Retiring in to a recession?

[Tabitha]

I’ve been OMY for a bit.  Work is interesting and I’m in year 3.5 of a 5 year project. I’m personally interested in the outcome and the development of my team. My team is currently WFH, and I’ve got enough time in that my employment is not a risk, though some of my team might be at risk.

My workplace Pension (P1) eligibility was last year. It would be partially indexed. H collects disability pension (P2). We could live on P1&P2, But not in the spendy fat-fire travelling way we’ve anticipated. Because reasons we have more in taxable than tax-sheltered accounts. We could spend down the taxable accounts for the 10-20 years until I receive a govt pension (H’s income will not change), still leaving 250k in tax sheltered as additional safety net. Statistically H will pass before I do, cutting P2 By 50% but also lower expenses. FWIW, the greater part if our income is Canadian source. The greater part of our investments are parked in the US. We file in both countries.

Knowing the safety net was there has helped me happily gloss over any corporate politic BS while still adding to the stash and enjoying work perqs. I’m realizing that some of that peace is fraying because of the current risk of recession and unknown (to me) implications.

 I may stay OMY, but I invite your thoughts on the effects of retiring into what will likely end up as a recession, and what I should consider or where I should shore up my plans.

[EverythingisNew]

What does OMY mean?

If your H currently collects a pension that puts you in a secure spot. There is very little risk of inflation in the next few years and even some economists have said deflation will be a concern. If you run the numbers now and you can retire plus you want to retire, then you should! Think about if you want to retire. You most likely can financially, but you might not want to retire during this time since with the lock down there is not much else to do!

[BikeFanatic]

OMY is one more year, as in working one more year after you reach FI. I am on my last year, feel if I sell my home I will be FI, and I am ten years away from social security, I do share the same concerns about retirement during a recession, so posing to follow what others reply. I may be retired now as I am certainly facing lay-off in the near future.

[Body Surfer]

I retired yesterday. If you believe you have your $ expenses covered I believe you will be in good position to retire. Make sure your AA is at an appropriate %

[Bettersafe]

How far are you away from the fat-fire traveling way you're anticipating? Is it reachable in the year and a half you've left on the project?

[Retire-Canada]

I've got 3 days of FT work left and then I'll be doing some sporadic PT work [~25%FT or less] in FIRE. I hit 4%WR pre-COVID now I am back down a bit below that amount as my investments dropped, but we can call it FI. Between a 6 month cash buffer and some PT income I'll leave my investments to recover back to 4%WR. With a [relatively] low base spend it doesn't take much PT work to move the needle and working at home or on the road [when that's a thing again] a few hours a week seems very nice compared to commuting in to a desk job FT. While retiring into a recession isn't ideal they happen and you need a plan that can accommodate that reality.

Ultimately what it comes down to for me is that the most precious resource I have is time not money so I'm going to allocate it wisely to maximize its utility to me and that doesn't involve OMYing past FI because of the recession or whatever concern will come over the horizon next...and make no mistake there will be another concern and then another one.

My FIRE plans have spendy options and non-spendy options. I'll engage in the appropriate one depending on how my portfolio does. I know that I won't be remarkably happier by spending more so it's not that important to me which way things end up. The part of my FIRE plans that will make me happy is having the free time to do fun things with people I care about. That doesn't have to cost a lot.

[seattlecyclone]

A recession is historically one of the best times to retire. If you're at your number even after the market went down, you're well positioned to become quite wealthy during the recovery.

[YHD]

What @seattlecyclone said.  Consider putting 1-3 years in cash and cash equivalents to ride out the recession or a sideways market without having to sell stocks when disadvantageous.

The real question is how much more do you enjoy your job vs the enjoyment of retiring.  Also, does your FIRE position really allow you to ignore the bullshit and the boxticking and the TPS reports? 

[LightStache]

I’m realizing that some of that peace is fraying because of the current risk of recession and unknown (to me) implications.

If recession risk is at the core of your concerns, seems like an obvious choice to continue working until that concern abates. You may technically have the resources to retire now, but loss of income is likely to make you even more worried about economic conditions, which would be an unpleasant entry to retirement. Consider giving yourself an OMY deadline of 12 or 24 months to make sure that your acute concern doesn't become chronic.

[Chris@TTL]

I asked a similar question over in the Post-FIRE forums. I think there's some good advice in there that can apply more generally to calling it quits during any recession.

