Author Topic: Semi-FI  (Read 10910 times)

StetsTerhune

  • Bristles
  • ***
  • Posts: 451
Semi-FI
« on: August 26, 2012, 07:32:07 AM »
It seems like a lot of people on here mention a "semi-retirement" phase in their plan, but I haven't seen an in depth conversation on what this means to everyone. 

Here's my current plan (or at least one of my current plans):
in 3-4 years we should reach the point of replacing 75% of our current spend. At that point, the wife and I, will consider ourselves "semi-financially independent." We could easily live on that 75%, but long term would like to have a bit more than that, probably about 100% of what we spend now (We live absurdly well right now, by my standards,  and if we replaced "work related expenses" with "free time related expenses," we'd live even better.).

So my plan is to spend the ensuing 5 years doing some combination of contract work and living very cheaply with the goal being to to have net 0 cash flow for those 5 years. During that time our savings would continue appreciating. If we managed 5% return during that time, we'd have increased it the point of being able to live on about 100% of our current spend.

I like my work enough that I think if I only worked 4 months a year it would probably be a positive in my life not a negative. Obviously not the easiest thing to arrange, but we'd only need me, or my wife, to do work about a 1/3 of the time to cover us. As for living cheap, I can think of a lot of cheap things that would be really enjoyable to do for a while in my 30's, but don't think I can count on that being my lifestyle indefinitely.

Live in SE Asia for a while, get a small RV and travel, slowly, in the US, long-term house sitting, backpacking. etc.

Any one else thinking along these lines? or know why I shouldn't be thinking along these lines?
« Last Edit: August 26, 2012, 07:35:29 AM by StetsTerhune »

KMMK

  • Handlebar Stache
  • *****
  • Posts: 1472
  • Age: 42
  • Location: Edmonton, AB, Canada
    • Meena Kestirke Insurance
Re: Semi-FI
« Reply #1 on: August 26, 2012, 08:14:51 AM »
Yes, we have similar plans. In about 10 years we will be around FI with a 4% withdrawal rate. But because we'll only be 45 then and are fairly risk averse, I'd like to bring that closer to 2%. At that point we'll try to switch to working just enough to pay our expenses and let our investments continue to accumulate. I really like my job and I think they will be amenable to me working 6 months of the year - the summer - covering other people's vacations, especially as opposed to me quitting outright. Since we're in Canada I'd love to be in the southern US in an RV during the winter, as would my husband. Hopefully he'll be able to find a similar employment strategy. Or he might retire outright in 10 years if he wants, perhaps doing truck driving on an extremely casual basis, while I switch to a half time schedule at my regular employer and pursue other interests.

Hard to say exactly what will happen, but definite plans in that area. I already try to act like I'm semi-retired all the time. Setting my own work schedule helps a lot. And just an attitude of relaxation I try to maintain.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27550
  • Age: -999
  • Location: Traveling the World
Re: Semi-FI
« Reply #2 on: August 26, 2012, 09:39:39 AM »
It seems like a lot of people on here mention a "semi-retirement" phase in their plan, but I haven't seen an in depth conversation on what this means to everyone. 

You're right, ESR (early semi-retirement) isn't very clearly defined, as I think it looks different for everyone. (Just like FI/ER looks different for each person.)

One potential ESR plan I've kicked around is basically for the wife and I to quit our normal day jobs, but keep managing our properties.

At some point we'll hire a property manager to manage them all (at an estimated cost of 22-27k/yr, for about an average of 45 minutes to hour of work per day .. Though that will be unevenly distributed, some days may have 5 hours of work, other times it may go a week with no work).  But when we first quit, we could save that 22-27k/yr and move to working ~45min to 1 hr/day.

We've also kicked around the idea of going to teach overseas for a year (maybe South Korea?), just for fun, to transition from working life to FI.

