My wife and I have what most people would call "good" jobs. We are "professionals", with salaries that put us closer to the higher end of the income spectrum. The jobs feature benefits like paid time off, employer-matching retirement contributions, and company-sponsored insurance plans. My guess is that many people who are currently looking for work would be happy to be hired into either of our jobs for these reasons.
By working at these jobs for a number of years, we have given ourselves the means to pay off our mortgage and accumulate substantial savings and investments.
Our jobs do something else for both of us: they add stress to our lives. The associated project deadlines and other responsibilities keep us thinking about our jobs often, even during traditional non-working times. Both of us stay connected to our employers remotely and will work as needed during evenings, weekends, and holidays -- my wife especially (she's not as completely jaded as I am yet).
As I've mentioned before, we're frustrated because our careful planning has put us in a situation where we don't need to work like this. We could meet our current spending needs with only a portion of one of our salaries. But there doesn't seem to be a better option. There is no part-time option at my employer (I've checked). My wife may eventually have the option to move to a part-time position, but she feels that once she asks for a part-time role, it would be unlikely that she'd be given a chance to go back to full-time employment (so she wants to ensure the time is right before making such a move). And even if she did move to part-time, the nature of her work means that she would still have deadlines and responsibilities hanging over her head. Knowing my wife, I anticipate she'd still end up working during her "free" time to ensure that she kept up with her "part-time" assignments.
Since we paid off our mortgage two years ago, we've been operating under the assumption that we'd keep our full-time jobs (and all associated stress, etc) until the time we felt our savings and investments reached a point that we could completely quit. Lately, however, we find ourselves discussing alternate possibilities more and more often.
My wife suggested we just draw a big X on the calendar, and commit to quitting when we get to that date, regardless of our financial situation. At that point we can take a "sabbatical" of sorts, hopefully in the form of a long-distance hike on the Appalachian Trail, or something similar. Afterward we could take stock of our lives and decide what course of action to take next.
I've suggested the possibility that both of us look for part-time jobs working as a team for the same employer, doing lower-stress work. For example, there is a business here in town that we think would hire us (based on conversations I've had with the owner). They are always looking for people to work on weekends, because that's when they do most of their sales. If my wife and I could get into a rhythm working a three-day schedule, say Friday - Sunday or maybe Saturday - Monday, we could have four days off each week to do whatever we wanted. This is the type of job where the instant we walked out the door, we'd be completely off the clock -- no deadlines to meet, no projects looming, nothing to worry about until we arrived at work the next day. The caveat is that we'd lose a lot of the benefits our current jobs offer -- no paid time off, no matching retirement contributions, lower pay. But I wonder if we wouldn't feel richer overall if we didn't have the stress of our current jobs: working at any hour of the day, 5+ days per week.
Reflecting back on my own employment history, I remember fondly the jobs I had which could be easily mastered, and which didn't follow me out the door at the end of the day. In high school I worked at a sandwich shop. I got really good at making delicious sandwiches (something I liked), and was expert at taking responsibility for the entire customer experience: from the greeting when they walked through the door, through the order and payment, the sandwich assembly, the delivery, and the clean-up and exit. There was very little stress because it was within my power to correct almost any error or customer disappointment, and each transaction was discrete, lasting no longer than 30 minutes or so. I didn't have to come home at night and think about the 6-month sandwich project I was working on, because that didn't exist. The job was part-time, so it didn't dominate my waking hours. And while the job itself was not the most stimulating, the lack of stress meant that I could fully enjoy my time off the clock, and find stimulation elsewhere. That job didn't define me -- it just allowed me the resources (cash) to follow other pursuits which made me feel whole as a person. Because of this, it may have been the best job I ever had.
I had several other jobs like that as a young adult. I didn't get rich working at any of them, but I felt more happy and healthy overall when I was employed in those types of roles.
If my wife and I did decide to make a move to lower-stress, part-time jobs, we would almost certainly have to reassess some of our other goals, like moving to our eventual "dream property" or reaching true financial independence. Although we wouldn't be preventing ourselves from reaching them, we would most likely have to push the desired achievement dates to the more distant future.
Balancing the short-term damage of stressful employment against the long-term benefit of financial independence is proving to be a challenge. My wife and I
haven't made any decisions to make a change yet, but we are working to
find a course that will help give us the most life enjoyment overall.
Sunday, June 2, 2013
Sunday, April 21, 2013
The Snowball Effect
This past week, we had some work done in our master bathroom by outside people, as the work was well past The Executioner's and my skills (which doesn't say too much in the way of home improvement!). Now, we are left with a few more basic tasks that we are willing to tackle - painting the ceiling and walls, putting in some flooring (which the contractor assured us is "SIMPLE" to do...) and then dealing with baseboards - measuring, cutting, staining, attaching. I am excited about this project - I have said since the day we moved into this house that this is the one room I would really like to redo. And now, thanks to the second leak in the shower, I got it! What I didn't want to do was spend a whole bunch of money on the house right before we moved out of it - in preparation for it to sell. So, this is a win-win for me and, er, well maybe it is just a win for me and not so much for TE - I'll let him weigh in on the situation. But, we are not planning to move out of our house right now, so I will get to enjoy the bathroom.
