Deliberately coasting to FI?

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black_son_of_gray
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Deliberately coasting to FI?

Post by black_son_of_gray » Wed May 27, 2015 11:31 pm

I've been considering the following scenario for a while now:

1. Amass half of goal assets (~12-16x yearly expenses or 6-8% withdrawal rate)
2. Quit job
3. Pick up a part-time job that involves a skill or activity I want to learn or enjoy in FI
4. Aim to make only enough money to cover living expenses (if making more than that, scale back employment?)
5. Repeat as desired (different jobs or locations) until assets have doubled (~10 years)
6. Now FI

Benefits:
1) Earlier escape from uninteresting job
2) Dramatically increases free time (every week has 3-5 free days)
3) Get paid to learn skills you wanted to learn anyway
4) Still connected to employment world if you want to return (no huge employment gaps, etc.)

Cons:
1) Longer time to FI (probably 3-5 years over min FI timeline)
2) Jobs might involve a lot of additional tasks you aren't interested in

Part of what appeals to me about this plan is that it makes use of the latter half of the ERE accumulation phase, where investment contributions start to play a smaller role than investment performance. So without much penalty, you can just cut out the contributions altogether - and in the meantime learn skills or travel in a more focused way than in spare time while fully employed.

Examples jobs I think might work:
Get a job as a bicycle repair tech - learn how to repair and maintain many different kinds of bikes, maybe also get to participate in various company-sponsored group rides/tours
Get a job at an outdoors supply retailer - learn about the various gear, participate in outdoor skills workshops/hikes/trips
Become a WWOOFer - learn farming skills (ok, that's not a part-time job)

Has anyone here done this, or considered it? Any other major pros or cons? Any other jobs people think would work well with this?

Matty
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Re: Deliberately coasting to FI?

Post by Matty » Thu May 28, 2015 3:00 am

This is similar to my semi-ERE strategy!

To me it seems like a very well-rounded strategy and perhaps more in line with Jacobs philosophy than the more common ‘work for X years to achieve 3% SWR and your done with work for good’.

I am uncomfortable with placing too much dependence on my financial capital. I would rather diversify my livelihood to be equally sustained by financial capital, social capital and human capital (ability to earn $).

As an example:

John works for 5 years and saves $300,000 and declares FI with the intent to never work again with a very SWR of 3% giving him $9000 per year. Then the share-market drops 50%, he ‘loses’ $150,000 and his confidence in his strategy plummets.

Jane works for 2 and a half years and saves $150,000, she then quits her full-time job and continues to make income through seasonal work, part-time jobs, small businesses in-between doing all the stuff she always wanted to do. Two and a half years later the share market drops 50% and she ‘loses’ $75,000. But she is confident in her ability to survive thanks to the last 2 and a half years. She actually ramps up her income to take advantage of some good buying opportunities in the share market.

I want to be flexible like Jane. I also hate working full-time and want to escape ASAP!

sky
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Re: Deliberately coasting to FI?

Post by sky » Thu May 28, 2015 4:05 am

I think that is a strategy that might work for some, but remember that the second half goes a lot faster than the first half when you are in a job with a good income.

GandK
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Re: Deliberately coasting to FI?

Post by GandK » Thu May 28, 2015 7:35 am

sky wrote:I think that is a strategy that might work for some, but remember that the second half goes a lot faster than the first half when you are in a job with a good income.
That was not my experience.

If you like this strategy and are healthy, I'd say go for it, OP. You'll have to lean more on your skills than your money, but I can't see how that's a bad thing when it's what you're doing already.

Check out the anti-fragility threads if you haven't already for some encouragement in this line of thinking.

jacob
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Re: Deliberately coasting to FI?

Post by jacob » Thu May 28, 2015 10:17 am

@black_son_of_gray -

That's more or less the path I followed (for idiosyncratic and historical reasons, much of which has to do with visas and work permits) except I was already past FI when I quit the job and I picked up part time job(s) and other income sources, a couple of which actually covered living expenses (which isn't hard at my level). I have repeated that as desired not really caring about the income as whether the activity was interesting...

