Author Topic: Work less now or retire earlier  (Read 7011 times)

FreeBy45

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Work less now or retire earlier
« on: June 24, 2014, 01:25:49 PM »
I have the opportunity to go 80% at work, which means I would work 32 hours instead of 40 hours (Fridays off). My family can afford this thanks to the downsized lifestyle we have become accustomed to, thanks to this site. This is a wonderful opportunity, however, when I run the numbers, it looks like it would push out my early retirement goal about a year (The goal date is currently May 2019 with 40 hours). I canít decide if itís worth it to take the time off now, or keep plugging away at 100% until I retire. What would you do?

brandino29

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Re: Work less now or retire earlier
« Reply #1 on: June 24, 2014, 01:28:22 PM »
Ooooh, bugger, that's a tough one. 

My feeling is to take the 80% and give ER a little practice run for a year. 

bo_knows

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Re: Work less now or retire earlier
« Reply #2 on: June 24, 2014, 01:29:28 PM »
When my son was born 2 years ago, we decided that we wanted to change our work schedules (because we could) to have him at home.  I work 36hrs (roughly 4 9hr days) and have Friday's off to watch my son.  When you're in a situation like that, it seems like a no-brainer. I won't get that time back... he's never going to be 2 years old again, learning things every day. I want to be here for that.

I feel like I never want to work 40hrs/week again, even if that pushes FIRE out a bit.  It's just so sweet to have this sort of work/life balance IMO.

farmGirl14

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Re: Work less now or retire earlier
« Reply #3 on: June 24, 2014, 01:29:39 PM »
I would take the time off! To me it would be worth it to work one more year, to have 5 years of less stress and more time.

Zamboni

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Re: Work less now or retire earlier
« Reply #4 on: June 24, 2014, 01:30:17 PM »
For me it is a very easy one:   work less now, especially if a) you like your job pretty well and/or b) you have kiddos.

begood

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Re: Work less now or retire earlier
« Reply #5 on: June 24, 2014, 01:42:29 PM »
I have the opportunity to go 80% at work, which means I would work 32 hours instead of 40 hours (Fridays off). My family can afford this thanks to the downsized lifestyle we have become accustomed to, thanks to this site. This is a wonderful opportunity, however, when I run the numbers, it looks like it would push out my early retirement goal about a year (The goal date is currently May 2019 with 40 hours). I canít decide if itís worth it to take the time off now, or keep plugging away at 100% until I retire. What would you do?

Will you be able to keep your benefits (particularly health insurance) if you drop below full-time work hours?

Pangolin

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Re: Work less now or retire earlier
« Reply #6 on: June 24, 2014, 01:48:04 PM »
I would take the time off! To me it would be worth it to work one more year, to have 5 years of less stress and more time.

Well said. I'd take a 4 day work week now if I could. Much better work-life balance. I had this schedule years ago and it was great.

gobius

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Re: Work less now or retire earlier
« Reply #7 on: June 24, 2014, 01:52:35 PM »
begood brings up a good point; if health insurance isn't an issue I'd go with the 32 hours.

FreeBy45

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Re: Work less now or retire earlier
« Reply #8 on: June 24, 2014, 02:01:33 PM »
I have the opportunity to go 80% at work, which means I would work 32 hours instead of 40 hours (Fridays off). My family can afford this thanks to the downsized lifestyle we have become accustomed to, thanks to this site. This is a wonderful opportunity, however, when I run the numbers, it looks like it would push out my early retirement goal about a year (The goal date is currently May 2019 with 40 hours). I canít decide if itís worth it to take the time off now, or keep plugging away at 100% until I retire. What would you do?

Will you be able to keep your benefits (particularly health insurance) if you drop below full-time work hours?

Yes all benefits will still be available since 32 hours is still considered full time at my company. Although vacation will be reduced to 80% as well, although that's ok since I will essentially be getting 52 extra vacation days per year :)

warfreak2

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Re: Work less now or retire earlier
« Reply #9 on: June 24, 2014, 02:04:07 PM »
This is what I do, at the moment at least.

Money is more useful to you the sooner you earn it, so theoretically you minimise total working time by doing all of the work now. But you may value free time now more than you value it later (for the same reason you'd rather have a cake now than later), so for some it makes sense to work more in total if it means more free time in the short term.