The snowball effect is this... I walk out of the bathroom and look at the hallway, which we never repainted when we moved in. It is a disgusting color that looks like someone ate purple grapes and chocolate milk and then threw up, or something along those lines - grayish/tanish/purplish ugliness is what it boils down to. So, said hallway could REALLY use a new coat of paint. And then there are our floors. The upstairs carpet is old, and should probably be taken out sooner rather than later. In addition to that, the whole house squeaks. My parents live in a house that was built in the 1800s and I am pretty sure our house has more squeaks than theirs does... that seems wrong to me. And then I move into... well, you get the picture.
The battle that rages within me is this: some of these small-ticket modifications (painting the hallway) could handily be done by TE and myself. A coat of paint wouldn't cost THAT much. It would be quite a bit of life energy though:
I now walk into every room (mind you, we haven't gotten that far in the bathroom we are presently working on, which could change the way I look at rooms if the project completely blows) and think of the small renovations we could do. For example, the cheapest renovation to our kitchen wouldn't entail too much - we could pull some of the 2.8 billion curtain rod support brackets out of the wall and patch those wholes (same with the window frames), paint all of the walls a lovely new color, put down the same 'SIMPLE' flooring, call it a day. There is a lot of power in some putty for the walls, a can of paint, and new baseboards - it would help elevate the appeal of the house and hopefully help in resale, but is my life energy worth it? That would mean fewer long runs, board-game nights, weekend hiking days. There are also some MAJOR repairs that are well beyond our ability that I would love to have done - carpeted stairs turned into hardwood staircases, a barely-finished basement turned into a functioning finished basement, and did I mention all of the floors squeak? :) For those, in my ideal world, we'd somehow have the time to learn from someone doing those renovations - we'd be an apprentice of sorts. But, we would definitely need someone who has the skills to pay the bills to teach us.
I guess at this point, I will let the battle within rage and will take it one project at a time. Maybe I figure out that I enjoy painting rooms, in which case I know what I am willing to do. Maybe I learn that cutting baseboards makes me want to crawl over broken glass. There is a lot to learn from this bathroom project, and I am excited for it. Since we're still in the early phase, it is looking like it will be reasonable and enjoyable... I'll keep you posted on whether this Pollyanna attitude still exists in a couple of weeks or not! Calm down - I know you just saw the word weeks and are going - wth Spicy Princess, why are you going to drag it out so long? Work travel... can't make The Executioner do all the renovations on his own. ;)
If you have guidance - feel free to dole it out. :)
The snowball effect is this... I walk out of the bathroom and look at the hallway, which we never repainted when we moved in. It is a disgusting color that looks like someone ate purple grapes and chocolate milk and then threw up, or something along those lines - grayish/tanish/purplish ugliness is what it boils down to. So, said hallway could REALLY use a new coat of paint. And then there are our floors. The upstairs carpet is old, and should probably be taken out sooner rather than later. In addition to that, the whole house squeaks. My parents live in a house that was built in the 1800s and I am pretty sure our house has more squeaks than theirs does... that seems wrong to me. And then I move into... well, you get the picture.
The battle that rages within me is this: some of these small-ticket modifications (painting the hallway) could handily be done by TE and myself. A coat of paint wouldn't cost THAT much. It would be quite a bit of life energy though:
- empty these rooms/cover everything/move stuff away from the walls
- I would probably want to take off the baseboards of any room we paint in a) to make it look better and b) because the last family that lived here let their kids play floor hockey regularly (no proof to this statement, but a more fun way to say that the baseboards are really beat up)
- taping
- painting
- doing all the new baseboardy stuff
- cleaning up
- blah blah blah.
I now walk into every room (mind you, we haven't gotten that far in the bathroom we are presently working on, which could change the way I look at rooms if the project completely blows) and think of the small renovations we could do. For example, the cheapest renovation to our kitchen wouldn't entail too much - we could pull some of the 2.8 billion curtain rod support brackets out of the wall and patch those wholes (same with the window frames), paint all of the walls a lovely new color, put down the same 'SIMPLE' flooring, call it a day. There is a lot of power in some putty for the walls, a can of paint, and new baseboards - it would help elevate the appeal of the house and hopefully help in resale, but is my life energy worth it? That would mean fewer long runs, board-game nights, weekend hiking days. There are also some MAJOR repairs that are well beyond our ability that I would love to have done - carpeted stairs turned into hardwood staircases, a barely-finished basement turned into a functioning finished basement, and did I mention all of the floors squeak? :) For those, in my ideal world, we'd somehow have the time to learn from someone doing those renovations - we'd be an apprentice of sorts. But, we would definitely need someone who has the skills to pay the bills to teach us.