So in my case

1. Amass 25x of goal assets (reached at age 30) and keep working because it was still interesting at the time.
2. Pick up part time jobs.
3. Market downturn bringing me back from 30+x to 25x at the bottom.
4. Quit full time job/first career because it was no longer interesting (age 33)
5. Quit first part time job, pick up another, repeat as desired. Gaps and overlaps exist. My average money making activities have exceed a one count.
6. Replace part time with full time job (can't be scaled back---not all activities are easy to scale in terms of effort)
7. Now extremely FI (getting close to 100x).

In terms of cashflows, I could actually have skipped step 1(!), but in that case I wouldn't have been so bold/opportunistic. Some are brave enough to consider 2x to be sufficient FU money. And as far as I remember a full half of all consumers operate at under 0.1x and still manage to change jobs, etc.

I consider the multiple/serial/recurring/"aim to add value in your activities" part time job strategy to be antifragile whereas FI is merely robust, so I treat FI more as a backup plan.

7Wannabe5
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Re: Deliberately coasting to FI?

Post by 7Wannabe5 » Thu May 28, 2015 5:23 pm

The lesson that I learned from hard experience is that the bolder you are in terms of FU multiple , the more you need to be concerned with both cash flow as well as average hourly income from whatever small business or part-time/temp endeavors you take on. IOW, your level of anti-fragility will be increased in some manner far beyond the additive if you have one sure cash-in-hand solution and one more risky high income possibility solution and two of each would be even better. Of course, I would note that it is highly likely that the most horrible consequence you would be trying to avoid with this strategy would be having to go back to full-time employment at a position you like even less than the one you currently hold as opposed to starving to death in some grim unheated garret or FITB with irrational fear of choice.

I would also note that it has been my experience that there are a lot of things you can enjoy doing for money if you don't have to do them for 8 hours a day /5 days a week with an hour commute on either end. The perma-culture rule is that each need (such as income) should have multiple solutions and each solution should fulfill multiple needs/goals. So, for instance, teaching water aerobics to senior citizens for 4 hours/wk could provide certain cash flow, exercise and community involvement/service and 4 hours/wk of dumpster diving could provide thrills, the occasional high profit score and it is a sound environmental practice. To round out this mix you might spend 2 hours raising angora rabbits for fur and manure, 6 hours working at the local food co-op and 4 hours writing/publishing a children's book about stoic philosophy. Of course, you would have to also spend some time cooking your pot of lentil soup and cutting your own hair etc. but I bet you could survive and have fun.

jacob
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Re: Deliberately coasting to FI?

Post by jacob » Thu May 28, 2015 7:04 pm

@7w5 - The "permaculture rule" is actually a standard rule in systems theory management (also see Peter Senge, Fifth Discipline). In ERE I call it "web-of-goals" to emphasize the time-dimension which isn't as relevant in permaculture as it is in the personal [finance]/socioeconomic universe, but same idea. The idea is to build mutually reinforcing guilds that adds as much value to the system as possible. Given capitalism, such behavior tends to be rewarded to the person adding it.

steveo73
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Re: Deliberately coasting to FI?

Post by steveo73 » Fri May 29, 2015 3:45 am

black_son_of_gray wrote:Has anyone here done this, or considered it? Any other major pros or cons? Any other jobs people think would work well with this?
My plan now has a lower asset level but more time prior to drawdown. I don't intend to get a different job than the one I have now. I bicycle to work in about 5-10 minutes. I get a lot of freedom (work from home and turn up and leave when it suits me) and the pay is good.

Pros:-
1. I can work less sooner.
2. It may have benefits with regards to adapting to retirement.
3. I think its safer with regards to decreasing my chance of retirement failure with regards to losing all my money.
4. The smaller target is easier to aim for.

Cons:-
1. Working longer until reaching true FI.

I'm not sure if I will follow through with this plan but it makes sense to me at this point. It will be interesting what I actually do though when I get to the point where I can work less.

Tyler9000
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Re: Deliberately coasting to FI?

Post by Tyler9000 » Fri May 29, 2015 10:27 am

Perhaps it would help to think of this topic less as "coasting" in a normal career path and more like "right-sizing" the career to begin with.

cmonkey
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Re: Deliberately coasting to FI?