• How resilient is your skillset?
• Would you be able to maintain your skills after you leave work to make it easier to go back if you needed to?
• Would a gap on the resume be problematic?

It sounds like you work in a professional situation so if you can come up with a good "consulting" explanation while gone, you can probably go back if you need to. Having a fallback plan like that can go a long way for peace of mind.

So far as shoring things up before hitting the road, you could look at evaluating your financial freedom steps and reconsider things. Maybe even "level up" a stage before you leave.

[Tabitha]

I asked a similar question over in the Post-FIRE forums.

Thank you. I don’t wander widely on the forums and missed that thread. It’s given me food for thought.

Re skillset, I’m an accountant and would be able to land on my feet. If nothing else I could do taxes for a few months ea year but I’d rather not.

So far as shoring things up before hitting the road, you could look at applying the Position of Strength in a recession to your financial situation. Maybe even "level up" a stage before you leave.

Thank you. My analytic mind is happier doing research in the face of uncertainty.

[Chris@TTL]

@Tabitha - Sure thing! Keeping the little squirrel spinning in the wheel at least prevents it from eating a hole in the side! ;) Idle brains are dangerous!

[Chris@TTL]

@Tabitha - thought you might find this interesting as a followup to our discussion earlier in this thread.

We've completed our first month (May) on the road to early retirement. I suspect it'll be a long one as we both wind down work and business over time.

I posted our budget for the month over on the Share Your Badassity subforum with a fancy Sankey diagram, might be interesting for you.

We wound up with a 65% Savings Rate despite lower income due to COVID. I guess...that's a silver lining? :-( Anyway, a little food for thought so far as making the switch in a recession.

[rudged]

My employer (a university) is currently offering one year's salary to all faculty as an incentive for early retirement (provided we are eligible i.e. 55 + years old and ten years of service). I have no intention of doing so. One of the reasons why I went into academia in the first place was because there was no fixed retirement age.

I do worry for anyone who takes the bait, assuming that if they need to, they could always go back to their previous profession. The job market for many professions (not just academia) is currently terrible and it will only get worse over the course of the coming recession.

[rudged]

 

Well that's some nice "bait" and I'd be all over that myself - especially if I would be eligible for a full public pension on top of that. What is holding you back if you are already 55?

Thanks for your reply. I work at a public university that does not have a pension plan, but my employer does match my contributions to my retirement plans (11% match). I do have enough saved that I could comfortably retire if I wanted to.

But as mentioned above, I don't want to. My job is more than just a source of income. What would I do in retirement that I cannot do now? I can currently travel during the summer when I don't teach, but the covid-19 crisis has pretty much put a damper on that for the foreseeable future. I realize many people who pursue FIRE do so out of a conviction that work is fundamentally a trade of time doing something you don't want to do for money, and as such, the sooner you retire the better. Ideally a job is something you enjoy doing so much that you find yourself wondering from time to time why people get paid to do it. Academics don't get paid much, but the flexibility to set our own schedule and pursue research we are passionate about more than compensates for the diminished salary. It's a great job if you can get it.

I'm currently 57. Ten or fifteen years from now I might have a different perspective, but at the moment I want to continue to work as long as i can contribute.

[Tabitha]

Thread originally posted in 2020 when I was trying to figure out why I kept finding excuses stress about retirement.

As follow-up, in mid-2021 I gave a year's notice at work that I would finish in December 2022. This let me wrap up ongoing projects and smooth handoffs. It felt a bit lame duck in the last 6 weeks or so, but when I said I needed more work, I got told to just enjoy to the slide...
 
Our monthly living expenses, including putting money away for annual expenses, is less than my pension; his pension backfills for projects and additional fat travel. 
We did put 25K into home repairs this year, including new roof and new garage siding, and H has his eye on another 20K of renos for next year. We did a LOT of travelling (4 international and 4 domestic holidays), and still managed to not draw anything from the investments. I lined up a short term contract for May-June-July as I was going out the door (last OMY misgivings?)  I enjoyed the project, but don't plan to continue in 2024.  Assuming I correctly calculated the additional tax pre-payments from the contract we're ahead of the game, and I have booked another year's contribution towards the government pension I'll collect in another 10 years (the ultimate safety net.) 

[Loren Ver]

Thanks for the update!  Glad to see you made your decision :).