My wife and I identify with a part of the financial independence community that believes in 'the third option', and I wondered if there were many on here who are like-minded. Here me out.
When we read most blogs, forums, books, etc. on the topic of early retirement and financial independence, there seems to be only two camps. One which believes it can survive on very little, but still survive using the 3-4% rule, and those who believe you need significantly more in order to retire and enjoy the fruits of financial independence and early retirement.
From my research, many in the first group seem to go back to full time work eventually because they left too early, or it turns out they weren't truly ready to 'retire'. The other group often waits too long to finally pull the cord, and the internet is littered with stories of the 'Golden handcuff' dilemma. The part that strikes closest to home for us when we read these stories is hearing how people have missed the best years with their kids. That, and not trying their hand at careers/projects they were passionate about.
But what about the third option? The down-shift group? Say you own your house outright, and put away $500,000+ in your retirement portfolio. You have a reliable paid off car and no debt. You have never suffered from lifestyle inflation. Why continue to work full-time at all? What's to stop you from downshifting from your stressful career and spend time with your kids? Or try a side project, or go on multi-year sabbaticals? If this is your desire.
Now I hear the objections. This is not 'truly being retired' and your right. You are not completely living off of your 'investments'. I suppose this is the closest community I can find. But why do we discount the future value of the $500,000+ saved if you have no intention of touching it for several decades? If you are 36, and you plan to work here and there on side projects you want to do, or have some other way to cover your basic day-to-day living costs that you WANT to take part in, why is full-time employment necessary? In many ways, working full-time is expensive (daycare, gas, wear on cars).
I suppose the argument is that there is not enough cushion for some, or that you might need to tap into it, or that future returns are likely to be low. But even if you think returns will be quite low, how do you discount all the compounding that would take place over the next 20-30 years?
If your goal in life is to spend time with family, travel, and take part in work and projects that you are interested in, is this not a viable third option? Don't most people work to 'pay off their mortgage' and 'save for retirement' (ignoring those of you who love their careers ... not me).I argue that this is accomplished in the above scenario. Assuming you agree that the retirement account will compound sufficiently.
There are a lot of assumptions here, but in our case we are planning to:
- home school (we are both educators)
- own our own house outright in good repair
- most closer to family/extended family
- move to a rural location with forest/farm around us
- have $700,000 in retirement accounts (and not touch it)
- Have 2 paid off cars, but likely downsize to one
- Work just enough part time to cover utilities and food and will have some government benefits for kids
- have $20,000+ cash buffer
- start this when we are 38 and 35 (children will be 4, 2 and 2)
Obviously we are a minority. Most will look at our plan and think we are crazy. They will scream 'what about saving for college' but I have vastly different ideas on that, so lets ignore that one for a moment. We are also looking at this as a plan for 5-8 years before we move on to another stage in our lives. This may involve working again or starting our own business, but even if we didn't, I believe this scenario would still put us on a good footing.
So again, is there anyone else out there that is pursuing this strategy? Feel free to comment either way.