Post by cmonkey » Fri May 29, 2015 10:41 am

I agree with what Tyler just posted.

My plan right now is to work fulltime until FI is reached but I have been having thoughts of what I'd like to do when I reach that point go through my mind and am considering a possible relocation in the cards.

The DW and I have thought that working/volunteering with Seed Savers Exchange is in our lifepath. We'd be doing what we love and just might make a little extra cash. No better "retirement" than that.

RichUK
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Re: Deliberately coasting to FI?

Post by RichUK » Fri May 29, 2015 1:28 pm

I like this strategy and it's roughly the model I'm working towards.

I think you also have options in terms of the "part-time work" too. You could do zero work, part-time work, full-time work, or a mixture. And you could look at that on whatever timescale you like. Maybe you sell ice-creams on the beach full-time during the summer, and then take the winter off to go skiing. Maybe you go crazy and live a 2X year whilst you travel the world, and then work full-time the next year and replenish the fund. Or visa-versa.

The question I'm asking myself is how big does my fund need to be for this sort of lifestyle.

JamesR
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Re: Deliberately coasting to FI?

Post by JamesR » Fri May 29, 2015 6:16 pm

I'm a big supporter of the semi-ERE concept.

The trinity study shows that even a 7% withdrawal rate can work almost as well as 3-4%. That means that 15x your yearly expense is probably a good cut off point for going semi-ERE.

I am planning on going "semi-ERE" at only 12x. I will leave the job and switch to part-time freelancing.

I have some experience with freelancing on oDesk. Plus I'll have fresh work experience & honed skills from the current job. Plus I'll move back abroad, and live for cheaper, and pay less in taxes. For these reasons, I think I'll be able to stay within 70% of my current savings rate.

Speaking of taking on lots of interesting part time jobs.. I also think about that too. A couple of jobs I think would be interesting to do for a season: bike mechanic, courier, gym rat, male model, line chef, etc.

bibacula
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Re: Deliberately coasting to FI?

Post by bibacula » Fri May 29, 2015 8:53 pm

I did this inadvertently. A "coasting" lifestyle is really interesting.

I was laid-off in 2001 when I had 20x saved (5% withdrawal rate). I decided that I was "FI enough" because I planned to do paid work in the future.

I took a few years off to finish my bucket list, then I found interesting work in 2004. I liked the work so much that I kept working when I really didn't need the money.

There are some huge advantages to a "casual work" lifestyle:
1. Withdrawal rates don't really matter. You'll never need to worry about running out of money. Earning enough to cover a low-spending lifestyle is easy.
2. Portfolio fluctuations don't really matter. Equity markets have collapsed twice since 2001, but you can just take a job whenever you feel nervous.
3. Portfolio returns don't really matter. Stock market returns have been poor over the last 15 years, but you won't rely on high stock prices.
4. You'll get the FI-mindset sooner. Realizing that you are financially free greatly expands your opportunities.

Regarding specific jobs, I had a lot of fun teaching English in Cambodia and Taiwan.

oldbeyond
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Re: Deliberately coasting to FI?

Post by oldbeyond » Sun May 31, 2015 5:02 am

My plan is to amass 10-15 times expenses, which will probably mean another 10 years of full-time work, and then use my by that time hopefully honed skills and decent network to do consulting work in my field, either for a few days a week or for a few months a year. I hope I can reach a state were this would be sustainable for the rest of my life should I choose to, so that I am not forced out of the labour market against my wishes by "normal" variance in the economic climate. How long I'd keep at it would depend on how I felt about the work, and what other opportunities presented themselves. I don't feel the need to reach complete FI in a hurry, as I foresee myself participating in the economy to a fairly large extent, in one way or another, for the rest of my life. But having that cushion will make me bold enough to participate on my own terms.

jacob
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Re: Deliberately coasting to FI?

Post by jacob » Sun May 31, 2015 9:55 am

It's important to consider how easy it is to cover expenses by casual work which in particular depends on how high those expenses are.

For example, a high salary of $8000 per month coupled with a for average people average spending of $4000 month will be tough because a $4000/month income is not something that can just be picked up doing whatever whenever wherever. But remove one zero from those numbers and the possibilities go way up.

