Fear of early retirement?!?

[vagabond-e]

Anyone else experiencing "fear" when it comes to early retirement? I've been using the "10x" your last annual salary estimation on retiring and am pretty much there at age 46. I've also been running the numbers and different projection models for withdrawal scenarios. All is looking reasonable. BUT a fear of pulling the plug on the regular paycheck is holding me back. Anyone have some advice on how to overcome that fear?

[RFS]

Since this your first post [welcome, by the way ], maybe more information about your situation would help. Can you make an income outside the job? Will you stay within your SWR? It seems to boil down to those 2 things.

MMM recently wrote a good post for people worried about pulling the early retirement plug.

[2Birds1Stone]

Salary is pretty much irrelevant.

Shoot for 25-33x actual/projected annual expenses. The math dictates that as long as you have a sound investing strategy (low cost, diversified, decent exposure to equities) you pretty much have a 99%+ chance of success.

If you are in the USA that does not even include pensions/SS/or any part time income you may make as a hobby over the next 3-4 decades.

Enjoy =)

[wolf]

I've been using the "10x" your last annual salary estimation on retiring and am pretty much there at age 46.

Welcome vagabond-e (cool name btw)! Are you vagabonding?
What is the 10x annual salary estimation? I haven't heard about it. Can you explain it?

[Mikeallison]

I think people get too caught up on the "retirement" part. You have ten years of your current income! In what situation would that be inadequate to cover any emergency? Ten years is plenty of time to figure out what to do next! Doesn't mean you have to stop working either, only that you can stop working at something you don't care about. You can pursue work that is meaningful to you, even if the pay sucks, because you don't need the income anyway.

This is how I solved the "what now?" dilemma:

I'm the outdoors type, so I moved to a state that is full of natural beauty. In less than 8 hours I can be in Yellowstone, in less than 4 I can be in Glacier national park, or British Columbia. In less than 15 min, in any direction, I can be at a lake surrounded by pines and mountains. Because all of this is so close, every free moment of good weather I get to go out and do what I used to do only a few times a year during vacations. I have a family now too, so I get to enjoy it with them which has been awesome. I continue to work part time to give me something to do (especially in winter) but I still feel like I am on vacation everyday. Oh and on the social end, I now get to spend time with people who like hiking, fishing, and camping like I do, instead of miserable coworkers who I have nothing in common with.

I may be an oddball though. I've never tied my identity and self worth up with a career, and I've always found the best parts of life to be outside of the grind. I'm also a pro at entertaining myself, I have more hobbies than time. I can be lazy for sure, but I'm rarely bored. If you are the type that lives to work, it may take some soul searching to figure it out, but better now when you are young and have the time!

[DutchGirl]

You have a case of the "OMY"-syndrome. The "One More Year" of working-syndrome, where people feel like they can build up even more of a security cushion if they work one more year. And then after that, of course they work another one more year, for even more safety. Etc.

I have no solution for you... But perhaps it helps to be aware that you're not alone with this fear. And perhaps some googling can help to see how people have beaten this fear...

[2Birds1Stone]

I'm the outdoors type, so I moved to a state that is full of natural beauty. In less than 8 hours I can be in Yellowstone, in less than 4 I can be in Glacier national park, or British Columbia. In less than 15 min, in any direction, I can be at a lake surrounded by pines and mountains.

May I ask where? This is something I long for.

[Mikeallison]

@2birds1stone

I'm in the panhandle of idaho.

[TheFIminator]

I would imagine most people have fear of retirement. You can do as many spreadsheets as you want but life is not a spreadsheet. So things can change and the unknown is scary at the best of times. So the fear of early Retirement is quite real and natural. A lot of people start slowing down for a while before giving up work completely. That helps test the waters and see how comfortable you are.

The other thing to consider is to walk on the side of caution when working our your numbers. I take a 3% SWR and 35 x expenses as a target, to build in as much buffer as I possibly can. Of course, I was able to do this as I was close to that number, not everyone may be able to. But worth building in buffers to make yourself sleep better at night.