I guess at this point, I will let the battle within rage and will take it one project at a time. Maybe I figure out that I enjoy painting rooms, in which case I know what I am willing to do. Maybe I learn that cutting baseboards makes me want to crawl over broken glass. There is a lot to learn from this bathroom project, and I am excited for it. Since we're still in the early phase, it is looking like it will be reasonable and enjoyable... I'll keep you posted on whether this Pollyanna attitude still exists in a couple of weeks or not! Calm down - I know you just saw the word weeks and are going - wth Spicy Princess, why are you going to drag it out so long? Work travel... can't make The Executioner do all the renovations on his own. ;)
If you have guidance - feel free to dole it out. :)
Sunday, April 14, 2013
Not What I'm Here For
Last night, The Executioner and I had a productive night of running errands. We are both non-shoppers, for the record. We hit 7 different stores over 3 hours - we both were tired and in need of rehydration by the time we got back home. And we'll be good without stepping foot in a store for many months now.
The line that I said again and again (in at least 4 of the stores) was, "Not what I'm here for..." - consumerism is so easy to get sucked into! At an outdoors/camping store I could have easily spent about 5 times the amount of money we did if I had given into all of the pretty/flashy/new/cool things I saw. Luckily, I was able to remind myself that all of those items were not what I was truly there for. I figured, if I remembered any of the items today and still felt that I really want them, I could always put them down on a wishlist. And in the light of the morning, I can remember one of them and it may go on my birthday/Christmas list... but I am not sure that it will. The reminder last night served for me: you need to be strong to battle consumerism. Put blinders on before going into a store so you don't get sidetracked by all of the shiny things.
There is one other thought I'd like to share from our adventure last night about the importance of mindset. On Friday, I received a decent raise at work. This raise puts my salary at a point that, when leaving college, I never thought I would reach (based on the fact that I was an elementary education major). The power of the mindset is that instead of looking at this raise and thinking 'sweet, we can buy X, we don't have to carefully plan out how much money we spend on Y, I can get knick-knack Z' The Executioner and I have been thinking 'sweet, we can save X% more each week, that means we'll be saving $XYZ.00 more per month, that means we're that much closer to FI.' So, to tie it back to last night... there were a few shiny things on the shelf that The Executioner and I thought could be a nice addition to our lives and were tempted to by. However, with the iron-clad mindset in place, I was able to talk to the fact that none of those things were items we needed right now. Additionally, they would be excellent items for our family members to give us as gifts, which would also make us really happy. Win-win situation - my mom is reeled in and not buying us crazy stuff we immediately wonder how we can get rid of, and we get something new and shiny and useful!
And finally, for the record - the best deal of the night (in my opinion) were my new hiking boots! I desperately needed them and got them 40% off because I had a coupon, a store credit from a return, and there was a promotion of 10 off of $100 or more. Now, if they can keep my feet happy during hiking, they will really be the best buy.
I think the commercials on TV about shopping being a sport and how much effort, work, and energy it takes are accurate - but I think their focus is wrong. Instead of trying to get the highest amount of non-essential items for the lowest price, we should be focusing on the energy, effort, work it takes to ONLY get the essential items and to do so at the lowest price.
The line that I said again and again (in at least 4 of the stores) was, "Not what I'm here for..." - consumerism is so easy to get sucked into! At an outdoors/camping store I could have easily spent about 5 times the amount of money we did if I had given into all of the pretty/flashy/new/cool things I saw. Luckily, I was able to remind myself that all of those items were not what I was truly there for. I figured, if I remembered any of the items today and still felt that I really want them, I could always put them down on a wishlist. And in the light of the morning, I can remember one of them and it may go on my birthday/Christmas list... but I am not sure that it will. The reminder last night served for me: you need to be strong to battle consumerism. Put blinders on before going into a store so you don't get sidetracked by all of the shiny things.
There is one other thought I'd like to share from our adventure last night about the importance of mindset. On Friday, I received a decent raise at work. This raise puts my salary at a point that, when leaving college, I never thought I would reach (based on the fact that I was an elementary education major). The power of the mindset is that instead of looking at this raise and thinking 'sweet, we can buy X, we don't have to carefully plan out how much money we spend on Y, I can get knick-knack Z' The Executioner and I have been thinking 'sweet, we can save X% more each week, that means we'll be saving $XYZ.00 more per month, that means we're that much closer to FI.' So, to tie it back to last night... there were a few shiny things on the shelf that The Executioner and I thought could be a nice addition to our lives and were tempted to by. However, with the iron-clad mindset in place, I was able to talk to the fact that none of those things were items we needed right now. Additionally, they would be excellent items for our family members to give us as gifts, which would also make us really happy. Win-win situation - my mom is reeled in and not buying us crazy stuff we immediately wonder how we can get rid of, and we get something new and shiny and useful!
And finally, for the record - the best deal of the night (in my opinion) were my new hiking boots! I desperately needed them and got them 40% off because I had a coupon, a store credit from a return, and there was a promotion of 10 off of $100 or more. Now, if they can keep my feet happy during hiking, they will really be the best buy.
I think the commercials on TV about shopping being a sport and how much effort, work, and energy it takes are accurate - but I think their focus is wrong. Instead of trying to get the highest amount of non-essential items for the lowest price, we should be focusing on the energy, effort, work it takes to ONLY get the essential items and to do so at the lowest price.
