The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: BigBangWeary on September 20, 2016, 12:05:41 AM

Title: The Third Option
Post by: BigBangWeary on September 20, 2016, 12:05:41 AM
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.

Title: Re: The Third Option
Post by: okits on September 20, 2016, 03:53:27 AM
Have you seen this thread?
Title: Re: The Third Option
Post by: MrMoogle on September 20, 2016, 12:02:58 PM
Maybe I've been around this forum too long, but I've read many posts like this one.  Lots of people do it.  I wouldn't even say it's a third option, just a slight variant on the FIRE option. 

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'.
I haven't heard of many people who had to go back to work because of finances.  If you choose to go back because you enjoy it, that is still FIRE in my book.  It's doing what you want when you want.
Title: Re: The Third Option
Post by: mozar on September 20, 2016, 12:22:11 PM
A lot of people, maybe even most, don't have the kinds of jobs where you can go part time or go back after a sabbatical.
Title: Re: The Third Option
Post by: poppan on September 20, 2016, 01:56:54 PM
 I see what you describe as pretty much FIRE'd.

Title: Re: The Third Option
Post by: BigBangWeary on September 21, 2016, 12:30:31 AM
okits, thanks for the thread.

mozar, when we leave our careers we can never go back due to several factors. I was talking about working part time in completely new areas.

poppan, Cheers, I think so too.
Title: Re: The Third Option
Post by: poppan on September 21, 2016, 09:48:41 AM
So OP, maybe you've found your compatriots here :)

We're downshifting. My husband has done a really good job of finding a cushy job. By not pursuing management and leadership roles and just focusing on being a really strong individual contributor. He mostly works from home and has a lot of flex in his schedule. His job is salaried and comes with good benefits for the whole family. So in a way he just never up shifted and he's just in the right place for him/us.

I have a high paying but very stressful job. I feel I am missing out on my kids (they are elem school age). We are doing well enough that we can roll back to one income, so that's what we're going to do. I might pick up some work on the side if something falls in my lap. I just want fewer hours. It's nice not to have the pressure (of depending on my paycheck).
Title: Re: The Third Option
Post by: BigBangWeary on September 21, 2016, 11:08:05 PM
Thanks for the questions lazarus_long, I will try to explain my thinking, but perhaps I am just my usual confused self:

1. I guess what I am distinguishing between is working part time because you really do need to or you may get into some trouble later  because there is not enough saved for big key milestones (home, retirement, etc.), v.s. setting yourself up so that where working part time is a more sporadic and potentially optional act.


Person A - Has $150,000 saved and rents. Can cover their cost of living working 'part-time' and downshifting because they are personally comfortable with that.

Person B - Has house paid, large nest egg that should grow to cover retirement and future expenses for the family, other assets paid off in full, some play money for starting side projects, etc.

To me these are different. Perhaps they are not.

2. You're right, I should provide sources here. I am truly just thinking back on posts I have read on various forums and a few friends I have in the community. I guess I can't back that up with academic rigor. Point taken.

It sounds like we are both similar minded. We have always planned to work really hard and then stop. But as it is with so many, it is a question of when it is enough.

poppan, happy to meet other like-minded people. So your husband will keep his salaried job? There is a great deal of safety worked into your plan then. I say go for it! Enjoy those years. If you have kids, I think it is one of those things you want to be sure you wont regret missing.