In a general sense I think ESR almost always entails:
A) switch of jobs, or
B) major reduction of hours

Or both, in some cases.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

James

  • Handlebar Stache
  • *****
  • Posts: 1680
  • Age: 46
  • Location: Rice Lake, WI
Re: Semi-FI
« Reply #3 on: August 26, 2012, 09:41:05 AM »
I consider FI and retirement two entirely separate things.  FI means having enough investments to provide living expenses without employment.  I expect to hit that in 5 years or so, though it might be longer as I cut back hours to spend more time with the kids.  Retirement means you "stop employment", though that is pretty vague.  So you need FI for retirement, but you don't have to be retired when FI.


I see myself working for the next 20-30 years in some form because I love what I do and I need to maintain my skill in order to do the volunteer work in other countries that I love.  But as I hit FI and then the kids then move out and finish college, I'll only work when I want and as much as I want.  I can use it to fund greater and longer volunteer positions, donate ever larger amounts to charity, etc.  I may work for 6 months to a year in some foreign location providing health care and teaching.  The line between working and retirement for me is extremely vague, so I simply don't worry about that term.  To me, FI is the only one of the two I care about.  Could I call that phase "semi-retirement"?  Maybe, but I'd rather just call it FI.

StetsTerhune

  • Bristles
  • ***
  • Posts: 451
Re: Semi-FI
« Reply #4 on: August 26, 2012, 10:30:12 AM »
James, excellent point on the difference between FI and retirement, and probably shouldn't have included the word "retirement" in my original post.  I guess what I'm really trying to do is semi-retire when I'm only semi-FI.  Certainly they're  both pretty amorphous concepts.

I'd hate to quit my job if I wasn't theoretically "financially independent", in the sense that I could live comfortably without working. But I'd also hate to stop working completely while I can still enjoy it, and could use that to be more financially independent. But I'd also hate to keep working 1900 hours a year when I could live comfortably without working. These are pretty good dilemmas to have in life, I suppose.

James

  • Handlebar Stache
  • *****
  • Posts: 1680
  • Age: 46
  • Location: Rice Lake, WI
Re: Semi-FI
« Reply #5 on: August 26, 2012, 12:48:33 PM »
I guess what I'm really trying to do is semi-retire when I'm only semi-FI.  Certainly they're  both pretty amorphous concepts.

I agree, it's a good dilemma we have, I try to focus on that instead of the "what might have been".  :)

I think adding "semi" removes meaning from the words.  Retirement and FI are fixed points and adding a word like semi doesn't make any sense to me.  I would us the term part time as I drop down and spend less time in my career.  And if I'm not FI then I'm still in the accumulation phase and will work and save to reach FI.  I think there is a nebulous position where someone could be FI if they retired and dropped their spending, but I wouldn't call them FI until they actually do that.

But all wording aside, I think we are in the same boat, which is different than MMM's route.  He went full speed until he reached FI and then retired into what he currently does.  I wish I had done that, but starting from where I am right now that doesn't work, so I'm adapting to my own circumstances.

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4047
Re: Semi-FI
« Reply #6 on: August 26, 2012, 03:24:15 PM »
I consider FI and retirement two entirely separate things.  FI means having enough investments to provide living expenses without employment.  I expect to hit that in 5 years or so, though it might be longer as I cut back hours to spend more time with the kids.  Retirement means you "stop employment", though that is pretty vague.  So you need FI for retirement, but you don't have to be retired when FI.

Exactly!  I've been marginally FI (which I call being independently poor) for some years, which means I can select work I enjoy doing, and which allows me to pretty much set my own hours, so I can hike, bike, ski, ride the horse or whatever when the spirit moves me and the weather's nice.  But as far as complete retirement, to me that equates to a short wait for death.

StetsTerhune

  • Bristles
  • ***
  • Posts: 451
Re: Semi-FI
« Reply #7 on: August 26, 2012, 05:00:36 PM »
To me "financial independence" is just about what the resources you have allows you to be comfortable doing (whether or not you decide you want to actually do it).  Full FI, to me, is being able to totally walk away from work, with no thoughts to the future. Semi-FI, to me, is being able to not have to work like "normals" work, but not being able to do nothing (whether that means working to be crazy cheap, or working to manage some properties, or whatever.)