You also have to remember that if you are retiring early, you will be in your younger years, which means that you will be able to get some job or source of income if you really have to once you pull the pin. So there are options to fall back on.

[IlliniDave]

Yes. Not the same sort of fear I'd have with an angry grizzly bear 15 ft in front of me, but it's not a trivial juncture for me.

I'm a little older than you, have <10X salary, but ~42x anticipated average annual withdrawals, the latter arguably being more of a direct measure. I'm currently 53 and looking to go at 55.

Having seen ups and downs I'm wary of the fact tha the math doesn't capture everything about life. The work part of my life has been very stable for 31+ years and not unpleasant. Ditching good in pursuit of better entails risk.

The one thing I've done that has given me some confidence is to adopt my planned retirement lifestyle (especially as pertains to spending level) while I'm still working. This allowed me to adjust as necessary and prove the plan at least potentially viable. Related to that is having a fairly specific plan of what you are going to do with the time freed up by ceasing employment.

Of course, I have 1-2 years to go and only time will tell if I pull the plug on schedule. But it became far less intimidating when I went from: "I think I can live on that and find some fun stuff to do," to "Spending-wise, there's no change to my current lifestyle and I'm all set to do A, B, and C the first three years."

Still, for many of us it is a big change and therefore can be a source of anxiety. It may not be possible to banish it with math and anecdotal experiences of others. For me, at some point, it will be a matter of summoning courage to leap into the semi-unknown.

[BRUTE]

The work part of my life has been very stable for 31+ years and not unpleasant. Ditching good in pursuit of better entails risk.

has IlliniDave considered working part time, taking off 3 months per year, a gap year, instead of just outright quitting?

[IlliniDave]

BRUTE, I have. My present employer doesn't offer much in the way of options in that regard. Part-time is an option, but only continuous part-time. Unpaid leaves-of-absence are sometimes allowed. Both are detrimental to the accumulation of retirement benefits, however. And I don't see a way either of those options could mesh well with my other goals in the next phase of life.

I discussed this topic with my supervisor when my mom's health began failing, and she went so far as to try to initiate a change in HR policies to allow long-service employees a "sabbatical" opportunity that wouldn't penalize them, but in typical Megacorp fashion the bureaucracy was far too rigid for such an idea.

Once I get retired and relocated, if it becomes quickly apparent that I'm failing to adapt, I certainly could explore workforce participation opportunities. It's unlikely that financial reasons would be the driver, more likely it would be the creature of habit in me refusing to let go of the idea of explicitly "gainful" activity. So I'd have a lot of flexibility in how to approach it. While I'm typing this, though, it is not an intellectually appealing idea. I'd rather go and not look back.

[liberty]

It's also risky to stay in Corporate too long (dependent on how much you dislike your job). Let's say worst case happens, that you die or get sick early, let's say 15 years from now. Because you quitted today, you got 15 years of retirement to enjoy yourself. If you, on the other hand, worked 10 more years, you would only get 5 years to do the things you would love to. Isn't that also a risk to not retire early enough? The worst case scenario is not to run out of money, but that you die or get sick after few years of retirement.

[FruGal61]

It's also risky to stay in Corporate too long (dependent on how much you dislike your job). Let's say worst case happens, that you die or get sick early, let's say 15 years from now. Because you quitted today, you got 15 years of retirement to enjoy yourself. If you, on the other hand, worked 10 more years, you would only get 5 years to do the things you would love to. Isn't that also a risk to not retire early enough? The worst case scenario is not to run out of money, but that you die or get sick after few years of retirement.

Yup. I think about this a fair amount. My dear old dad was a union electrician. He retired at age 60, died at age 69. He was fortunate in that he enjoyed 9 years of retirement, doing what he wanted which included traveling, RV'ing to a sunnier climate in the winter with my mom, tinkering around in his workshop and taking naps in the middle of the day. He could not wait to retire and he planned well so that he could. Also, he was fortunate to have a pension. He left my mom in good financial shape, she is still alive at 92.

I do wonder if I work until the "full" retirement age which I believe for me, is now 67. Then I think of my dear old dad. Shudder the thought.