Theoretically there's a mathematical optimum, but I haven't bothered to work it out, nor am I particularly convinced it would be worth doing. "How much free time would you give up in ten years' time for a day off now?" is hard to usefully quantify.

smalllife

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Re: Work less now or retire earlier
« Reply #10 on: June 24, 2014, 02:14:33 PM »
I'd take the time off now, especially if it only delays full FI a year.  You get three day weekends EVERY weekend - the lowered work stress, more free time, and breathing room to live live are well worth that extra year to me.  Your internal calculus may be different.

Another thing to keep in mind is the health of the company.  If they are offering 80% to reduce costs because they are in the beginning of a collapse, or even if not, make sure your resume is up to date.

Undecided

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Re: Work less now or retire earlier
« Reply #11 on: June 24, 2014, 02:21:32 PM »
This is what I do, at the moment at least.

Money is more useful to you the sooner you earn it, so theoretically you minimise total working time by doing all of the work now. But you may value free time now more than you value it later (for the same reason you'd rather have a cake now than later), so for some it makes sense to work more in total if it means more free time in the short term.

Theoretically there's a mathematical optimum, but I haven't bothered to work it out, nor am I particularly convinced it would be worth doing. "How much free time would you give up in ten years' time for a day off now?" is hard to usefully quantify.

I'm also doing this now. Although I sometimes consider going back to full time, the whole progressive taxes thing makes it seem like it's not worth it (but don't tell the economists that they're right!). True, I could stop working sooner if I returned to full time, but the ratio of dollars/headaches I'd get for the additional pay would be lower than the rate I have now, and I'd lose out on the "extra" time that really represents much of the best aspects of my life now (time with kids, time for sports, time to make most of our meals). If I'd had perfect foresight when I first went to part time, a year before my first child was born, I may have continued full time until he was two, but I recall that I was fairly disgruntled when I decided I needed to make the change, so that may not be realistic. And for what it's worth, I'm not someone who "loves" his job, although it's fine (mostly because of the flexibility, money and interesting problems, balanced somewhat by dealing with extremely demanding people who are in high-pressure situations).

rocksinmyhead

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Re: Work less now or retire earlier
« Reply #12 on: June 24, 2014, 02:24:31 PM »
Probably a personal decision, but I would take the work less now/retire later option in a heartbeat!

boarder42

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Re: Work less now or retire earlier
« Reply #13 on: June 24, 2014, 02:30:55 PM »
While it pushes your retirement back 1 year on the calendar. You will get roughly one year off of work over the next five. So essentially the same amount of time off. I'd do 32 hour weeks. My plan is to do that at 30. Then retire by 35-36

FreeBy45

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Re: Work less now or retire earlier
« Reply #14 on: June 24, 2014, 02:36:25 PM »
While it pushes your retirement back 1 year on the calendar. You will get roughly one year off of work over the next five. So essentially the same amount of time off. I'd do 32 hour weeks. My plan is to do that at 30. Then retire by 35-36

That's a great point. Thanks everyone for your input and insights. I was leaning heavily to the 32 hour weeks as well and now feel much better about that decision.

warfreak2

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Re: Work less now or retire earlier
« Reply #15 on: June 24, 2014, 02:54:30 PM »
I'm also doing this now. Although I sometimes consider going back to full time, the whole progressive taxes thing makes it seem like it's not worth it (but don't tell the economists that they're right!).
Progressive income tax is a good point, but won't by itself rationally affect your decision if it will take you more than about 5 years to retire working full-time. Not sure about the US but here in the UK the biggest proportional jump in marginal tax rate is from 20% to 40%.

Assuming a 7% real rate of return on the stock market, if the choice is between earning an extra $1 now at a marginal tax rate of 40%, and earning that extra $1 in 5 years' time at a marginal tax rate of 20%, then $0.6*1.075 > $0.8 and you're better off paying the higher tax rate so that you can benefit from stock market returns for those 5 years.

Also, if I worked full-time instead of half-time there's no doubt I could earn more than twice as much, even after tax, though it wouldn't necessarily be doing something I enjoy as much.

Northerly

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Re: Work less now or retire earlier
« Reply #16 on: June 24, 2014, 03:16:00 PM »
What if we re-frame the question? Let's say you currently work 32 hours a week and plan to retire in 2020. Your company offers you next year off (with a sufficient mustachian income) if you will agree to work 40 hours a week when you come back and then through 2020. Would you take that deal? All the elements are the same; they just occur at different times.

Something I try to remind myself is that my future self will exist almost as certainly as my current self does. So I try to treat him as well as my current self.