So unlike FI which just depends on ratios like savings rates, semi-retirement depends more on absolute numbers.

7Wannabe5
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Re: Deliberately coasting to FI?

Post by 7Wannabe5 » Tue Jun 02, 2015 9:31 am

Very true point about semi-retirement depending more upon absolute numbers. Maybe $800/month ($10/hr X 80 hrs.) would be safe margin? So, if you have track record of keeping expenses below $800/month and you are okay with working/hustling 20 hours/week/average at this or that or the other thing, then go ahead and quit. Otherwise, you will need more passive investment income.OTOH, in my experience, you kind of got to get it down to more like 14hours/week on average (half day of work for money every other day) to really feel slacker semi-retired so maybe around $600 would be better?

steveo73
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Re: Deliberately coasting to FI?

Post by steveo73 » Tue Jun 02, 2015 4:51 pm

My problem with hustling for casual work is that if I am getting paid a decent salary now why would I hustle for a decreased hourly rate with probably not as good conditions.

Now I bicycle to work in 5-10 minutes. I can work from home. I can leave and come when I want too. I get paid a decent salary. So for me personally I think I would be better off staying in my current job and maybe working part time in my current job up until being completely FI.

7Wannabe5
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Re: Deliberately coasting to FI?

Post by 7Wannabe5 » Wed Jun 03, 2015 5:50 am

@steveo73- I think the usual reasons for being willing to hustle would be more free time for non-lucrative pursuits immediately, greater flexibility and greater variety. Sounds like in your situation greater variety would be the only possible motivation, so not worth the hassle of the hustle. OTOH, there is some truth to the notion that the day you can stop hustling altogether is the day that you die. I find it very hard to imagine most of the members of this forum not pursuing goals with measurable results post-"retirement." Another way to think of semi-retirement could be to think of only having maybe 1/6 of the goals/hour you are pursuing with $$ signs as end of race marker rather than 1/2. It is actually almost impossible not to relate most goals with measurable results to money. For instance, I currently have the goal of harvesting 365 lbs. of produce from my new gardens this year. If my goals were to reduce my resting pulse to X and visit Y state parks and crochet Z toilet paper cosies for Xmas gifts, I could still more or less readily convert the quantifiable measure of success to $$ saved, spent or earned. I mean, whole point of the study of economics. IOW, although there could, in theory, come an end to your need to hustle to improve your financial well-being, there will likely never come an end to your desire to hustle to improve your economic well-being unless you are in a coma or suffering from severe depression.

OTOH, reaching a state of content-not-to-hustle in one realm (such as finance) could feel very freeing because then you could focus on other realms. For instance, I recently read a study that claimed that there is an exact number that can be attached to a feeling of contentment with current body weight for white American women of my age and height.

steveo73
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Re: Deliberately coasting to FI?

Post by steveo73 » Wed Jun 03, 2015 6:33 pm

7Wannabe5 wrote:I find it very hard to imagine most of the members of this forum not pursuing goals with measurable results post-"retirement."
I completely agree with this but I don't want to focus on money at all.
7Wannabe5 wrote: there will likely never come an end to your desire to hustle to improve your economic well-being unless you are in a coma or suffering from severe depression.
I agree to a point. I don't want to have to work for my money. I'm happy managing my finances but the idea of FI to me is to not be reliant on my job.
7Wannabe5 wrote:OTOH, reaching a state of content-not-to-hustle in one realm (such as finance) could feel very freeing because then you could focus on other realms. For instance, I recently read a study that claimed that there is an exact number that can be attached to a feeling of contentment with current body weight for white American women of my age and height.
This is my goal. I can find plenty to do and be happy with. I don't need work to feel happy and I would rather focus on other stuff.

SimpleLife
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Re: Deliberately coasting to FI?

Post by SimpleLife » Wed Jun 03, 2015 10:25 pm

My idea of coasting to FI would be to move overseas for 5-10 years or however many years it would take for my assets to compound to a million or two and then move back to the US. Party it up on a dirt cheap budget with a 1% withdrawal rate and let your assets compound and then come back to a normal US lifestyle as a millionaire after letting compounding do the work for you while you party it up. Too bad I can't relax and could never pull this off, lol.

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