How far things changed in just a few short months…
With the pandemic still ravaging the economy and the incredible market crash just a few short months ago, it’s hard to imagine that here we are, contemplating early retirement because of strong market performance.
Yet, one of the readers is doing just that. He met his retirement number a month ago. And with the market’s going straight up ever since, he’s now pretty confident that the pot he saved up will last his family for the rest of their lives. He’s only 51 years old though and doesn’t know anyone nearly as fortunate as him so he’s a bit nervous.
If you were him, what questions would you be asking yourself before you tell your boss you’re leaving for good? Here are a few to consider.
Am I going to drive my spouse insane being at home all day?
I put this one up first because it sounds ridiculous, and thus it’s a question that’s often overlooked. Yet, there are far too many people who find out that seeing each other at home all day unbearable after years of having one (or both) spouse(s) out of the house for long periods of every day.
I’m not saying to keep working forever just because you and your significant other can’t work it out, but take the time to talk to your spouse so there’s an understanding that there’s going to be a change. Go to couple’s counseling if you have to. Do whatever it takes, because an early retiree might be spending the next 50 years living together with their spouses and seeing them for 10+ hours each and every day.
Do I feel comfortable whenever others make remarks about me as a stay at home dad?
This is more for the husbands thinking about retiring because our culture expects men to have a job before retirement age. It doesn’t matter that you’ve made more money in a short time than the average person makes in their whole career because not everyone will know your story when you meet them.
This is doubly true if your wife plans to continue working. How will you feel if someone says that you aren’t retired and that you are just a stay at home dad with your wife being the breadwinner? Now don’t get me wrong. There is nothing wrong with the woman of the house bringing money home. However, this becomes an issue if you aren’t comfortable with the idea. If you retire, you have to make peace with this.
Being comfortable with your situation is more important than you think. The last thing you want to be is to feel miserable when you thought early retirement is the holy grail.
Have I thought of a good retirement story to tell others whenever the topic comes up?
This ties into the last point about being comfortable, because you probably don’t want everyone you know to think you are just bumming off your parents or spouse if you have been prudent with your finances all your life. People want to know your secret, so tell them. Did you save aggressively? Did you make astute investments? Did you hit a home run with a business? Be proud of what you’ve accomplished, and let the world know. Don’t brag though, because it’ll just put people off. Be open about how you got here, or else you’ll start alienating people around you.
Are the finances really, I mean really, good to go?
The market crash seems like ancient history now, but it wasn’t that long ago. The sad truth is that another one is just right around the corner. You feel good about your finances now, but what if the market drops 30% in the next month or two? How will you feel about your retirement prospects then?
Not needing to wake up every day at a specific time is freeing, but feeling stressed about not having enough constantly probably makes retirement not worth it.
Run some numbers and see how whether your finances can handle a sudden drop. Use the 4% rule. Know your budget. Remember this as a rule of thumb while you are looking at your financial picture – you are never as rich as you think you are in a bull market and never as poor as you think you are in a market crash.
Are you planning to downsize, or relocate?
One of the biggest costs that can change in retirement is your housing cost. Where are you planning to live once you retire? If you are planning to downsize, then you should get the numbers figured out before you retire. Same if you plan to live in another state. Remember to factor in travel costs, because chances are good that you’ll want to visit your kids and grandkids every once in a while.
There are many mistakes people make when they downsize. Here are some you should make sure to avoid.
What am I going to do once I retire? Is life going to be better than work?
Plan out what you are going to do day in and day out. Everyone enjoys the first month after retiring from a long stressful career, but some people start to miss work after a while because they are bored at home. Retirement won’t be enjoyable for those who don’t know what to do with all the free time every day. Get a list ready, and enjoy it.
What about part time, or consulting work?
If you can’t think of anything to do to fill your day, perhaps you could downshift to a different type of work instead of flat out retiring. Most people don’t mind working. It’s the stress that they hate. Are there positions in the same company that allows you to do work without office politics?
Is there a hobby that can make you income where you can dictate your own hours?
I remember how we bought some handcrafted wooden lettering to hang in Sara and Jayden’s room when they were born. We bought them through eBay, and they were made from a retired man who loved to do woodwork. He just makes them whenever he wants, and he sells them on the side. If someone buys them, great. If not, it’s fine too because he enjoys the process of creating those wood crafts even if no one buys them.
I love how this man is spending his time because the side income gives him some focus, yet he’s also enjoying his work. He can also control his hours because he can do as much as he wants, or take a break whenever he feels like it.
Another friend of mine loves wine and buys rights to cases of wine that’s going to be produced in the future. And because you can get these bottles at a discounted price since they aren’t produced yet, he makes money when he takes delivery and sells them into the open market. As a result, he keeps a bottle of two of his batches and then sells the rest. He says he’s not in it to make money, but he’s been able to drink some very fine wine for free.
There are infinite possibilities to spend your time in retirement and make some money. Find them.
What is my investment plan going forward, now that I need to take money out of my portfolio instead of always making deposits?
The internet is obsessed with how to accumulate more money into the pot, but not nearly as many articles are focused on how to withdraw money once that pot is filled. Will you be changing your stock and bond mix? How are you actually going to take money from your portfolio? Are you going to reinvest the dividends and then sell investments every month? Are you going to let the dividends accumulate cash? Where will the cash go before it’s spent? There are many components that should be thought through here. Coming up with a plan is crucial because you don’t want to make sub-optimal decisions next time a market crash comes and you are coming up with a plan on the fly under stress.
Bottom Line
Retirement is a step into an entirely different phase of your life, so don’t take this decision lightly. Don’t quit just because you reached some financial number and hate your work. Retire into something great, and make sure you know exactly how great that retirement will be.
As an early retiree, you may be planning for a life that will last longer than how long you’ve lived so far. Your journey is a long one, so there’s no need to rush. Keep that in mind.
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I think before you retire you better have cultivated a number of shared hobbies with your spouse. Years before we retired my wife and I shared tennis, hiking, fishing, off roading, travel, cooking, running and skiing. We also enjoyed those activities separately with others as well as together. We take trips both together and separately with our same gender friends. I also kept a consulting job which she isn’t involved in as well as a couple of significant volunteer activities. We’ve had a great first five years and are even closer than when I had a full time job, but that’s only because we built a group of fun shared hobbies as well as some we do separately. I really worry about people whose only shared activity is eating out, that’s not enough to keep you together.
My wife and I used to golf together and I remember that being loads of fun. While we still do many things together, we both stopped golfing all together. We were just talking about going to a round together yesterday. Perhaps we will do that soon. Thanks for sharing!