Starting Stopping Working

by Michael Scepaniak on March 12, 2018 in finance

Morning Glory

I’m giving early retirement a try this year. I’m 43 years old. I’m not sure it’s going to work.

In my mind, and the way I present it to those I choose to tell, I’m giving early retirement a try this year. Note – I’m not saying I’m retired. With this approach, I’m seeking to temper my own expectations and hopes so that failure, should it occur, does not prove to be too shocking. But, I’m not sure how much I’m buying into it. 😛 Hopefully, it works out as well as I anticipate it will and I never feel compelled to return back to full-time employment. I’m thinking there’s two major reasons why it might not work:

  1. I grow dissatisfied with not working (in the traditional “career” sense).
  2. My financial projections turn out to be significantly incorrect.

Anyone that knows me well knows that I’m a preparer. Meaning, for any given action or event, I like to be prepared for different outcomes. It’s very natural and comforting for me to think through possible scenarios and do what I can to mitigate those that are negative and amplify those that are positive. That begs the question – with the two potentially negative outcomes I’ve listed above, what have I done to mitigate them?

To be honest, out of the two I’ve listed, I’ve spent a much larger amount of time and mental energy on #2 as opposed to #1. Likewise, I’m going to spend a greater percentage of this essay discussing #2 than #1.

Let’s say I proceed through this coming year of early retirement, only to discover that, for whatever reason, I’d rather go back to my pre-retirement life of full-time employment? What preparations have I made for this outcome? Even before getting that far, what have I done prior to retiring that makes me think this outcome won’t come to pass?

Research

As with most things you might find yourself pursuing, the odds are good that you aren’t alone in your pursuit. Someone else has probably already blazed a trail before you. Early retirement is no different. From Early Retirement Extreme (ERE) to Mr. Money Mustache (MMM) to the Mad Fientist to the Mr. Money Mustache forums, there is no shortage of reference materials concerning financial independence and retiring early (known as FIRE to those who are… in the know). And so I read.

Jacob (of ERE) and MMM have both been FIRE’d long enough, and have been writing about it long enough, that they have moved beyond writing about how to retire early. Instead, they moved on to write more about post-FIRE lifestyle, interests, and motivations. Nothing (or little) of what I’ve read in that vein has given me pause or caused me to doubt that what they have is what I want. Jacob has also written about who he feels should retire early and why. I believe it was Jacob that made one specific and valuable observation, in particular, that has stuck with me. It was to the effect that – people who have the ability, talent, motivation, and interest to become financially independent and retire early aren’t prone to feeling bored or directionless once their career ends. That thought very much resonates with me.

I tend to be very self-directed and self-motivated, in both my professional and personal life. In my career, I’ve gotten to the point where I frequently set (or at least suggest) my own priorities, responsibilities, and deliverables. And in my personal life, I motivate myself to do many things that are… inconvenient – eating right, exercising vigorously, etc. In both lives, I primarily look to myself (not others) to drive me forward. And that would appear to be an important characteristic of anyone that would find happiness and satisfaction in early retirement.

In short, my research led me to believe that early retirement would suit me well. Regardless, even the most thorough research and due diligence can fall apart fast in the face of reality. And this is why I decided to ease into early retirement gradually – by first working at my career on a part-time basis before pulling the early retirement trigger.

Working Part-time

For about 7 months prior to fully quitting my career, I worked on a part-time basis at the position which I had been, up to that point, working full-time (for over a year). Fortunately for me, the nature of my work allowed for such an arrangement. I was working as a contractor, billing hourly, so there was no need for an awkward conversion from a salaried designation. I simply gave my client a heads-up that I intended to no longer work or bill more than two days (16 hours) per week. Once I had transitioned from full-time to part-time, I more or less maintained a fixed schedule of working on Tuesdays and Wednesdays, which opened up Mondays, Thursdays, and Fridays to a life of FIRE.