This, of course, is completely dependent on you and your risk tolerance. Some people need a 2% SWR to feel comfortable, some 4%, some 6%. Some people are happy to live without any real plan for the future at all.

happy

  • Magnum Stache
  • ******
  • Posts: 4777
  • Location: NSW Australia
Re: Semi-FI
« Reply #8 on: August 26, 2012, 07:12:37 PM »
This is a timely thread since last night I decided I would be "semi-retiring" in November. The workload of my current job has been steadily increasing, and I've been getting  more fedup.  If I stay working at my current hours I will be FI in 5-6 years.  After a lot of soulsearching I decided I did not want to spend the next 5-6 years miserable: at nearly 54 time is getting much more precious.  I recently read YMOYL and found encouragement in Woodpecker's blog http://gooddaytolive.wordpress.com/ and decided downshifting might be the best compromise. This has been a tough decision because I want FI to retire quite badly and working half time will delay this.

I plan to use the opportunity to provide the necessary pressure to further reduce my expenses. I might stay half-time for 6 months or a year or "forever", that is until FI. If I decide to take on more work again I will do it on my terms ie I decide when, what and how much. Another option might be to work fulltime for half a year and take half a year off, which I will consider once I feel a bit more rested. Or I might do something else altogether.
 
I still wasn't entirely comfortable with this but the last few days I have been reading RetiredSyd (http://retiredsyd.typepad.com/ and decided that rather than feel negative about it, I would declare it to be semi-retirement.  So I will be semi-retired and on the way to FI (maybe hemi-FI? :) ).  Having declared semi-retirement I feel much closer to my goal and really excited about it, ( and not like I'm wimping out).

All these terms I think have different connotations for different people. If you are younger than me and think retirement is a negative term , you might be happier to say "I work part-time" or "I'm downshifting". Retirement before 65 to me is a sign of success and at my age I'm very happy to declare semi-retirement! (raises fist in air and shouts "yes!").


Ben

  • Stubble
  • **
  • Posts: 123
  • Location: SC
Re: Semi-FI
« Reply #9 on: August 26, 2012, 07:38:05 PM »
James,

I would respectfully suggest that retirement is not a fixed point, for most people at least. Until recently, I viewed retirement primarily as a decision process (when and why do people decide to retire?) rather than a series of changes and adjustments (how do people change their employment status and goals in reaction to the demands, limitations, and opportunities in their life?). However, my mind has been changing as I have had the opportunity to do more research on retirement at work.

Many researchers are now viewing retirement as a late career stage, where you are continuing to seek social and intellectual fulfillment from what you are doing, although you may no longer be working for pay (or may engage in bridge employment, work part time, job share, etc.). Bridge employment (either similar or dissimilar to what you spent your 'career' doing) is much more common than it used to be.

MMM subscribers are rather an enigma in the retirement spectrum, as most aspire to early (voluntary) retirement, while in most other populations, early retirement is involuntary (due to life/health reasons). People generally adjust poorly to (unanticipated) early retirement. MMM readers will likely be better prepared for retirement, but there is a lot of research suggesting that many people struggle with the retirement transition.

James

  • Handlebar Stache
  • *****
  • Posts: 1680
  • Age: 46
  • Location: Rice Lake, WI
Re: Semi-FI
« Reply #10 on: August 26, 2012, 08:46:03 PM »
James,

I would respectfully suggest that retirement is not a fixed point, for most people at least. Until recently, I viewed retirement primarily as a decision process (when and why do people decide to retire?) rather than a series of changes and adjustments (how do people change their employment status and goals in reaction to the demands, limitations, and opportunities in their life?). However, my mind has been changing as I have had the opportunity to do more research on retirement at work.