Tuesday, April 9, 2013
Life Lists
A few weekends ago, The Executioner (referred to from here-on-out as TE in this post [except in one place where I feel the full name is needed]) and I were up visiting my family. I saw something, and it disturbed me - so, naturally I decided to share it with anyone reading this. I couldn't sleep and was walking around the house, reliving memories of days of my youth. I heard something that sounded like muffled screaming coming from my parents' bedroom so opened... just kidding - let's not go there.
Seriously now - my father owns a small slice of heaven in my eyes - he has this cabin that is in the middle of a bunch of woods, no neighbors to see in any direction. The place has running water from a spring when the land isn't frozen, and an outhouse completes the glorious experience. TE and I were invited up to spend part of each day there while we visited. We talked, enjoyed the beautiful outdoors, and just relaxed. That for my father in and of itself is quite impressive - the man is always in motion, thinking, and more so - DOING. But, when the weather is right and he's at this place, he relaxes and it is so nice to be a part of.
As we were up there, I noticed (one of) my father's always-on-hand To-Do list. The thing deserves a Wiki entry all to itself, it is that impressive. I can't remember a time in my life when I would climb into his car and there wasn't a To-Do list on the passenger seat or on the console. He has the 'current To-Do' list, that one lives in the car most of the time; the 'Work To-Do' list; the 'Cabin To-Do' list, and I am sure he has more. He puts EVERYTHING on his lists too - I haven't looked recently, but wouldn't be overly surprised if I saw 'wake up' on his list... just so he could cross it off. As I looked at the list, many things seemed appropriate. There were things like 'fix spring line' and 'move wood from cradle 3 to cradle 4' and things like that. Additionally (this must have been 'Current To-Do'), there were things like 'balance checkbook'. All tasks I deem appropriate for a To-Do list. However, a few items have left me reeling. One was 'Visit The Executioner and Spicy Princess' and one was 'Watch Duke & Louisiana'. SERIOUSLY?!?! You have to put 'hang out with your child who you haven't seen in over 2 months' on a list to make sure that it will get done? Or, is it that you put it on there so you can cross it off and say 'phew - lived through that, glad its done!'? I have a hard time wrapping my head around a college basketball game being something that he feels he MUST endure. Either way - I have been left thinking about To-Do lists.
I have been known to make a list. Mine are electronic, of course, and I do find power in collecting my many tasks into one common document when life is getting a little crazy. I realized after that visit, that I don't want to feel it necessary to write down tasks I enjoy onto a to-do list to make sure they are accomplished. I wonder - if my dad hadn't written these items down, would he have not done it? Would he have forgotten? Would he have deemed something more important - such as balancing his checkbook? Would he have felt compelled to do one of the tasks on his list, simply because it was there and 'hang out with family' wasn't?
In that moment of seeing this list - I realized how different I am from him. He is defined by work, defined by what he gets done on a daily basis. I am not. I see myself as many things, and if pressed to list them in order, my occupation would not be in the top 5. Seeing that was like the saying "stop and smell the roses" - for me it was a reminder to embrace each day. I don't want to be defined by a list - whether it is a list of what I got done or what I failed to get done. I want to be able to enjoy life and wake up each day, be grateful for the day, my health, and my loved ones, and take it from there. I have thought about this frequently since our visit and today I returned to the thoughts on To-Do lists - today was a gorgeous spring day and I would have loved to take my dogs for a long walk, join TE and friends in playing a game of Ultimate Frisbee, or even just sat outside and read my book. But, my To Do list said I had to jump on a plane and travel for work.
I look forward to when my To-Do list has items on it that are key to helping us live, and are enjoyable tasks. I also look forward to when there are very few items on my To-Do list, meaning that living life is really at its fullest.
Seriously now - my father owns a small slice of heaven in my eyes - he has this cabin that is in the middle of a bunch of woods, no neighbors to see in any direction. The place has running water from a spring when the land isn't frozen, and an outhouse completes the glorious experience. TE and I were invited up to spend part of each day there while we visited. We talked, enjoyed the beautiful outdoors, and just relaxed. That for my father in and of itself is quite impressive - the man is always in motion, thinking, and more so - DOING. But, when the weather is right and he's at this place, he relaxes and it is so nice to be a part of.
As we were up there, I noticed (one of) my father's always-on-hand To-Do list. The thing deserves a Wiki entry all to itself, it is that impressive. I can't remember a time in my life when I would climb into his car and there wasn't a To-Do list on the passenger seat or on the console. He has the 'current To-Do' list, that one lives in the car most of the time; the 'Work To-Do' list; the 'Cabin To-Do' list, and I am sure he has more. He puts EVERYTHING on his lists too - I haven't looked recently, but wouldn't be overly surprised if I saw 'wake up' on his list... just so he could cross it off. As I looked at the list, many things seemed appropriate. There were things like 'fix spring line' and 'move wood from cradle 3 to cradle 4' and things like that. Additionally (this must have been 'Current To-Do'), there were things like 'balance checkbook'. All tasks I deem appropriate for a To-Do list. However, a few items have left me reeling. One was 'Visit The Executioner and Spicy Princess' and one was 'Watch Duke & Louisiana'. SERIOUSLY?!?! You have to put 'hang out with your child who you haven't seen in over 2 months' on a list to make sure that it will get done? Or, is it that you put it on there so you can cross it off and say 'phew - lived through that, glad its done!'? I have a hard time wrapping my head around a college basketball game being something that he feels he MUST endure. Either way - I have been left thinking about To-Do lists.
