Early Retirement Decisions: One More Year

One More Year….

I used to swear I would never be drawn into one more year.  Its been interesting to read how many people suffer from it.   It made no sense to me why people continued to work once they hit their number!  Well folks, now I’m there.  This isn’t written out to justify whatever decision we make, but outline all of the thoughts that go through your head as you approach that retirement date.

“I’m supposed to be sailing off into the sunset!  You forgot me!”

Lets outline the pretty obvious reasons to retire early!

 

Achievement of a life-long goal:   I knew at an early age I wanted to “never worry about money”.   I watched both my mom and dad struggle through money problems growing up, I realized money doesn’t buy happiness, but not having money creates unhappiness.   I scribbled “millionaire by 40” in early finance classes and calculated how long it would take on an old TI Financial Calculator.   I remember when an insecure boss threatened my job early in my career for speaking up and I said “I will never tolerate this again”.   Declaring early retirement is an accumulation of those goals.

Time:  We can never get this time back, each year I continue to work I’m giving up one of the healthiest year of my life.  This one is pretty strong.  I enjoy exercise, travelling, cooking, reading, writing, learning, walking, all of which full time work gets in the way of.  I want to adhere to the “One Appointment A Day” rule just established by Mark and Tonja over at Our Next Life.  That’s just awesome!

Lack of Creativity:  Rules, guidelines, regulations, sales processes get in the way of enjoyment.  This hit home when I heard a speech recently from a less than inspiring member of upper management reminding our group that “We’re the execution team, not the strategy team”.   Not a good vibe for someone that sees things that can be done better.   Recently I had a coworker I trust joke with me that our corporate motto is “Why do today what we can put off until next year?”   I don’t conform well enough and struggle to tolerate people who want to ignore glaring long-term trends in our business.

Vacation Time:  Only having four weeks of vacation plus one unpaid week off a year is just not enough.  I want to stay 2+ weeks at most destinations/trips we take.  I enjoy the act of moving from one location to another, whether its hurling through the air at 600 miles per hour or driving down the highway in a fancy vehicle, but I don’t enjoy it enough to want to dedicate multiple days to traveling within a week or two of each other.  I initially drafted this post as I cringed thinking about a two day drive from the East Coast to the middle of the country.

Geographic Freedom:  We don’t love where we live, the professional environment is incredible but it lacks most of what we enjoy personally, which includes the beach, mountains, fishing, hiking, and reasonable weather.  We’re pretty much perpetual spring/summer/fall people.

Enough is Enough (and then some):  We have a good sum saved and I expect I will likely earn money after leaving the full-time workforce, nullifying the need for the additional income one more year would earn me.  The art of making money has always intrigued me, I will be laying on a beach doing the math in my head about the economics of the paddle board rental business setup next to us.  I endlessly run the numbers on rental properties when I go somewhere.   The brewery business fascinates me when I’m on a tour, even though the big money is probably gone.  There’s an inner entrepreneur that will earn something.

Shorter “Work Week”:  I enjoy the mental stimulation of work, much of what I do is a game, but I would be better suited for part-time consulting work.  The idea of continuing to put in 50-60 hour weeks making hundreds of yes/no decisions, coaching employees, and helping sales has gotten old.   Its possible to enjoy the work, but not enjoy the volume of work.

 

Reasons to work One More Year.

 

Additional Cash:  Lets get this out of the way, my employment arrangement is an agreement to trade my time and energy for money.   Based on my tenure, experience, and value to employer, its a nice sum of money.   Money is freedom and money is capital.

Need for Capital:  My inner business nerd will drive me to invest in capitalistic opportunities.  You either invest your time, your money, or both.  If you aren’t willing to work full-time, you better bring some money to the table in addition to expertise.  The final year above the FI number provides that capital to risk.  This can be a slush fund for the mental stimulation and challenge without risking the core funds that allow for financial independence.

Inability to re-enter workforce at the same level:  Much of my value is from current and active relationships, both with employees and clients/prospects, knowledge of current policies/procedures, and being known in the market.  Exiting employment and re-entering after an extended break would cut my earnings by 1/3 to 1/2.   I don’t have the same value even after six plus months out of the market and workforce.

Inflation Diversity:   All of our assets outside of our home are invested in marketable stocks and bonds.   I would be more comfortable after adding one or two inflation protected assets that would provide a decent return.   Today this looks like 1-2 rental properties and I’m also interested in land with timber rights.   All of this requires capital, either in terms of employment to get loans for it or the cash earned by one more year of working.