[RealPerson]

Having seen ups and downs I'm wary of the fact that the math doesn't capture everything about life. The work part of my life has been very stable for 31+ years and not unpleasant. Ditching good in pursuit of better entails risk.

This is so well said. The life of a human being simply does not fit on a spreadsheet. Especially not the unknown part in the future. I think there are 2 answers for this. One is the willingness to be flexible, such as part time job, living situation, expenses.... But not everything is amenable to flexibility. If a chronic cancer condition brings you to financial ruin, you may not have the energy of stamina to find a part time job, start a side business etc.

The second answer is that at some level there needs to be acceptance that not everything in life can be calculated, predicted or even effectively managed. You don't know 100% for sure what will happen, that you will be okay, etc. In fact, the biggest things in life aren't even related to money. The spreadsheet, i.e. the money, is the easy part. Life on planet earth carries a ton of risk. We all have to learn to come to peace with that. Safety and security are illusions for all of us. Staying in the work force believing that you will achieve safety and security is a fallacy. The only certainty is that each day at work is one day less remaining in your life. How do you want to spend that day?

[Farm_or]

@realperson - very well put.

If we are too intent with planning the future - both feet in the future, we don't get to experience the present. It takes one foot in the future and one foot in the past to be centered in the present.

That said, I have experienced the fear of failure in every change that occurred in my life. You don't always recognize while it's happening, but there was always a catalyst to help me on my way...

[jacob]

It's not the fear of early retirement that's being discussed here. Fear of early retirement would be along the lines of "I worry that I will be socially isolated" or "What if I don't deal well with lack of structure?" or "Maybe I'll die early because I'll end up spending all day watching TV!"

What's being discussed here is the fear of financial independence. I submit that this is mostly a fear of the unknown. Like what if I get cancer, will I have enough money? What's not considered is the unspoken assumptions behind relying on earned income: Like what if I get cancer, will I be able to keep my fulltime time? What if I have children and don't have enough SWR? Ditto, but insofar you can't get a raise? You also see this from the FI side. Many believe that if they run out of money, they can just go out and get a job. I think that might not be as easy as one assumes. Jobs don't exist on demand. If you want to wear both belt and suspenders, the ultimate solution is semi-retirement or the wider renaissance approach with multiple and different kinds of income streams.

I think the best way to resolve this [fear] is to do trial runs. YMOYL handled this well with their crossover diagrams. However, this only works emotionally if you set up your financial structure as-if you were already living off of capital income. It's one thing to know theoretically that you could get n% out of an IRA in principle. It's quite another to have arranged your accounts in such a way as to deposit your capital income directly into your checking account on a regular basis. The latter has a much stronger SWAN factor (sleep well at night). However, this is hard to set up if you "only" have average income because in that case the 401k+HSA+IRA will eat most of your income leaving little in taxable income. In that case you HAVE to pretend (as close as possible) that you're getting those streams according to roth conversion ladders or 72(t) but route the actual cash (from earnings) instead. Conversely, if your capital income comes mostly from taxable accounts, you deposit your (entire) paycheck with your broker but live off of capital income from your broker.

Ultimately this issue has to do with emotions not aligning up with theory. It's the same reason why Dave Ramsey suggests paying off your smallest CC debts first (which is the psychologically correct thing to do) instead of the highest interest debts first (which is the mathematically correct thing to do).

[IlliniDave]

What's being discussed here is the fear of financial independence.

Not necessarily by all of us. The things that mainly give me pause are the things like maintaining a routine and finding things to fill my extra time over a few decades.

I do like the idea of trialing post-employment financial flows/mechanisms ... though in my case it's really not possible. I do keep a portion of my paycheck that is < my anticipated retirement annuity (i.e., pension) every month and the rest goes to VG (or to 401k/HSA via payroll deduction). I don't ever think I'll ever have enough income generated from investment accounts to cover withdrawal needs, and selling shares now with the associated tax drag is maybe more than I want to pay for a little extra realism. I'll have to think about it.