're 5.5 years into FIRE now. After our initial six months of lay-about, sleep lots, burnout recovery, we ended up taking on very casual, ad hoc, part-time work. Depending on the year, we've had $55k-$97k in income, usually more in the $65k-$75k range before expenses and deductions. We haven't touched our savings. 5 stars, strongly recommend, would do this lifestyle again.

To answer the original question, that would have been about $800k without a paid-off house, to be FI and keep working. Instead it was $1.5m + paid-off house that (in today's ridiculous Covid bubble market for single-family homes and comps on our block, has an estimated value of $1.4-$1.7m, 3x what we paid ~8 years ago). When we were able to FEEL FIRE in our bodies -- how much better we felt, better sleep, everything -- I wished we'd done it sooner.

mistymoney

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Stress and burnout is real. When you have FU money, semi-ER becomes a tempting option.

^ This. In retrospect, knowing we'd end up choosing to do sporadic part-time work (and that said work would add up to a decent income), I wish we'd gone FIRE sooner. We were just scaredy cats and waited until we paid off our SF Bay Area mortgage (not representative of today's astronomical home prices, as we bought a VERY small house near the bottom of the Great Recesssion/late 2012).

We're 5.5 years into FIRE now. After our initial six months of lay-about, sleep lots, burnout recovery, we ended up taking on very casual, ad hoc, part-time work. Depending on the year, we've had $55k-$97k in income, usually more in the $65k-$75k range before expenses and deductions. We haven't touched our savings. 5 stars, strongly recommend, would do this lifestyle again.

To answer the original question, that would have been about $800k without a paid-off house, to be FI and keep working. Instead it was $1.5m + paid-off house that (in today's ridiculous Covid bubble market for single-family homes and comps on our block, has an estimated value of $1.4-$1.7m, 3x what we paid ~8 years ago). When we were able to FEEL FIRE in our bodies -- how much better we felt, better sleep, everything -- I wished we'd done it sooner.

this is hard for me to hear, actually. I've been waggling on the precipice of taking a sabbatical with 1099 income and seeing how far I can make it vs continuing to grind.

I've been researching everything I can here and elsewhere about how it all works, AA, WR, taxes, simulations, fail rates, etc. etc.

I'd just today decided to go for 3 more years....then read this.....


....

Evgenia

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this is hard for me to hear, actually. I've been waggling on the precipice of taking a sabbatical with 1099 income and seeing how far I can make it vs continuing to grind.

I've been researching everything I can here and elsewhere about how it all works, AA, WR, taxes, simulations, fail rates, etc. etc.

I'd just today decided to go for 3 more years....then read this.....


....

Oh, I'm sorry. This is all very easy to say in hindsight, knowing things have turned out okay (that there was ad hoc work at all, for example, and at decent pay, which is luck and privilege in spades). None of what has happened was a given, and I was risk averse too... would we be on the Mustachian path if we were taking impulsive risks all over the place? Nah. It's okay to want to be secure and do the figuring and have more than enough, just in case.

It's funny... I *say* I would have done it before paying off the mortgage (hindsight) but, at the time, it was the paid-off house that -- at risk of sounding dramatic -- evaporated the real need to work. I had no idea how much it apparently drove my staying in the traditional workplace. As soon as that mortgage was gone, work life was SO much more of a palpable drag. Some totally unforeseen thing like that may tell you when you're ready and help you leave. :-)

mistymoney

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this is hard for me to hear, actually. I've been waggling on the precipice of taking a sabbatical with 1099 income and seeing how far I can make it vs continuing to grind.

I've been researching everything I can here and elsewhere about how it all works, AA, WR, taxes, simulations, fail rates, etc. etc.

I'd just today decided to go for 3 more years....then read this.....


....

Oh, I'm sorry. This is all very easy to say in hindsight, knowing things have turned out okay (that there was ad hoc work at all, for example, and at decent pay, which is luck and privilege in spades). None of what has happened was a given, and I was risk averse too... would we be on the Mustachian path if we were taking impulsive risks all over the place? Nah. It's okay to want to be secure and do the figuring and have more than enough, just in case.