Family/Charitable Support:  We have a small donor advised fund to support some charities we are passionate about, but also may want to provide some support to family members who have been good to us and/or need assistance.

Ease of the Job:  Work is not that difficult and I’m entering the fifth year in my current role.  In business and in a career, tenure in a role and with an employer matters.  It takes less time to do tasks and people bring me problems I can usually solve.  Is the work hard and stressful?  Yes!  Is it as difficult and stressful as four years ago?  No.

Mathematical Variables:  Is a 4% withdraw rate right?  What about 3.5%?  3.25%?  (Update:  Big ERN settled on 3.83%)You can drive yourself nuts arguing about the theoretical withdraw rates.  The reality is all of the early retirees will earn *something* after they stop working, so this is less critical to me but still in the background.

Market Variables:   As our friend Big ERN points out, almost no one voluntarily retires at the bottom of a market, unless its a forced exit.  This means as an early retiree, I’m asking “what if I exit at the top and the market drops 40%!?!”

Health Insurance:  Health Care in the US is basically a disaster.  We have to have a plan with one of the Big 4 for the contracted rates, but due to the prior and current administration’s unwillingness to enforce an individual mandate, I have no clue what health insurance will cost or what providers will be left.  (yes, shoot me for being political, but the last administration struggled here too.  2/3rds of the people who chose not to buy health insurance got a waiver, but still received a tax refund.  The system doesn’t work if healthy people opt out of buying insurance).  In 2017, my employer provided insurance paid out more than $100,000 in claims which should not repeat itself, but it taught me the value of health insurance!

Compensation gains:  For most people, each year results in a higher compensation level.  Personally, the gains start leveling out in 2019 and it makes it difficult to walk away from the rewards of all of the hard work put in to get my compensation to this level.

Pension Variables:  Working the full year in 2018 does wonders for my pension calculation.  The pension calculation is the highest five consecutive years worked and 2018 will be significantly better than 2013, almost 80% higher in eligible compensation.  This also adds an additional year of service, but this incremental benefit is less than the compensation year calculation.  Pensions may be golden handcuffs or a Golden Albatross.  I’m fortunate/unfortunate to have both!

Geographic Arbitrage (ie: Moving is a pain in the rear):  Geographic arbitrage sounds great, it probably is great and we’re going to do it, but you know what?  Moving is a pain in the ass!  Purging stuff, dealing with real estate agents, cranky buyers, cranky sellers, dealing with a mortgage, ugh!   Ideally, it’d be nice to know exactly where we want to go and just buy a house as a 2nd home while I have a nice W-2 income to qualify, but we have no idea where we want to live yet.   Most of our money is tied up in tax deferred accounts and you can’t just get a mortgage on a house without income, so writing a check for a house would be a challenge.  Renting sounds great, but we’re control freaks about our house and didn’t like answering to a landlord the last time we tried it. We love to travel, but also love having a place we call home and a routine.  Would we RV it?  Would we slow-travel for 3-6 months then move? Listening to Brandon over at the Mad Fientist describe his long-travel adventure was enlightening!

Work Friendships:  Work has been the primary outlet for friendships.  Call it a curse of a high achiever, or just the challenge of a natural introverts in roles where they have to talk to strangers all day.  When we come home from work, we are done.  Being around strangers is not comfortable.  Work forces strangers to be together and not be strangers.

Expensive Travel Year:   Yeah, this would be on the list of terrible reasons to keep working.   If we  do, its tempting to sit up front on the plane a few times, especially on a long trip.   Could we do it?  We’ll see.

 

So what does this all mean?  One More Year is real, its real for almost every retiree unless you are fortunate enough to be booted out the door (with or without a golden parachute).   The fear of the unknown is real and it will hit everyone on the journey to early retirement!

 

Additional Resources:

There is some incredible work already posted by some other writers, you can find most of them through the following posts:

Retirement Manifesto – The One More Year Syndrome

Physician On Fire  – The Power of One More Year

 

 

 

 

 

 

 

17 Replies to “Early Retirement Decisions: One More Year”

    1. The ability to change my mind part-way through is comforting, provided we don’t suddenly do something incredibly dumb on the spending front

    1. I enjoyed heading over to your blog…worrying is natural when you’re going from such a high income to nothing. You might have a way to scale back significantly and ease into the career. I also worry about just being an outcast, we have been pretty diligent for just over nine years and didn’t realize how many people were out there like us, I just thought it was one or two people on message boards throughout the country!

