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.
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’m looking forward to an empty calendar and limiting appointments to one per day.
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 United States 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. Two thirds of the people who chose not to buy health insurance got a waiver, but still received a tax refund. The system can’t mathematically function without healthy people purchasing 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!
2021 Update: What is my opinion of this when I looked back on the post three and a half years later? One more year revisited.
There is some good work already posted by other authors, you can find most of them through the following posts:
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