Early Retirement Extreme Forums

I was wondering if it is beneficial to reduce hours to less than full-time before progressing to being entirely retired?

Where I work at the moment, it is somewhat flexible and I could choose to carry on working full-time for a while to achieve FI or
at some point could move to a 4 day week and it would take a little longer.

I mean mathematically due to compounding getting more money in earlier will lead to fewer hours worked in total throughout your life, but you have to be able to deal with it so depending on your preference you may prefer working more hours, but enjoy that time of your life more.

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You would have to be making quite a bit if you are using all tax advantaged options available(at least in the US) to lower your income as far as the IRS is concerned before this becomes the case.

You are right though that if you make a lot of money the equation might not work out.

If your personality is tied up in your work, then yes, reducing hours is beneficial in making the transition to retirement.

If you are a star worker, then you might be able to charge more for your hours and thus be able to reduce the number of hours you work.

I can't really think of any more scenarios where it works well, other than when trying to extend your financial resilience.

It’s important to consider what you would like to, want to, and also what you most likely will end up replacing those reduced hours with and if those new (or more of what your current) activities are more or less valuable to you based on whatever metrics are most important to you.

Example from my own life: I will move to China and work 25% of the hours I work now. I will fill that time with “anything other than working for someone else.” After making that change, I found I mostly just played video games with my extra time which I didn’t really mind. Now, I learn and practice web development is in my free time, and look down on my previous self for all the productive time I squandered. Then again, without that squandering of time, would I have ever started spending my free time more effectively? And, if so, when?

What I’m trying to drive home with my example is that what is a better use of your time is important to consider, is highly personal, and is not necessarily constant over time. As well, choices we make or don’t make have the potential for the sort of “butterfly effect,” especially when considered in hindsight.

There is too much to consider for any one single Internet forum response to advise. Hopefully the questions I posed for you to consider above will give you some insight and help you reach your own most well-informed at this point in time decision.

I think it can be a good move. Both tactically(perhaps working a bit less saves you from the rush hour commute so that much more time is freed, or perhaps the extra energy makes you more productive) as well as strategically(perhaps you'd be happier working three days a week than being FI and having all of your time unstructured, perhaps you value some time with your kids right now higher than complete freedom a bit sooner).

I think there's many reasons to desire FI, and for some it's more a case of work taking up too much time than the work being a problem in itself. I thrive from the challenge and structure of my job while many self-directed people on here would thrive on complete freedom.

I think I agree with all the points raised.
I'm kind of scared to reduce my hour prematurely in case it slows my progress too much.
Probably, I will do one more year full time and then think about 4 day weeks this time next year.

Nomad wrote: ↑

Tue Jun 19, 2018 7:24 am

I think I agree with all the points raised.
I'm kind of scared to reduce my hour prematurely in case it slows my progress too much.
Probably, I will do one more year full time and then think about 4 day weeks this time next year.

Yeah, when it really comes down to it on this kind of question it's up to you and how your feel on which is the best decision. Some people choose to slow down FIRE, but reduce the hours to make the journey easier. Some move to a lower paying, but more enjoyable job which has the same effect.

I see reducing hours instead of cutting off all income as being especially beneficial at this time, late in the business cycle / extreme bull market, because we don't really know how much we need to be financially independent for several decades (with a typical stock & bond index portfolio). The best metrics of valuations show us somewhere around the year 2000 tech bubble extremes, but across the broad US stock market, not just tech. We also have low bond yields now coupled with rising rates reducing bond prices, and low yields on stocks, cash, etc...

Our family is potentially at 4% withdrawal now but by no means would I call that a safe withdrawal rate. My wife will continue to work about 2 days per week putting us at a max of around 2% withdrawal rate depending on her hours and unpredictability of certain expenses. Furthermore I am planning on proposing a 2 day a week schedule in place of quitting outright, at least for the short term. If that works out, it would put us at a 0% withdrawal rate and around 60-70% savings rate.

If my part time plan works out and we were to continue that for three years, we would reduce our withdrawal rate to around 3%. We would be comfortable with a very conservative portfolio over this period of part time work, since we wouldn't be living off it yet (won't feel obligated to be heavy in stocks). Over the next three years I imagine we will see some changes in the economy and will be unlikely to be in such an extreme valuation / low yield regime. During this time we will potentially side-step any major downturn, so we would end up with an extremely safe withdrawal rate to meet the goal of growing our wealth, not just drawing it down. Still, it's unlikely we would both quit or lose our jobs at the same time, so we would probably only be withdrawing ~ 1.5% considering the steady part time income.

This seems overly cautious but really we wouldn't mind each doing about 2 days per week of work and would probably find it a satisfying way to spend part of our week while not being very stressful. So why not try a reduced schedule to smooth out future uncertainties?