Many researchers are now viewing retirement as a late career stage, where you are continuing to seek social and intellectual fulfillment from what you are doing, although you may no longer be working for pay (or may engage in bridge employment, work part time, job share, etc.). Bridge employment (either similar or dissimilar to what you spent your 'career' doing) is much more common than it used to be.

MMM subscribers are rather an enigma in the retirement spectrum, as most aspire to early (voluntary) retirement, while in most other populations, early retirement is involuntary (due to life/health reasons). People generally adjust poorly to (unanticipated) early retirement. MMM readers will likely be better prepared for retirement, but there is a lot of research suggesting that many people struggle with the retirement transition.


I absolutely agree that my suggestions of retirement as a fixed point is simply my view, it's how I like to look at it, but others will have their own way of thinking about it.  It's all good.  :)

JohnGalt

  • Bristles
  • ***
  • Posts: 481
  • Age: 34
  • Location: TX
Re: Semi-FI
« Reply #11 on: August 27, 2012, 08:59:04 AM »
It seems like a lot of people on here mention a "semi-retirement" phase in their plan, but I haven't seen an in depth conversation on what this means to everyone. 

Here's my current plan (or at least one of my current plans):
in 3-4 years we should reach the point of replacing 75% of our current spend. At that point, the wife and I, will consider ourselves "semi-financially independent." We could easily live on that 75%, but long term would like to have a bit more than that, probably about 100% of what we spend now (We live absurdly well right now, by my standards,  and if we replaced "work related expenses" with "free time related expenses," we'd live even better.).

So my plan is to spend the ensuing 5 years doing some combination of contract work and living very cheaply with the goal being to to have net 0 cash flow for those 5 years. During that time our savings would continue appreciating. If we managed 5% return during that time, we'd have increased it the point of being able to live on about 100% of our current spend.

I like my work enough that I think if I only worked 4 months a year it would probably be a positive in my life not a negative. Obviously not the easiest thing to arrange, but we'd only need me, or my wife, to do work about a 1/3 of the time to cover us. As for living cheap, I can think of a lot of cheap things that would be really enjoyable to do for a while in my 30's, but don't think I can count on that being my lifestyle indefinitely.

Live in SE Asia for a while, get a small RV and travel, slowly, in the US, long-term house sitting, backpacking. etc.

Any one else thinking along these lines? or know why I shouldn't be thinking along these lines?

This is pretty much my exact plan.

grantmeaname

  • Magnum Stache
  • ******
  • Posts: 4732
  • Age: 26
  • Location: NYC
  • Cast me away from yesterday's things
Re: Semi-FI
« Reply #12 on: August 27, 2012, 12:46:57 PM »
I've thought about going for a Ph.D. and living at cost to semi-FI and allow my stache 6ish years to compound. I'm not sure how much I'd enjoy that then, but I know that right now I'd absolutely love to.

mechanic baird

  • Stubble
  • **
  • Posts: 109
Re: Semi-FI
« Reply #13 on: August 27, 2012, 01:10:25 PM »
This is a great topic!
I am in a very similar situation as OP.
Our financial picture will change drastically after our children start to enjoy the free public education. Colorado is the 4th most expensive child care state so the child care expense is currently eating up a big chunk of our budget.

Once that happens in 4 years, our expense will be completely replaced by investment income. But I will probably take on some part time consulting work to make some extra income just to stay current with my skill set. Plus, I like what I do.

I think we would be spending more time with the family, grow a nice garden, sharpen up some hobby related skills and just chill.

StetsTerhune

  • Bristles
  • ***
  • Posts: 451
Re: Semi-FI
« Reply #14 on: August 27, 2012, 05:32:15 PM »
mechanic baird, Horribly ironic that it's the cost of child care that's slowing your financial independence while you wouldn't need child care if you were FI.  Suspect that's true of a lot of people though.

grantmeaname, When I was a in my early twenties the idea of getting a Ph.D. to kill some time while things compounded would have sounded very appealing to me. After being out of school for a while now, I truly can't imagine going back for 6 years, no matter how interested in the subject I was.  I think I'd prefer 6 years at my job, though the hours would probably be better with a Ph.D.