It's funny... I *say* I would have done it before paying off the mortgage (hindsight) but, at the time, it was the paid-off house that -- at risk of sounding dramatic -- evaporated the real need to work. I had no idea how much it apparently drove my staying in the traditional workplace. As soon as that mortgage was gone, work life was SO much more of a palpable drag. Some totally unforeseen thing like that may tell you when you're ready and help you leave. :-)

no need to apologize for sure! And kudos to you for being in such a great spot!

I've just been on a teeter totter for about a month or so.....if I figure it this way, I make it....if I figure it that way, I don't. Then I'm thinking no way I can do it.....but then I think - oh - forgot about SS kicking in eventually so I can make it.....then....forgot about taxes and the 10% withdrawal penalty, and I can't....but wait - if my 1099 income continues, or even grows...I make it...but pandemic, SORR could gut me, so I better not try right now....etc. etc....

I have a lot of vacation and holiday time in the next 2 months, so definitely going to push through to the new year. Maybe mix in a mental health day or two.

Then rethink in 2021....




MudPuppy

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I actually do find my FT job rewarding, so I guess I'm doing that now? In noncovid times I work with chronically mentally ill persons, but I have been moved to covid response team by my org.


My spouse isn't sold on the idea of the RE part of FIRE, so in reality, once our house is paid off we can live on their paycheck and I could quit working FT and just work a few shifts a months to keep insurance. We expect the house to be paid off in 10-12 years at our current payment rate.

For both of us to stop working we would need to have about 900k in savings/investments. Universal healthcare would reduce that need to around 600k.

ReadySetMillionaire

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Is it just me, or is this topic jumping up more often these days?

Stress and burnout is real. When you have FU money, semi-ER becomes a tempting option.

This is definitely my feelings, although I would say that you only need temporary FU money. I think if you have $100,000 in accessible cash, and you know how to make money on your own, you can likely CoastFIRE.

The interesting thing for me is that I somewhat explored CoastFIRE already, but didn't know it at the time. I was a solo attorney that was hustling making more than $100k/year, but life was still good. Having done it, and knowing I could get clients, I know I could "coast" and easily make enough income to cover my expenses (15/20 hours a week would likely be $40-50k/year).

Now I find myself doing my solo practice on the side while also working full time at the City Law Department.  Good base salary and amazing benefits here; but doing both is only temporary.

The plan is to save a mini-FU fund, pay off my student loans, and then probably coast with the solo practice.

Sugaree

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Probably $1M.  $850k would buy an annuity that would give me $2500/month.  That is the magic number needed to get a residency visa in Honduras.  Another $150k to buy a house.  Then I can  work, or not, as a dive instructor or open a coffee shop or hot dog stand.

ReadySetMillionaire

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I think this is basically my plan, to be able to go to part-time work in my same field (either negotiate for fewer hours or just move to a different job), or allow my husband to go part-time, or both of us go part time and not need to stash during that time as our stash grows on its own without additional contributions while also keeping our tax bracket lower.

I think somewhere between $500-$800k would do it, if we were able to not touch the stash. There are a lot of unknowns at this point. One thing that would help is if one of our jobs would cover medical for both of us--that would be worth a heck of a lot more than the actual paycheck.

I think this is my plan as well -- to go into PT work in my same field. And interestingly enough, and as I reflect on my seemingly always changing plan, the biggest reason I'm leaning towards CoastFIRE is because I've already dipped my toe into the water.

I left a law firm to start my own practice in early 2018.  I was going pedal to the metal with it, so it was a full time job and I was making $125,000 or so.  But I've already proven the concept to myself that I can hang a shingle and make it work. And I already know it would not be hard for me to get clients (the scariest part about going on your own), so I'm ready to do it.

Right now I work full time at the City Law Department ($66k/year plus amazing benefits) *and* my solo practice, which I do on Wednesdays and Sundays.  It's quite a bit, but the plan is to pay off my student loans, get retirement savings to about $350-400k (will be 35 at the time), get cash to $100k, and then go purely solo, 15 or so hours a week.

kissthesky

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Is it just me, or is this topic jumping up more often these days?

Stress and burnout is real. When you have FU money, semi-ER becomes a tempting option.

Love this thread. Planning something similar - I'm at $1.3M and am just waiting until DH is done with his PhD (~1.5yrs). I never want to work again while he loves his field and wants to work forever. The plan will be to live off his salary and not touch the stash. I'm so burned out though I don't know if I can make it another 1.5 years. but I'm too afraid to quit in case something doesn't go well with him getting a job.