I have been known to make a list. Mine are electronic, of course, and I do find power in collecting my many tasks into one common document when life is getting a little crazy. I realized after that visit, that I don't want to feel it necessary to write down tasks I enjoy onto a to-do list to make sure they are accomplished. I wonder - if my dad hadn't written these items down, would he have not done it? Would he have forgotten? Would he have deemed something more important - such as balancing his checkbook? Would he have felt compelled to do one of the tasks on his list, simply because it was there and 'hang out with family' wasn't?
In that moment of seeing this list - I realized how different I am from him. He is defined by work, defined by what he gets done on a daily basis. I am not. I see myself as many things, and if pressed to list them in order, my occupation would not be in the top 5. Seeing that was like the saying "stop and smell the roses" - for me it was a reminder to embrace each day. I don't want to be defined by a list - whether it is a list of what I got done or what I failed to get done. I want to be able to enjoy life and wake up each day, be grateful for the day, my health, and my loved ones, and take it from there. I have thought about this frequently since our visit and today I returned to the thoughts on To-Do lists - today was a gorgeous spring day and I would have loved to take my dogs for a long walk, join TE and friends in playing a game of Ultimate Frisbee, or even just sat outside and read my book. But, my To Do list said I had to jump on a plane and travel for work.
I look forward to when my To-Do list has items on it that are key to helping us live, and are enjoyable tasks. I also look forward to when there are very few items on my To-Do list, meaning that living life is really at its fullest.
Saturday, March 16, 2013
Counting Chickens
I'm sure the recent steady rise of stock prices has a lot of people feeling richer -- myself included. Although I've been reluctant to make many new additions to our FI Portfolio recently, the reality of our finances is that most of our investments are held in long-term retirement accounts which have benefited greatly from the return of markets to record highs.
In a classic case of counting chickens before they hatch, I projected the future performance of our retirement savings over 25 years (the length of time between the average age of my wife and me [34] and 59.5 years old [when current US laws would allow us to start to withdraw money from these accounts without penalty]). I used the sum of the most recent market values of our retirement accounts (as of last Friday's close) and assumed several different average rates of return to see a possible range of outcomes.
As you can see in the image below, assuming a conservative 3% annual return, we would have a million dollars in our retirement accounts in 25 years. Each 1% increase in the average rate of return above 3% would significantly add to our nest egg when we reach the government-approved retirement age. At a 5% annual return, we'd have $1.6 million. If we can somehow manage to see 8% returns on average, our retirement assets would swell to $3.3 million.
Of course, our investments are not guaranteed to go up. As an extreme example, we could see a 30% drop in value next week, meaning the starting amount in year 0 of the table would be significantly less, and the numbers in year 25 wouldn't be as impressive. However, even in that more pessimistic scenario, after 25 years the end result should allow us a modest lifestyle in our golden years.
One thing my table doesn't show is any new contributions we will make to our retirement accounts. We both get matches from our employers on contributions to our workplace savings plans. We also expect to continue adding the max amount to our Roth IRAs every year we are earning a paycheck. So it's possible that the year 25 row values are on the conservative side.
The point of this exercise for me was to confirm my suspicion that we have oversaved for our retirement up to this point in our lives, and undersaved for the 25 -year span between the present and when we are 59.5 years old. When you also consider that we should get something in the form of Social Security benefits in our 60s, the possibility that we've oversaved for retirement becomes even more likely.
The reality of our current situation is that we have 25 years to bridge, but I don't see us getting our FI portfolio to a point where it would produce enough income to allow us to quit full-time work any earlier than 10 years from now -- given our current savings rate and lifestyle. By that point we'd only need to cover 15 years until we could tap our retirement savings. And by then we could probably afford to spend some of the principal of our FI portfolio (along with the income) in order to get ourselves to age 59.5.
I've been trying to come up with creative ways to access our retirement savings early so that we can make a smoother transition to part-time work or early retirement. Unfortunately the current US tax laws don't have many loopholes to aid people in our situation.
If we happened to see a new bull market in the near future and had several years of significant gains (similar to what happened in the 1995-1999 timeframe), I wouldn't necessarily be opposed to pulling some money out of the retirement accounts early and paying the 10% penalty. I think this would be an extremely fortunate and unlikely scenario though.
We can withdraw our Roth IRA contributions at any time without penalty. I think this would be helpful making a final push to get our FI portfolio where we wanted to be. For example, if in the future we had $500K in our FI account and our goal was to have $600K in income-producing assets, we could take $100K of contributions out of our Roth IRAs and move it over to the FI account to reach our goal. This won't make a huge difference in the near term, however. This would likely be a shortcut we could use several years down the road.