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4047
Re: Semi-FI
« Reply #15 on: August 27, 2012, 06:08:40 PM »
I would respectfully suggest that retirement is not a fixed point, for most people at least.

I disagree.  Though I don't know of any actual numbers, from what I've seen, most retirements are like my neighbor's.  He turned 66 last year, came home from his last day of work, and has spent most of his time since sitting in front of the TV drinking beer. 

grantmeaname

  • Magnum Stache
  • ******
  • Posts: 4732
  • Age: 26
  • Location: NYC
  • Cast me away from yesterday's things
Re: Semi-FI
« Reply #16 on: August 28, 2012, 05:58:04 AM »
grantmeaname, When I was a in my early twenties the idea of getting a Ph.D. to kill some time while things compounded would have sounded very appealing to me. After being out of school for a while now, I truly can't imagine going back for 6 years, no matter how interested in the subject I was.  I think I'd prefer 6 years at my job, though the hours would probably be better with a Ph.D.
Yeah, that's kinda what I'm thinking. It's a really attractive idea right now, but we'll see what I think of it at 30.

galaxie

  • Bristles
  • ***
  • Posts: 370
Re: Semi-FI
« Reply #17 on: August 28, 2012, 06:27:08 AM »
A PhD might not take you 6 years.  Depends on your field and whether you have to get a master's or catch up on prerequisite knowledge first.  I loved grad school and would do it again in some other, wildly different field (maybe linguistics or comparative lit?) if I wasn't busy making money.

grantmeaname

  • Magnum Stache
  • ******
  • Posts: 4732
  • Age: 26
  • Location: NYC
  • Cast me away from yesterday's things
Re: Semi-FI
« Reply #18 on: August 28, 2012, 06:51:28 AM »
The average PhD in anthropology takes 7 or 8 years, so six is actually being a little bit optimistic. It's hard to find data in the ground, and you have to keep digging until you find it. (It's the same reason astronomers take for freakin' ever to get their doctorates: the observational sciences are totally at the mercy of their work!)

galaxie

  • Bristles
  • ***
  • Posts: 370
Re: Semi-FI
« Reply #19 on: August 28, 2012, 08:48:24 AM »
I suppose that is true.  I knew a high-energy physicist who took forever to get his degree too.  It's hard to get time on accelerators.

mechanic baird

  • Stubble
  • **
  • Posts: 109
Re: Semi-FI
« Reply #20 on: August 29, 2012, 02:05:32 PM »
mechanic baird, Horribly ironic that it's the cost of child care that's slowing your financial independence while you wouldn't need child care if you were FI.  Suspect that's true of a lot of people though.


Not if we make crazy money in our primary earning years. If we retire now, we wouldn't have enough even if we didn't have any child care expenses.. You forget how powerful a few more earning years can do for your nest egg..
If we kick in the high gear and make money crazy and save money crazy, it would be a few hundred thousand dollars difference in 5 years. Do the math if you can save $60K a year with 7% return. What will you get at the end of year 5?

By then, if we drop the child care cost, which is around $1000 a month now, that is a huge number. Think about how much you will need to generate $1000 a month? So BAM! With both sides of the equation (a much larger portfolio and a much smaller expense), we can pull the trigger comfortably. Don't ever underestimate the saving power during your primary earning years even if just for another 5 years.

AJ

  • Pencil Stache
  • ****
  • Posts: 906
  • Age: 35
  • Location: Oregon
Re: Semi-FI
« Reply #21 on: August 29, 2012, 02:36:02 PM »
Don't ever underestimate the saving power during your primary earning years even if just for another 5 years.

I don't think Stets was saying it is a bad idea to work now, only that it's ironic that the biggest hindrance is childcare, which you won't need in FI. Obviously, most people pay for childcare because it is financially better to do so.

