When I think I want to retire

When I think I want to retire

I will be hosting the Festival of Under 30 Finances this Friday and as part of the Festival I asked the submitters a question

“At what age do you want/plan to be financially independent (IE you don’t have to work full-time if you don’t want to) and what is your plan to get there.”

I figured I’d take a quick stab at the question myself. As you may or may not know I have a goal to have put away $100,000 in principal by the time I reach age 30. I’ve been making pretty good pace with that goal and I see myself reaching it, but it really doesn’t say much about my long term aspirations and goals. Theoretically speaking I could quit saving completely at age 30 and if I waited till I was 60 to retire and got 8% return on my money – I would have over $1 million dollars at age 60. Certainly $1 million dollars won’t exactly let me live the life of luxury in retirement, but I could probably survive. I however don’t plan on stopping my retirement savings once I reach 30 so I can probably shoot a little higher.

Ideally I think I would like to retire in my early 40s. Now when I say “retire” I mean don’t necessarily have to chase the highest paying job and can do something that gives me the flexibility I want to really spend time with my family. I’m pretty sure by the time I get to my early 40s I will have enough saved up to have a comfortable retirement later in life, so at that point I can be done saving for retirement. If all goes well I hope to have $1 million saved up in my early 40s, this would give me about $4.8 million at age 60, which I think would get me by. Ideally I wanted to have about $10 million, but I’m starting to value financial independence more than having a whole lot of money.

Now when I get to the point where I think I want to retire, my most important thing will be to find something I really love to do (not that I dislike my current career) and that gives me lots of flexibility to be with my family and travel. I’ve got a couple ideas in this arena. One I’ve tossed around the idea of being a high school teacher. My wife has her teaching degree and if we ever stop popping out kids she will go back to teaching. If I was a teacher we would have our entire summers off with our kids which would give us loads of time to travel and do other cool things. I also have a passion to coach high school sports and this would certainly give me more opportunities to pursue those dreams.

My other idea is to start my own business and consult or do project work. My career is advancing very nicely and I got a feeling by the time I reach 40 I will have a pretty lucrative set of job skills. It may be harder than I think to give up my job as I will probably be making well into the six figures if all goes well. Starting my own business would be fun and exciting and I have nearly started a couple businesses already and I think it’s something I would enjoy. It would likely just be a business based around myself, so I’d have some flexibility. The thing I worry about with this is, customers may or may not be understanding of my needs to take a month or two off here and there to go gallivanting with my family. Although I could just look for project work from say September to May and make sure I don’t have anything major going on in the summer. This would allow me to have the flexibility, but would probably pay a lot more than the teachers salary. However I could see the boundaries between work and home life being an issue and it may not be any more flexible or convenient than a full-time job. I currently only work 40 hours per week and set my own hours for the most part so I think it may end up being “teacher” or just keeping my normal job and making sure I don’t have much travel time and hopefully working in a few more weeks of vacation over the years when it comes to performance reviews.

Either way I won’t have the pressures of needing work a time consuming job just to bring home a big paycheck to pay the bills and save for retirement. Hopefully at this point any money will just be gravy and can be used completely discretionary without any adverse consequences on our financial situation. I’ve still got a lot of details to work out on this and as you can see I still don’t know exactly what I want to be when I retire, but I do know I want to be free to spend time with family and hopefully put a LOT more time into cool things like coaching/mentoring/traveling/charitable work without feeling like I am squeezed for time in the work/family/play balance in my life.

  • I would recommend taking inflation into account from the begining. Psychologically 4.8M sounds like a lot, but broken into dollars that we are used to dealing with today it’s easier to grasp exactly how much it is.

    From there you can roughly compute how long you can survive by using the 4% rule (planning out 4% of your nest egg each year to live on). The math should give you a guide.

  • I’m in a pretty similar situation. I’m in my late twenties and find it hard to look 30-40 years down the road and imagine still working in a similar job. Starting a business could be interesting and I’m trying to build the various skils needed for that type of work (social, financial, networking, managing). I’m more interested in not having to travel and instead would like to help build up my local community.

    Coming up with a retirement number at our ages seems just about impossible given the amount of unknowns. I like your approach to make medium term goals ($XXXX in X years).

  • MFJ

    Darn you Lazy!! I even had in the parentheses after my 8% (just for illustration purposes Lazy) just because I knew you’d start preaching about minor details like taxes and inflation 😉

    Yes $4.8M is chump change in today’s dollars. $1.75M (assuming 3% inflation) which would be $70k per year at 4%, which would probably be sufficient seeing as how I would hopefully be able to manage the taxes (currently 75% Roth money in nestegg) and wouldn’t have bills like mortgage, etc. I’d like to shoot higher, but like I said I may value early retirement more than being extremely wealthy in retirement. Plus who knows I might earn more money in early retirement than I do working, but at least this will give me the freedom to take risks and try other employment routes out.

    BTW I’m just picking on you for picking on me about inflation. I understand the evil power of inflation http://www.myfinancialjourney.com/archive/realistic-rate-of-return-part-iv-inflation

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  • Have you considerred just taking a demotion in your current job?

    I am in a very similar situation to you and Cents. I got a promotion to development team manager a year ago and will make 6 figures in the not too distant future. But, I won’t want to do this forever. I am targetting $1mm by age 42 and I also target having my final home paid off my then. Within a few years of that, I’d like to ‘retire’ as well. Teaching and being a wrestling or football coach has been a dream of mine.

    But, I recently started thinking of another option. At age 45, I will be getting 5 weeks of vacation a year. Right now I get 4 but take about 2.5 due to job demands. Because I manage a team, I get far behind when I take vacation. At age 45, I like the idea of taking a demotion to a non-managerial position. I would take an obvious pay cut. But, I could be free for more time with family and still have a salary equal to about $65k in today’s dollars. That is about the same age my youngest child will get in to college. Soon afterward, my income needs will drop off quite a bit. Without the kids at home and the mortgage, my income needs will drop off a lot and $65k in today’s dollars will still likely afford the same level of retirement savings that I currently maintain. A teaching career would be nice, but at

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