We could always stop contributing to our retirement accounts. This would allow us to divert more income to our FI portfolio. But since we get matching contributions from our employers, it seems like we would be neglecting an opportunity for free money by making that choice. Even if we decided later to withdraw from the accounts early and pay the penalty, our employers are matching at a rate higher than the 10% penalty -- so we would still come out ahead in the end. And as I said before, any contributions we make to the Roth IRAs can be withdrawn penalty-free later, so it makes more sense to me to contribute to the Roths now to allow an opportunity for some income/appreciation to occur in the tax-sheltered account until we are ready to pull the contributions back out. So stopping retirement contributions seems like a bad choice to me.
My wife has also talked about making lifestyle changes that would help us reach our goal sooner. For example we could sell our current house and downsize to a very inexpensive location (a trailer in the middle of nowhere) and pinch our pennies while waiting for our investments to compound over time. This sounds sort of romantic, but it would be a major change and would require us to give up a lot of things we currently enjoy. I think there is probably a middle ground to be found here, but it would require a lot of planning and discussion so we can agree on what we want from life over the next 25 years.
We could also try harder to change from full-time to part-time work. However as I've mentioned before, it doesn't seem like there are many opportunities for us to work part-time in our current fields -- employers seem to want to hire professionals for full-time positions only these days. (As an example, my employer has all but eliminated part-time positions across the firm. Current part-time employees are "grandfathered" in but no new part-time positions are being offered.) In order to shift to part-time, we'd need to find new types of employment, and the most common part-time work is found in very low-wage jobs. It might be possible for us to create our own higher-paying part-time jobs, but it seems to me that getting to a point where one can work in a part-time consulting or entrepreneurial role requires a large amount of up-front effort (in hours, stress, money, education/licensing, etc). I really don't want to take on a huge commitment for something meant to last only 5-10 years. I'm not looking to embark on a new 25-year career. I'm looking for the path of least resistance.
I keep hoping I'll stumble across something new that I haven't considered (or didn't know about) which would help us in our situation. Until then we'll continue to work our jobs and save as much as we can.
In a classic case of counting chickens before they hatch, I projected the future performance of our retirement savings over 25 years (the length of time between the average age of my wife and me [34] and 59.5 years old [when current US laws would allow us to start to withdraw money from these accounts without penalty]). I used the sum of the most recent market values of our retirement accounts (as of last Friday's close) and assumed several different average rates of return to see a possible range of outcomes.
As you can see in the image below, assuming a conservative 3% annual return, we would have a million dollars in our retirement accounts in 25 years. Each 1% increase in the average rate of return above 3% would significantly add to our nest egg when we reach the government-approved retirement age. At a 5% annual return, we'd have $1.6 million. If we can somehow manage to see 8% returns on average, our retirement assets would swell to $3.3 million.
Of course, our investments are not guaranteed to go up. As an extreme example, we could see a 30% drop in value next week, meaning the starting amount in year 0 of the table would be significantly less, and the numbers in year 25 wouldn't be as impressive. However, even in that more pessimistic scenario, after 25 years the end result should allow us a modest lifestyle in our golden years.
One thing my table doesn't show is any new contributions we will make to our retirement accounts. We both get matches from our employers on contributions to our workplace savings plans. We also expect to continue adding the max amount to our Roth IRAs every year we are earning a paycheck. So it's possible that the year 25 row values are on the conservative side.
The point of this exercise for me was to confirm my suspicion that we have oversaved for our retirement up to this point in our lives, and undersaved for the 25 -year span between the present and when we are 59.5 years old. When you also consider that we should get something in the form of Social Security benefits in our 60s, the possibility that we've oversaved for retirement becomes even more likely.
The reality of our current situation is that we have 25 years to bridge, but I don't see us getting our FI portfolio to a point where it would produce enough income to allow us to quit full-time work any earlier than 10 years from now -- given our current savings rate and lifestyle. By that point we'd only need to cover 15 years until we could tap our retirement savings. And by then we could probably afford to spend some of the principal of our FI portfolio (along with the income) in order to get ourselves to age 59.5.
I've been trying to come up with creative ways to access our retirement savings early so that we can make a smoother transition to part-time work or early retirement. Unfortunately the current US tax laws don't have many loopholes to aid people in our situation.
If we happened to see a new bull market in the near future and had several years of significant gains (similar to what happened in the 1995-1999 timeframe), I wouldn't necessarily be opposed to pulling some money out of the retirement accounts early and paying the 10% penalty. I think this would be an extremely fortunate and unlikely scenario though.
We can withdraw our Roth IRA contributions at any time without penalty. I think this would be helpful making a final push to get our FI portfolio where we wanted to be. For example, if in the future we had $500K in our FI account and our goal was to have $600K in income-producing assets, we could take $100K of contributions out of our Roth IRAs and move it over to the FI account to reach our goal. This won't make a huge difference in the near term, however. This would likely be a shortcut we could use several years down the road.
We could always stop contributing to our retirement accounts. This would allow us to divert more income to our FI portfolio. But since we get matching contributions from our employers, it seems like we would be neglecting an opportunity for free money by making that choice. Even if we decided later to withdraw from the accounts early and pay the penalty, our employers are matching at a rate higher than the 10% penalty -- so we would still come out ahead in the end. And as I said before, any contributions we make to the Roth IRAs can be withdrawn penalty-free later, so it makes more sense to me to contribute to the Roths now to allow an opportunity for some income/appreciation to occur in the tax-sheltered account until we are ready to pull the contributions back out. So stopping retirement contributions seems like a bad choice to me.