  1. I didn’t know it at the time, but I did a few one more years. Maybe, unknowingly was the best way to do them, at least for me.

    That’s come to an end though, and I’m now starting my second year of early retirement (there has to be a better term for this).

    So I have some experience of both sides, and recognise many of the for and against arguments on your list. It’s a personal choice of course but, from where I sit today, I like the arguments in favour of not one more year the best.

    1. There’s really two huge unknowns that jump out at me, the heathcare debacle, especially knowing that we’ve been and needed to use healthcare, plus not being able to start side hustles due to my current employment. I admire the folks who can have an outside stream of income at $1,000 or $2,000/mo going into retirement, it can make all the difference in the world.

  2. Since you don’t NEED the job any longer, what about negotiating for a month sabbatical? You could spend that month in an area you might like to live / split it into two locations. It sounds like you’re not miserable or chomping at the bit to be done, so this might be a possible option to get to what really seems to interest you now.

    1. I’ve been hesitant to ask for that yet – I have a number of leaders and sponsors inside the company that have me on a path to higher levels of management and part of my high compensation comes from keeping me in the company because of my potential. (Eh, I know that sounds odd). I’m going to have to “come clean” with them about that not being a desire of mine sooner rather than later, probably sometime during Q2.

      There are some other roles I could do and possibly transfer into to scale back and collect out more of the golden handcuffs, but it would involve me coming clean on future desires. I say all that because a Sabbatical contains the same issue, I run a multi-million dollar division of a large public company and that would create quite the pain and show the lack of commitment. I’ve also written a draft proposal on how to lay me off (and let me collect the severance/restricted stock I’d walk away from). Overwealming and terrifying when I have to start telling people.

  3. Congratulations on one more year! That is wonderful. Great points as well about why the additional year gives you some extra security. I also couldn’t agree more on extended vacation time – we took the first 2+ week vacation of our lives this summer and never want to do it any other way!

    1. Thanks for stopping by. The math is tough to argue with on working an additional year, as Big ERN over at Early Retirement Now pointed out to me recently, it’s the last nine month investment of time results in a 10%+ perpetual income stream. The math will always be something like that, but the numbers won’t be as large.

  4. Great post! I’m in the “several more years” category but I can appreciate many of the points you make. Especially the thoughts on vacations. The typical one week getaway never feels like enough. A former coworker, who just retired, has been doing two week stays at his favorite places and he said it makes a world of difference.

    Life goals!

    1. I can not recommend the two week vacation enough, even while working. We took our first one after I had been working for about ten years, it was one of the most refreshing experiences. Also if you rent an AirBNB and live like a local, you experience a post FIRE life but not sitting entirely at a resort, which we were guilty of on early vacations

  5. Hey Stop Ironing,

    Great post, and not simply because you gave my idea of the Golden Albatross a shout out (but thank you)! I am going to book mark this post and revisit in two years’ time when I get closer to pulling the trigger. I see you have a pension coming your way. Let me know if there is anything I can do to help you figure out how that fits into your overall plan.

    Best of luck,

    GM

    1. Thanks for reading GM! We have a fantastic pension for a 30+ year employee, but unfortunately there’s no COLA adjustment to it. The best I can figure it out (with some extra help from ERN) it’ll add a few basis points to my safe withdraw rate. The real handcuffs are because I’m in a risk-based business, they take 30% of my compensation and say “we’ll pay this to you four years from now if you didn’t screw stuff up”.

      1. Wow, that’s a new type of Golden Handcuffs to me. Do they withhold 30% every year? Or your final year?

        In any case, there are ways to value your pension if you ever want to do it. Check out ChooseFI Episode 58R for a case study I did for a listener.

        Regards,

        GM

        1. I look forward to hearing you on the roundup. ERN did a case study on me recently and referenced your Golden Albatross:

          “OK, I’ve talked to people who hate their work but I’ve never met anyone who’d walk away from a 10% boost to the post-retirement consumption for nine months of work.”

  6. Great Post SIS. I’m still about 10 years from deciding if I should work one more year. Still, all the factors in your decision really come through here. Good luck making the call.

    It’s hard to walk away from the benefits of working. Yet we only have so much time in life. That extra money is not nearly as valuable as the initial sum needed to meet our basic needs.

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