Some great thoughts on decision making: http://hbr.org/2013/06/you-make-better-decisions-if-you-see-your-senior-self/ar/1

Rezdent

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Re: Work less now or retire earlier
« Reply #17 on: June 24, 2014, 03:19:18 PM »
I've done this.  Once I  factored in the reduced taxes plus the reduction in work - related costs such as gasoline,  etc., I really didn't see that much of a reduction in my take home pay.  Plus I use more of the "vacation days" as real vacation time because I can do errands, appts. and stuff on my day off.

Undecided

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Re: Work less now or retire earlier
« Reply #18 on: June 24, 2014, 03:20:53 PM »
I'm also doing this now. Although I sometimes consider going back to full time, the whole progressive taxes thing makes it seem like it's not worth it (but don't tell the economists that they're right!).
Progressive income tax is a good point, but won't by itself rationally affect your decision if it will take you more than about 5 years to retire working full-time. Not sure about the US but here in the UK the biggest proportional jump in marginal tax rate is from 20% to 40%.

Assuming a 7% real rate of return on the stock market, if the choice is between earning an extra $1 now at a marginal tax rate of 40%, and earning that extra $1 in 5 years' time at a marginal tax rate of 20%, then $0.6*1.075 > $0.8 and you're better off paying the higher tax rate so that you can benefit from stock market returns for those 5 years.

Also, if I worked full-time instead of half-time there's no doubt I could earn more than twice as much, even after tax, though it wouldn't necessarily be doing something I enjoy as much.

The reality of how much the extra work would yield will absolutely affect the rational decision, regardless of timeframe, and that's directly impacted by progressive taxation. You seem to mean that it's not a dispositive factor if it's considered in isolation as a financial calculation, and I have run those numbers to be able to understand how I'm making my decision, but when I say (as I wrote) that "it's not worth it," I meant, "not worth it" for what I'd give up in total. I am sacrificing relatively lower-utility annual income (it would be taxed at approximately 50%) to get relatively higher-utility hours of leisure now (based on my prior experience full-time, I would have essentially no non-weekend leisure if I returned to full time, and weekends themselves would be significantly more interrupted by work). At the end of this road, the additional utility of the leisure (the boost from sufficient leisure to absolute leisure) that I'll have a year sooner (drawing my early retirement to 4.5 years from now vs. 5.5) isn't worth the sacrifice for those 4.5 years. If the marginal rate were lower, I might reach a different conclusion.

GGNoob

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Re: Work less now or retire earlier
« Reply #19 on: June 24, 2014, 03:25:45 PM »
Sounds like you come out even either way...taking 1 day off a week for the next 5 years would be equal to 1 full year of work. So if by taking the time off now you only push your retirement out 1 more year, I'd do it!

I'm in the same type of situation. I have the opportunity for a new job with about an 17-18% pay increase, but I would get half as much time off. So while taking the new job with more money would decrease my time to retirement by 2-3 years, it is pretty much even when I factor in the number of days off I'll have over the next 15-17 years until I can retire. Right now I'm leaning towards keeping my lower paying job with more time off.

Emg03063

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Re: Work less now or retire earlier
« Reply #20 on: June 24, 2014, 11:56:03 PM »
I'd take the time now.  Free time has a diminishing marginal utility just as surely as any other resource, and 52 extra days off per year is worth a lot more to a working person than it is to a retired person.

bo_knows

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Re: Work less now or retire earlier
« Reply #21 on: June 25, 2014, 09:21:37 AM »
I'd take the time now.  Free time has a diminishing marginal utility just as surely as any other resource, and 52 extra days off per year is worth a lot more to a working person than it is to a retired person.

It's funny... I've been on a 4-day work week for 2 years now, and I never thought of it as "52 extra days off per year". That's awesome.

brandino29

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Re: Work less now or retire earlier
« Reply #22 on: June 25, 2014, 12:04:13 PM »
What's the verdict, Freeby45?  Looks like most everyone overwhelming supports taking the four day work week. 

FreeBy45

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Re: Work less now or retire earlier
« Reply #23 on: June 25, 2014, 12:11:31 PM »
What's the verdict, Freeby45?  Looks like most everyone overwhelming supports taking the four day work week.

I love all the comments. They have put so much perspective on this decision. Iíve decided to take the time off now. I especially like the comment about diminishing marginal utility, and feel that while the math may not work in my favor, the free time will be worth more to me now and I will appreciate it more than I will when I have unlimited free time. Thanks everyone!