My wife has also talked about making lifestyle changes that would help us reach our goal sooner. For example we could sell our current house and downsize to a very inexpensive location (a trailer in the middle of nowhere) and pinch our pennies while waiting for our investments to compound over time. This sounds sort of romantic, but it would be a major change and would require us to give up a lot of things we currently enjoy. I think there is probably a middle ground to be found here, but it would require a lot of planning and discussion so we can agree on what we want from life over the next 25 years.
We could also try harder to change from full-time to part-time work. However as I've mentioned before, it doesn't seem like there are many opportunities for us to work part-time in our current fields -- employers seem to want to hire professionals for full-time positions only these days. (As an example, my employer has all but eliminated part-time positions across the firm. Current part-time employees are "grandfathered" in but no new part-time positions are being offered.) In order to shift to part-time, we'd need to find new types of employment, and the most common part-time work is found in very low-wage jobs. It might be possible for us to create our own higher-paying part-time jobs, but it seems to me that getting to a point where one can work in a part-time consulting or entrepreneurial role requires a large amount of up-front effort (in hours, stress, money, education/licensing, etc). I really don't want to take on a huge commitment for something meant to last only 5-10 years. I'm not looking to embark on a new 25-year career. I'm looking for the path of least resistance.
I keep hoping I'll stumble across something new that I haven't considered (or didn't know about) which would help us in our situation. Until then we'll continue to work our jobs and save as much as we can.
Monday, March 4, 2013
The Cost of Recreation
My boss at work just returned from a vacation with his family. They flew to Florida, spent several days at the Disney parks, then went on a five-night cruise around the Carribean. He described to me how buying twelve-month passes to the parks saved his family money, since the cost for a family of four to go to Disney is something like $354 per day (tickets and parking -- not counting food, lodging, or souvenirs). This is a typical vacation for them -- one they've taken once or twice per year going back almost a decade now.
I have another friend at work who likes to spend time with his (adult) son working on and then driving/piloting various motorized conveyances -- motorcycles, ATVs, snowmobiles, Jet Skis, etc. He's always saving up to buy a new engine or some other upgrade for one of the machines.
I have a few other work friends who own "ski cabins" up in the mountains that they use as a base of operations for their frequent ski trips. I have yet another acquaintance at work who is a serious computer gamer -- always telling me about the latest game or equipment he's bought and is spending time on.
The reason I mention all of this is not to commend or criticize any of these behaviors. I am definitely an advocate for taking time to enjoy life -- "working to live" rather than the other way around. The reason I mentioned these folks is because it occurs to me that the sorts of things I am naturally drawn to, and which I try to partake in whenever I have an opportunity for some recreation time, are things which don't cost nearly as much as any of the things that a lot of the people I work with do. The activities I enjoy usually require a bit of upfront cost, but very little in they way of ongoing/maintenance costs. For example:
Hiking and Backpacking. I love getting outside and seeing the scenery. Hiking up to a high point in the mountains in this part of the country is a rewarding experience. My wife and I have spent many a day together on the trails, either for short day trips or for longer overnight/backpacking hikes. But hiking costs very little. All you really need is a good pair of boots or trail shoes and a backpack. Nothing has to be fancy. Most of the trails around here are free or have very nominal parking fees, which can be alleviated through the purchase of a yearly pass for around $25 (just over $2 per month). For the winter months, a good pair of snowshoes comes in handy.
Ultimate (frisbee). What a great game. I discovered it in college and have been playing informal/pickup games ever since. It's often possible to find space to play on a free field in a park. Discs cost around $10 each. Cleats are the only special equipment that I use, and not everyone uses them (some even play barefoot).
Board games. Countless hours of fun can be had for a very small up-front cost. This offers an excuse to get together and socialize with others on a regular basis -- we've been playing with our group about once a week. If everyone brings their own food and beverages, game nights can be a very inexpensive way to have fun. My personal favorite these days is Settlers of Catan (of course including the Seafarers and Cities and Knights expansions).
Other favorite pastimes include reading (usually library books or free eBooks from sites like Project Gutenberg), blog writing and reading, and bicycling (primarily a commuting exercise for me).
I guess I should consider myself lucky that I'm naturally satisfied by experiences that don't come at a high price. I prefer using my muscles over using motors or engines. I'm not drawn to activities that require a lot of high-priced equipment or regular usage fees (like hockey or golf or skiing). I also hit the jackpot when I found a woman who appreciates the same sort of low-cost entertainment as I do. We've had some great vacations backpacking in some of the national parks for very little cost -- transportation to the parks being the main expense.
For this reason, I expect that once we are able to break away from our full-time jobs and have more hours to fill with recreation, we won't have any trouble filling our days with fun and enjoyment without significantly increasing our expenses.
I have another friend at work who likes to spend time with his (adult) son working on and then driving/piloting various motorized conveyances -- motorcycles, ATVs, snowmobiles, Jet Skis, etc. He's always saving up to buy a new engine or some other upgrade for one of the machines.