With this arrangement, I was able to swing the pendulum away from having the majority of my prime/daylight hours dedicated to work – and, instead, toward everything other than work. This allowed me the taste of early retirement life while also allowing me to easily slide back into full-time employment, should I desire. (My client had left the door open to me returning to my full-time complement of hours and work.)

I essentially flipped the standard weekly schedule from a 5-day workweek plus a 2-day weekend to, conversely, a 2-day workweek plus a 5-day weekend. This flip offered up to me the rarest of commodities – time. Instead of clutching at my free time as a precious and rare resource, I was able to soak in it and submerge myself in it, doing with it what I please. In fact, my entire daily schedule – waking, sleeping, etc. – changed once the focus of my life shifted from professional to personal. Because my weeks were no longer dominated by workdays, it no longer made sense to allow my work schedule to dictate how and when I lived my life.

And yet, I was still able to remain productive and find satisfaction in my work, despite time-boxing it to just 2 days and anywhere from 15 to 18 hours each week. My client and co-workers were not suffering from any awkwardness created by me working part-time. I was happy with both my working and non-working days, just as my client was getting along fine on both my working and non-working days. This relative satisfaction on all sides afforded me the luxury to keep to this schedule for quite a long time (7 months, as I said previously).

This state of equilibrium proved to be valuable. I didn’t feel any pressure to make a decision between early retirement and my full-time career. I didn’t feel strongly coerced to move in one direction or the other. Whichever direction I chose, it would be based on my free will.

Like the research I explained earlier, my part-time experiment also led me to believe that early retirement would suit me well. My most important findings were of what did not happen. When the focus of my life stopped being my career, I did not feel lost or listless. My life did not lose meaning. My drive and motivation did not wane. I did not grow dissatisfied. Rather, I felt refreshed. I was happy and I wanted more.

So, through both research and experimentation, I had good reason to believe that a life of FIRE would probably leave me feeling anything but, or at least far short of, dissatisfied. But, I’m still a preparer, so I still took steps (and continue to take steps) to recover should I grow dissatisfied with early retirement.

Allowing for Recovery

The most obvious step I took to allow for recovery is a practice I’ve engaged in throughout my career – maintain strong bridges back to my client. I took pains to wrap things up as cleanly, competently, respectfully, and transparently as possible, so as not to leave a bad taste in anyone’s mouth. There’s little reason to consciously do something in the last few weeks of employment to leave a negative impression. Again, that should be obvious.

I’m also making efforts to keep my “network” warm. To consciously let it go stale could make resumption of my career difficult, especially if my last client were to decline a re-engagement. But, again, this is a practice I’ve been following throughout my career – made easy because my “network” is made up of friends I happened to make on-the-job. In fact, this step has been made somewhat easier with early retirement, since free time to meet up for lunch and whatnot is now easier to come by.

I’m working to keep my head in the “game” – software development, in my case. This step isn’t very difficult, either, as I have always enjoyed my craft. And, fortunately, it is completely feasible for me to continue developing software (of some shape and fashion) on my own and in my own time as I desire. I enjoy keeping up with developments within the industry. This is also a natural by-product of keeping my “network” warm, since software development is always going to be a natural topic of conversation amongst former colleagues.

An Experiment

Now, the steps I just covered above are all fairly generic. They could apply just as easily to someone who has been laid-off or left a bad job mid-career as someone who is retiring early. But, one specific step that I have taken that is specific to early retirement – I referred to at the start of this essay. I don’t think of myself as retiring and I don’t present it that way to anyone. Instead, I’m giving early retirement a try this year. In both my mind and in conversations with others, this is an experiment – an experiment which could fail.

This is what I told my client, and this is what I tell my friends and colleagues. In doing this, the message that I’m sending to both myself and others is that nobody should assume that me being retired is permanent. I have not made any grand pronouncements. I have not marked myself as “retired” on LinkedIn. I have not posted a “life event” to Facebook. I have not sent out any mass emails or planned a party for myself. I don’t consider the game over or the deal done – and nobody else should, either.