For folks who wise up young enough and delay children a bit, they have the best timing of all, not needing to ever pay childcare (a la MMM...)

mechanic baird

  • Stubble
  • **
  • Posts: 109
Re: Semi-FI
« Reply #22 on: August 30, 2012, 10:55:33 AM »
Don't ever underestimate the saving power during your primary earning years even if just for another 5 years.

I don't think Stets was saying it is a bad idea to work now, only that it's ironic that the biggest hindrance is childcare, which you won't need in FI. Obviously, most people pay for childcare because it is financially better to do so.

For folks who wise up young enough and delay children a bit, they have the best timing of all, not needing to ever pay childcare (a la MMM...)

Not if we are hitting 40.. It's either now or never.. We did wait. That's why we could pull the trigger when they are just around school age so we can spend more time on parenting and helping with school work.. I think the plan is gonna work well..

Ben

  • Stubble
  • **
  • Posts: 123
  • Location: SC
Re: Semi-FI
« Reply #23 on: September 13, 2012, 12:56:36 PM »
I disagree.  Though I don't know of any actual numbers, from what I've seen, most retirements are like my neighbor's.  He turned 66 last year, came home from his last day of work, and has spent most of his time since sitting in front of the TV drinking beer.

Sure, there is certainly a subset of people that move straight from FT work into total non-work. Your neighbor may rouse from his booze-and-tv induced stupor and decide to get a FT or PT job, or he may not. But there are many who take more customized paths late in their career/life stage. If you care about that sort of thing, this would be a good research article to read:

Wang & Schultz (2010). Employee Retirement: A Review and Recommendations for Future Investigation. Journal of Management, 36, 172-206.


kaeldra

  • 5 O'Clock Shadow
  • *
  • Posts: 57
  • Location: Seattle, WA
    • Cascadia Inspired
Re: Semi-FI
« Reply #24 on: September 18, 2012, 12:57:38 PM »
I'm considering switching to part time before I'm FI - because I expect to keep working part time even after I am FI regardless. I need some sort of structure to help me prioritize the rest of my time, and I enjoy my work, I just wish it was 30 hours a week instead of 40. Rather than work solid for several months and be off the rest of the year, I would rather have 3 day weekends all year.

James

  • Handlebar Stache
  • *****
  • Posts: 1680
  • Age: 46
  • Location: Rice Lake, WI
Re: Semi-FI
« Reply #25 on: September 18, 2012, 07:35:43 PM »
I'm considering switching to part time before I'm FI - because I expect to keep working part time even after I am FI regardless. I need some sort of structure to help me prioritize the rest of my time, and I enjoy my work, I just wish it was 30 hours a week instead of 40. Rather than work solid for several months and be off the rest of the year, I would rather have 3 day weekends all year.


I'm different, I'd rather work full time for a month and then have a couple weeks or a month off.  It's interesting how each person has their own idea of the right balance.

happy

  • Magnum Stache
  • ******
  • Posts: 4777
  • Location: NSW Australia
Re: Semi-FI
« Reply #26 on: September 19, 2012, 04:34:01 AM »
I think the "balance " can also shift over time as well. For me after working 17 years part-time I have changes the shape of my working week according to the needs of my family.  When using childcare, a regular working week within childcare hours is preferable. When the family go to school, the hours change again and the ability to take whole weeks off in the school holidays is important.

I think a 3 day weekend is really helpful... recently I've been working every day bar Thursday, and really missing a longer break to decompress.

My reduced hours are now approved in writing..."semi-retirement" here I come: I will have a 4 day weekend.

travelbug

  • Bristles
  • ***
  • Posts: 261
  • Location: Australia
Re: Semi-FI
« Reply #27 on: September 19, 2012, 09:43:02 PM »
We will be semi-retiring in a way next year. We will be managing our business from afar.
It's a trial run to see if we can let go and leave someone else in charge. If it doesn't work we will sell it. I will do the accounts each month from where-ever I am and with the internet it is much easier to be location independent.
It's a security for us to trial for 12 months, take a wage and not touch it to see if our investments are enough as well.