I have a few other work friends who own "ski cabins" up in the mountains that they use as a base of operations for their frequent ski trips. I have yet another acquaintance at work who is a serious computer gamer -- always telling me about the latest game or equipment he's bought and is spending time on.
The reason I mention all of this is not to commend or criticize any of these behaviors. I am definitely an advocate for taking time to enjoy life -- "working to live" rather than the other way around. The reason I mentioned these folks is because it occurs to me that the sorts of things I am naturally drawn to, and which I try to partake in whenever I have an opportunity for some recreation time, are things which don't cost nearly as much as any of the things that a lot of the people I work with do. The activities I enjoy usually require a bit of upfront cost, but very little in they way of ongoing/maintenance costs. For example:
Hiking and Backpacking. I love getting outside and seeing the scenery. Hiking up to a high point in the mountains in this part of the country is a rewarding experience. My wife and I have spent many a day together on the trails, either for short day trips or for longer overnight/backpacking hikes. But hiking costs very little. All you really need is a good pair of boots or trail shoes and a backpack. Nothing has to be fancy. Most of the trails around here are free or have very nominal parking fees, which can be alleviated through the purchase of a yearly pass for around $25 (just over $2 per month). For the winter months, a good pair of snowshoes comes in handy.
Ultimate (frisbee). What a great game. I discovered it in college and have been playing informal/pickup games ever since. It's often possible to find space to play on a free field in a park. Discs cost around $10 each. Cleats are the only special equipment that I use, and not everyone uses them (some even play barefoot).
Board games. Countless hours of fun can be had for a very small up-front cost. This offers an excuse to get together and socialize with others on a regular basis -- we've been playing with our group about once a week. If everyone brings their own food and beverages, game nights can be a very inexpensive way to have fun. My personal favorite these days is Settlers of Catan (of course including the Seafarers and Cities and Knights expansions).
Other favorite pastimes include reading (usually library books or free eBooks from sites like Project Gutenberg), blog writing and reading, and bicycling (primarily a commuting exercise for me).
I guess I should consider myself lucky that I'm naturally satisfied by experiences that don't come at a high price. I prefer using my muscles over using motors or engines. I'm not drawn to activities that require a lot of high-priced equipment or regular usage fees (like hockey or golf or skiing). I also hit the jackpot when I found a woman who appreciates the same sort of low-cost entertainment as I do. We've had some great vacations backpacking in some of the national parks for very little cost -- transportation to the parks being the main expense.
For this reason, I expect that once we are able to break away from our full-time jobs and have more hours to fill with recreation, we won't have any trouble filling our days with fun and enjoyment without significantly increasing our expenses.
Sunday, March 3, 2013
Getting A New Dog
It's Spicy Princess here, reporting for the first time. You'll quickly be able to identify my writing in the future from the ! and :) that will be dropped in. And, probably most obvious, when you read the title and go "how the heck does that relate to The Executioner's plan?" - bear with me, there is always a connection.
We're not really getting a new dog, but I have named my Rollover IRA Spot, because I am funny that way. At first I was only thinking about the name Spot with the fact that Rollover is in the name, however after thinking about the paperwork that went into getting Spot into my possession (and by possession I mean loaded with my hard earned money) and all the research I am doing on what I should do with said Spot, it is feeling a lot like a new dog. I remember when I got my first dog, at the age of 21... I read every book and looked at all kinds of websites to prepare for it and questioned every decision I made. I am feeling a bit like that again now - at age 21.5 (joking). Luckily for me, a huge difference in this process is that I have an experienced partner and coach. The Executioner did some amazing explaining on the what's and why's and showed his patience in explaining some things again and again and again.
So now that I have Spot, I am deciding what type of tricks I want him to do. I am using the websites, books, and lists The Executioner (TE) has suggested and am hoping to have come to a (somewhat) final decision/plan to talk through with TE within the next week or two. Work keeps getting in the way of my concentration and learning about Spot though. I'll be back soon to tell you all about Spot's new tricks.
We're not really getting a new dog, but I have named my Rollover IRA Spot, because I am funny that way. At first I was only thinking about the name Spot with the fact that Rollover is in the name, however after thinking about the paperwork that went into getting Spot into my possession (and by possession I mean loaded with my hard earned money) and all the research I am doing on what I should do with said Spot, it is feeling a lot like a new dog. I remember when I got my first dog, at the age of 21... I read every book and looked at all kinds of websites to prepare for it and questioned every decision I made. I am feeling a bit like that again now - at age 21.5 (joking). Luckily for me, a huge difference in this process is that I have an experienced partner and coach. The Executioner did some amazing explaining on the what's and why's and showed his patience in explaining some things again and again and again.
So now that I have Spot, I am deciding what type of tricks I want him to do. I am using the websites, books, and lists The Executioner (TE) has suggested and am hoping to have come to a (somewhat) final decision/plan to talk through with TE within the next week or two. Work keeps getting in the way of my concentration and learning about Spot though. I'll be back soon to tell you all about Spot's new tricks.
Subscribe to:
Posts (Atom)