Should I find the need to backtrack away from early retirement and resume my career, I won’t have to eat any crow, swallow any pride, deal with any awkwardness, or feel like I let anyone down. Framing the year as an experiment also (hopefully) keeps me in the minds of my colleagues, within the realm of possibility for any choice gigs or job openings.

So, I just described steps that I have taken to allow a recovery back to full-time employment. I covered those steps in the context of me growing dissatisfied with not working… and wanting to cut early retirement short. But, those same steps are equally applicable to the second major reason why I suspect early retirement might not work – my financial projections turn out to be significantly incorrect.

Goal Statement

When you spend enough time in the world of FIRE, you come across several rules of thumb, gauges, goals, or measures that attempt to simplify the math of financial independence (which then leads to early retirement):

These rules of thumb are valuable, because they make (what can appear to be) a very daunting effort more approachable. But, as I got closer to reaching FI, I felt a need to go beyond these rules of thumb and sweat the details. For example, take the goal that I ultimately came to target –

get my annual unsheltered passive income to exceed my annual enduring expenses.

There’s a number of qualifiers and adjectives in that goal statement. Like I said, details.

By making my goal statement this detailed, I was able to drive my financial projections to be as accurate, relevant, concrete, and understandable as possible.

Unsheltered Income

My experience as an investor began in my mid-twenties (I’m guessing 24 years old), with our money (I was married at the time) going into mutual funds, mutual funds, and more mutual funds. These funds were held in both tax-sheltered (IRA and 401(k)) and non-tax-sheltered accounts. In my early days, I didn’t really have a plan in place that dictated our allocation between tax-sheltered and non-tax-sheltered accounts. Neither my now-ex-wife or I had any dreams/delusions of early retirement or financial independence. We were simply saving as much as we could in forms other than cash. We were saving for nothing more specific than “the future”.

By the time I started developing a real awareness of the ramifications of these allocation decisions, I was 34 years old, with slightly more than 50% of our investment assets held in tax-sheltered accounts. Then came a divorce. It was only after an additional year or two had passed that I came to set my sights on early retirement. At that point, as a result of the gyrations and asset-split of my divorce, I had less than 33% of my investment assets held in tax-sheltered accounts.

This shift in allocation turned out to be a good match for my newfound goal of early retirement. I stopped envisioning 60, 65, and 70 as my retirement age and, instead, set my sights on 48, even 44. As a result, I couldn’t see why I’d want to continue putting my savings into tax-sheltered accounts that I wouldn’t be able to touch until I turned 59 1/2 years old. And so I stopped. I haven’t put an additional dime into my tax-sheltered accounts since.

This is why the income portion of my goal statement is qualified as “unsheltered” income. I bucket my passive income based on which accounts (tax-sheltered or non-tax-sheltered) it comes from. As far as I’m concerned, the assets contained in my tax-sheltered accounts, and the income they produce, don’t factor into my immediate or near-term early retirement financial projections. In this way, when projecting, I don’t overestimate the amount of income I should expect available to me. While I’m (now) aware of the strategies that are available for getting access to my sheltered assets prior to age 59 1/2, none of those strategies play a prominent role in my financial projections.

Enduring Expenses

When I was in my mid-thirties, probably around that time when I was 34 years old (when I was starting to become aware of the ramifications of allocating investments in tax-sheltered accounts vs. non-tax-sheltered accounts), I vaguely remember looking at our total expenses for the previous year and thinking that we’d need $4 million in order to retire. For whatever reason, our expenses had spiked up that year. No wonder thoughts of early retirement had not yet entered into my consciousness! $4 million!

In retrospect, I’m not sure what accounted for that spike in expenses. Regardless, a couple years later, during the process of me setting my sights on early retirement, I started getting closer to what constituted my expenses. I started classifying them with finer granularity – splitting out personal and corporate tax payments, expenses to myself, mortgage payments, etc. Over time and after many iterations, I eventually arrived at the concept of enduring expenses (in contrast to non-enduring expenses).

Enduring expenses are those expenses which are incurred both before and after early retirement, whereas non-enduring expenses should cease once early retirement is reached. Enduring expenses are most easily thought of by what they exclude. For someone who’s job requires formal attire, think weekly dry cleaning. For someone with a long commute to their job, think gas. For me, it’s payroll servicing, disability insurance, commercial liability insurance, and mortgage payments (because, post-FIRE, I intend to “mothball” my corporation and pay off my house). What you choose to classify as enduring and non-enduring is up to you.

Hidden Expenses

In this way, I was able to calculate a more realistic (and achievable) figure that properly captured my post-FIRE annual expenses. However, you have to really scrutinize those items/expenses you exclude from the “enduring” bucket, otherwise you might end up painting an overly-rosy picture for yourself. For example, with me, I was late in realizing (only a year or two away from early retirement) that my property tax and home insurance payments were bundled in with my monthly mortgage payments. I had been classifying 100% of my mortgage payments as a non-enduring expense. But, the plan was always for me to keep my house post-retirement. And so, I would still be on the hook for those property tax and home insurance expenses. That discovery of additional enduring expenses was an unnerving realization. As a result, my annual enduring expenses figure increased by ~15%.

Taxes, in general, are a ripe source of hidden enduring expenses. A common line of thinking is that, post-FIRE, your tax burden will essentially disappear. This is based on U.S. tax codes and rates being driven, for the most part, on earned income. Being a FIRE student myself, a lot of my post-FIRE financial projections are predicated on me keeping my income low enough to qualify for tax-free capital gains and qualified dividends. In this way, I don’t expect to pay any U.S. federal taxes. As a result, I’ve always classified my copious amount of taxes paid every year as non-enduring “expenses”.

But, of course, taxes aren’t just the purview of the feds. And yet, I was late in realizing this. I’ve since come to terms with the likelihood that I’m going to be on the hook for state and local income taxes post-FIRE. How much, I’m not exactly sure. This is one of the drawbacks of outsourcing your tax preparation. Regardless, I read up on my state and local tax codes and estimated my post-FIRE tax burden. This increased my annual enduring expenses figure by an additional 6% or so.

Yet another item I missed is non-qualified dividends. The vast majority of my passive income stream is derived from dividends and MLP (Master Limited Partnership) distributions. As I stated before, I’m hoping and expecting to realize these tax-free. But dividends come in at least two flavors – qualified and non-qualified. Under the right circumstances (which I intend to place myself in), qualified dividends are tax-free. Conversely, regardless of income level or tax bracket, non-qualified dividends are not tax-free. Yet another unnerving realization that I came to late. This increased my annual enduring expenses figure by another 2 or 3%.

All of this analysis is driven by the “enduring” qualifier within the expense portion of my goal statement. I’m doing the best I can to accurately distill my pre-FIRE expenses down to a figure that accurately projects what my expenses will be in a future stage of life that will be structurally different than every stage that has come before. It’s a tough exercise. But, it’s one that I feel needs to be done in order to arrive at financial projections that are as accurate as possible. Having gone through it, and seeing the multiple oversights I had made at various points, I’m all the more conscious of the likelihood that there remain additional oversights and mistakes to cause my projections to be off.

Uncontrolled Expenses

Here’s my goal statement again –

get to the point where my annual unsheltered passive income exceeds my annual enduring expenses.

In trying to arrive at a goal statement that is accurate, yet still understandable, I chose to forgo attempts to capture some details and other complicating factors. As such, there exist some important risks and other considerations that are not covered by my goal statement.

I’ve spoken at length about enduring expenses. The limitation with focusing on enduring expenses is that they imply a continuation (a smooth one, at that) of existing known expenses. However, expenses can be volatile and lumpy. Just the other year, I had a confluence of non-discretionary housing-related expenses that blew out my enduring expense figure for that year by many thousands of dollars. These were things like mold remediation, radon mitigation, and the replacement of a hail-damaged roof. Because of the infrequent, somewhat fluky, almost one-time nature of these expenses, in my calculations, I split these out from my typical enduring expenses. And yet, were these issues to arise post-retirement, I’d still have to pay for them.

Expenses can also grow rapidly and continuously in ways that are largely out of your control. I’m thinking of health insurance premiums here. I’ve been self-employed for a long time, and single (unmarried) for a large portion of that long time. As a result, I have years of experience buying health insurance for myself. Looking back 7 years ago, I paid $122/month for health insurance with a $2,700 deductible. I now pay $411/month with a $6,550 deductible. That’s a fairly massive increase. And the future doesn’t look promising. Ugh.

In a certain way, though, I feel fortunate having had this experience of buying my own health insurance and suffering through these increases. It allows me a greater degree of insight into what tends to be a big unknown for (I’ll venture to say) most new early retirees, who have probably had employer-sponsored health insurance their entire careers. But, this insight only extends so far. During my career, I’ve never been eligible to receive a subsidy (tax credit) on my ACA health insurance plan. As a result, I’ve always paid the full “sticker price”.

Once in retirement, though, with my income substantially lowered, I estimate that I’ll be eligible for a health insurance premium tax credit that will, in effect, reduce my premium by nearly 50%. It’s tricky, though, since I entered in my pre-retirement income when applying for health insurance last year. As a result, should I ultimately realize that tax credit, I’ll end up seeing it in the form of a tax refund. And that tax credit will be sensitive to any capital gains I realize during the year, possibly as a result of tax gain harvesting. So, it’s difficult for me to feel confident in projecting those specific costs.

Speaking of health insurance, there’s also health care costs to be wary of. Those big health insurance deductibles are real and ominous. I don’t believe I’ve ever come close to hitting one that is so high. Were I to while in early retirement, it would prove to be a big blow to my enduring expenses projection. And yet, because (like I said before) I’ve never come close to hitting a $6K+ deductible, it would seem to be overly cautious and pessimistic of me to factor that deductible amount into my enduring expenses. And so I haven’t. But it seems quite foolhardy to simply ignore the possibility that I’ll have to pay a full deductible once or more while in retirement.

Cash Cushion

As I’ve said before, I’m a preparer. I’ve factored in some of these negative possibilities, and more, into my financial projections. But, I’ve chosen to address these risks and considerations outside of the equation represented by my goal statement. I’ve, instead, established a complementary aspect of my financial plan – a cash cushion. This cash cushion goes above and beyond the “perpetual” and recurring income that I figure I’ll need to cover my enduring expenses. It will act as my first line of defense against unexpectedly large and lumpy expenses.

My cash cushion is simply a lump of cash that, unlike the rest of my holdings, is not expected to be invested or generate any meaningful amount of recurring income. Whereas the bulk of my holdings and the projections related to those holdings is all about income, my cash cushion and the projections related to it are all about raw principal. To be clear, my intention, post-retirement, is to live on investment income alone. I’m not planning on touching the principal that is yielding that income to pay for any expenses. In this way, my projections are rather conservative. I would consider the application of any principal or capital gains to offset living expenses to be… not according to plan.

The income-generating portion of my holdings is all about accounting for the expected. I anticipate that the cash generated by my unsheltered assets will remain relatively stable – and that my enduring expenses will remain relatively stable. Over time, keeping the stability of both in equilibrium with each other will be the goal. After one year of early retirement, I should be able to get a good feel for how well I’ve set myself up for that equilibrium. Fortunately, past experience can serve as something of a guide. I’ve been keeping records of my investment income and enduring expenses for years. This allows for relatively dependable projections.

The cash cushion portion of my holdings, conversely, is all about accounting the unexpected. It will act as a shock absorber, allowing the delicate equilibrium between recurring income and enduring expenses to remain undisturbed. It’s difficult/impossible to project the unexpected. Furthermore, drawing any definitive conclusions about the effectiveness of the cash cushion portion of my financial strategy after only one year of early retirement would be premature. But, just having it in place and available for this one year of early retirement, even if I don’t touch it, will prove enlightening. Because my cash cushion is to also act as a stress reliever.

By my cash cushion being there, I expect that I’ll be less stressed about the possibility of unexpectedly large, retirement-ruining expenses landing in my path. And I’ll be much more likely to truly enjoy early retirement. Only in giving early retirement a dedicated go this year will I really know if, psychologically, that proves to be true. On the other hand, were I to dip deeply into my cash cushion as quickly as the first year, it would give me pause. I’d have to reconsider my preparedness to retire early.

Too Much Income

There’s a flip side to my financial projections that I haven’t mentioned. It shouldn’t come as a surprise that my goal statement, like the other rules of thumb, looks for savings and income to outweigh expenses. In order to remain financially solvent, you need to bring in enough to offset the amount that goes out. But, once in retirement, what if you make too much? I know, you’re probably thinking “nice problem to have”. But, if my income for one year were to land within a certain range, it would actually be a significantly bad problem.

I’m not going to launch into too much detail on the subject here, but I’ll try to give the gist of the issue. I expect that the majority of my post-retirement income will come in the form of qualified dividends – paid out by my unsheltered stock holdings. The crux of my post-retirement financial strategy is to realize that qualified dividend income tax-free. The U.S. federal tax code allows for this, provided that your taxable income stays below a certain threshold ($38,600 for single filers, at the time of this writing).

However, should your income exceed this threshold for the year, all some of your qualified dividends (and long-term capital gains) realized that year are no longer tax-free. In my planning, the most likely cause for that happening is selling too many shares of stock, thereby realizing too much of a long-term capital gain for the year. This could become necessary for several reasons:

  • the fundamentals of a stock holding turn sour
  • a stock holding becomes substantially overvalued
  • a stock grows so much in value that it accounts for too-high a percentage of my portfolio

Any of these or other developments could prompt a sale.

Regardless of the specific cause, were I to exceed the taxable income threshold by even $1, I’d trigger an additional and unplanned-for $5,000 or more in taxes additional taxes. Ouch. My hope is that I am able to project for this properly and prevent it from occurring. In my projections, I’ve made an allowance for long-term capital gains, but it’s a rather arbitrary amount. If my allowance proves insufficient and I blow past the tax-free threshold amount, the additional taxes owed would end up being another unexpectedly large and lumpy “expense” that my cash cushion would have to absorb.

Update July 20th, 2018 – My initial understanding of this was wrong. Qualified dividends and long-term capital gains are taxed marginally, not absolutely. Meaning, only the portion of the qualified dividends and long-term capital gains income that exceeds the 0% threshold is taxed, not all of it. Meaning, if I go $1 over the 0% tax bracket, I’ll pay 15% of $1 (15¢), not the $5,000 I had initially feared. So, while this remains a mild concern, it is not the potential catastrophe that I first thought it to be. For more details, please read this thread on the Personal Finance & Money Stack Exchange and/or this thread on Reddit.

Dirty Experiment

Despite my years of planning for FIRE, this experimental early retirement year actually snuck up on me a bit. The circumstances of me choosing to end my contract weren’t as smooth as I had hoped they would be. Me deciding to pursue early retirement this year actually represented a late-game change to my short-to-near-term plans. It was the fact that a new tax year was just getting underway that moved me to act decisively and in short order.

As I explained above, my post-retirement financial projections are dependent on me realizing my qualified dividend income tax-free, which is dependent on me keeping my taxable income below a certain threshold. Because taxable income is calculated annually, from an experiment perspective, it becomes very important to start that experiment at the beginning of a fresh tax year. Allowing too many paychecks, tax withholdings, and/or invoice payments to roll in and muddy my finances would compromise the experiment. I don’t expect any of those in a typical post-FIRE year, and so I don’t want any in my experiment year.

Truth be told, I wish I had done a better job in this area. It would have been cleaner if I had ended everything, career-wise, in October or November of the previous year instead of December. As it is, I had several invoice payments roll in during the early months of this, my experiment year. And my final paycheck, for December of last year, was dated January 1st of this year. That’s dirtier than I wanted.

I believe I should be able to account for this “dirt”, but seeing all of this through is new for me, and the balancing act between bringing in too little income and too much income is tricky. Fortunately, I feel that my projections are robust enough to tolerate these mistakes. And that’s probably for the best, because mistakes won’t suddenly cease in retirement (ongoing retirement). I need that robustness.

Idea Lists

Earlier, I discussed the steps that I have taken to allow a recovery back to full-time employment. These steps apply whether the need to recover is due to dissatisfaction or erroneous projections. But, in the case of the latter, I’ve also prepared a couple lists full of ideas that could pre-empt the need to fully reverse course.

The first list contains ideas on how to deal with a situation where my expenses significantly exceed my income post-FIRE. I imagine that this is a list that every impending retiree (early or traditional) makes. Mine is fairly evenly divided between ideas for juicing income and ideas for trimming expenses. The income ideas start, of course, with dipping into my cash cushion. Beyond that, I could sell some shares of stock to generate some spending money, pursue some low-cost small business ideas (which I’ve had in mind for a long time), or get a part-time hourly job that would yield some small (but impactful) income, benefits, and/or perks. I could also pursue gardening more intensively, thereby increasing my food “income”.

From an expense-trimming perspective, I already live frugally. But, I still have some lifestyle fat I could cut. I could sell and do without my car, drop my monthly gym membership, cut back on travel/vacation costs, and/or prepare my own tax returns. There’s also the matter of my charitable contributions, which I have lumped in with my enduring expenses. While I wouldn’t tend to call them “fat”, those monetary donations could be trimmed back, if needed.

My second list, which is probably much less typical for most impending retirees, is of ideas on how to deal with a situation where I have too much income. As I discussed earlier, this would most likely be caused by realizing capital gains (selling appreciated or “winning” shares of stock), which would raise my taxable income. In order to lower my taxable income, I could contribute to either my HSA (Health Savings Account) or traditional IRA (despite the fact that I would already be retired). I could also directly offset the excess capital gains with capital losses (selling depreciated or “losing” shares of stock).

There’s also the option of gifting some of those “excessive” capital gains to charity, as opposed to making donations in cash. With that, I’d be turning a problem into an opportunity. Win, win! I imagine there are a few other options, but that still makes for a short list. Which makes the need to properly project and manage income all the more important. And that, in turn, makes all of this planning and these thought exercises equally important.

Closing

This essay represents a lot of thinking, maybe over-thinking. I tend to not believe that, though. I’m not one to speak in such terms, but starting stopping working has been my dream. My dream. In that light, is there such a thing as over-ensuring a dream? Throughout my life, especially my professional life, I’ve found that the best way to find gaps in my logic is to write that logic out. And so it goes with my early retirement logic.

Having written all of this, I’m feeling pretty confident that neither of my imagined reasons for early retirement to not work will manifest. Meaning, I’ll find it satisfying and my financial projections will prove solid (enough). I think I researched FIRE from some excellent sources, learned what I needed from my part-time experiment, drove my financial projections with a spot-on goal statement, established what will turn out to be an invaluable cash cushion, grabbed decisively at the right opportunity to start early retirement, and identified several ideas to course-correct, if needed.

Many people (at least, many of the people who know me well), when I tell them that I’m giving early retirement a try this year, they say something to the effect that they’re sure it’ll work. That I’ll make it work. With everything that I have discussed here, I’m either proving them right or I’m proving them wrong… or both. Maybe, by thinking through and being aware of all of the ways in which something can fail, you increase the chances that it will succeed. If so, then hooray for me. 🙂

Mike
Want to be notified when new articles are posted?
Enter your email address:

{ 2 comments… read them below or add one }

Bode Fuwa April 5, 2018 at 8:05 pm

Very informative! Thanks Mike! Good luck living the FIRE lifestyle.

Reply

Michael Scepaniak April 5, 2018 at 8:29 pm

I seek to inform. Thanks, Bode!

Reply

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed

Previous post:

Next post:

Member of The Internet Defense League