Can I take an 85+% pay cut for fun?

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fast_and_curious
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Can I take an 85+% pay cut for fun?

Post by fast_and_curious » Thu Mar 08, 2018 10:17 pm

Hi Bogleheads,

Synopsis: Can I quit my current job that pays roughly $275k (that I hate), to pursue a career that I'm passionate about but pays only ~ $35k?

Details:

I work at MegaTech as a software developer. With bonus & stock, my annual compensation is roughly $275k. But I've really been feeling burned out the last few years - not interested in the work at all anymore, just getting so repetitive, lots of little irritants, etc. I switched jobs in 2016, so I think it's the industry / general job description that I'm burned out on, not this particular position or company.

I have the opportunity to pursue a completely different career track that I am passionate about, and would really enjoy, but that would pay roughly $35k to start, probably moving up to ~$65k within 5-6 years. Maybe higher after that, but maybe not.

Here's the rest of our info:

Age: 45 (both my spouse and myself), assume spouse not working.
Retirement Accounts (401k, tIRAs): $920k, roughly 65/35 stock/bond
Taxable Accounts: $1.75M, again roughly 65/35 stock/bond
529 Accounts: $175k
House: ~$600k, paid off. But I'm not really counting this, as we have no plans to move.

So total investable, non-529, assets of about 2.7M.

Most everything is in a 3 fund portfolio, with a few Vanguard active funds in my taxable account that I'm holding only to avoid capital gains taxes. I can provide fund breakdown if necessary, but I don't think it really matters.

Our annual spending is roughly $135k, not including income tax or savings.

Two kids in middle school, doing great academically, so really no idea whether we will be looking at flagship in-state tuition or possibly private or out-of-state-public tuition in a few years. But some kind of tuition x 2. Plus teenage car insurance rates coming soon. :)

My own analysis:
Initially we'd need to draw $100k + taxes (spending of $135k - new salary of $35k), from our roughly 2.7M; that's like a 3.7+% drawdown. Pretty risky at our ages. But, after a few years, assuming my salary goes up to ~ $65k as expected, the drawdown would be more like $70k which is only 2.6% of our initial 2.7M nestegg. Less risky, IMHO.

Of course, we could reduce our expenditures -- $135k certainly has some room for frugality. But then, unknown tuitions, etc....

But to me, the overall plan seems risky - not completely crazy, but not a sure thing either. So, that's pushing me toward at least working 1 or 2 more years before re-evaluating whether to make the switch... maybe try to get to at least the $3M number before pulling the trigger. It's just hard to picture continuing my current job for that long. :(

One minor consideration I almost hate to mention is that as it stands now, I would eventually receive a mid-seven-figure inheritance. However, I don't want to count on this since (a) my parents are both in good health and I'm not trying to be morbid! and (b) they could end up spending all their money on anything from an internet scam to long-term-care facilities. But, knowing that there's a decent chance of a sizable inheritance also makes me think I can afford to take a bit more risk.

Thoughts appreciated!

f_and_c

sport
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Re: Can I take an 85+% pay cut for fun?

Post by sport » Thu Mar 08, 2018 10:45 pm

Perhaps there is another career path you would enjoy, or at least tolerate that will pay more than 35K, even though it might be less than 275K. Think about alternatives. Think "outside the box". Perhaps if you let us know what the 35K job would be, you might get some suggestions for something less financially risky.

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Re: Can I take an 85+% pay cut for fun?

Post by AlohaJoe » Thu Mar 08, 2018 11:00 pm

I think it mainly comes down to how painful it would be to cut expenses and have your wife get a job.

I think you have a fair amount of flexibility if things do hit the fan: downsizing the house, telling kids they are going to a state school, cutting expenses by $20,000, having your wife get a job, etcetera. But I'd have a family conversation up front about all of it to make sure everyone is on board. You might also want to talk now about what guard rails and corrective actions you might want to take. "If our withdrawal rate goes above 4% then the wife needs to get a job." Or whatever. Just to better align expectations between everyone.

If it were me...I'd do a "dry run" of living on lower expenses for two or three months. When I did it, it helped me understand what the true downside risk looked like. Was I really able to cut expenses or did it create too much relationship stress? I found it a lot better than theoretical pondering about cutting expenses.

Overall, I'd lean towards the career change, though. Just make sure it isn't a knee jerk jump and that your family has talked it through. In a lot of cases in modern society, what with our generally high standard of living and the diminishing marginal utility of wealth, it isn't worth the breadwinner being unhappy just to provide the family with a 10% better lifestyle.

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CaliJim
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Re: Can I take an 85+% pay cut for fun?

Post by CaliJim » Thu Mar 08, 2018 11:40 pm

Sounds a little like mid-life crisis.

I always advise against dealing with an emotional crisis by making huge life changing decisions that affect not only your self, but spouses and young children.

Also, kids, their college education, and helping them get started as adults can be very expensive. %500k to $700k of your savings might need to go towards the kiddy tax, leaving you with less than $2m perhaps retirement in 20 years.

If future investment returns are as slim as some predict, your standard of living in retirement may well be lower than you desire.

Make some changes in the work/life balance area. If you are not exercising hard 3 to 7 hours a week... hit the gym. It's often as effective as counseling and SSRIs.
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AlohaJoe
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Re: Can I take an 85+% pay cut for fun?

Post by AlohaJoe » Thu Mar 08, 2018 11:44 pm

CaliJim wrote:
Thu Mar 08, 2018 11:40 pm
Also, kids, their college education, and helping them get started as adults can be very expensive. %500k to $700k of your savings might need to go towards the kiddy tax,
With median household income bring $59,000 a year, I'm pretty sure most people aren't spending 10-15 years of their pre-tax income on their kids college education and helping them get started as an adult. Those are luxury purchases. Part of cutting expenses is deciding what luxuries to go without as a family.

jminv
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Re: Can I take an 85+% pay cut for fun?

Post by jminv » Fri Mar 09, 2018 12:08 am

You would need to cut your expenses. You should try doing it while you are still working in this job to see if it's doable.

You could also find some way to trial the career that you are passionate about and see if you are still after a few months.

I am also thinking of transitioning into a new career (I've done this twice before but more for personal interests) and my general thoughts on it are that it's a great idea if you're moving from a high stress job you hate to a lower stress job you love. (it's even better if you first make yourself financially independent so the choice isn't focused on money and you're basically there if you could cut expenses) I wouldn't do it for that sort of paycut though - I would instead make it a stay or retire sort of proposition. You could potentially work a few more years in your current job function, cut your expenses in the meantime, bank all the savings, and retire. You can do with your free time as you will and have fun. It's hard having a family when making these sorts of decisions because you have to take them into consideration too. I don't have kids but my DW doesn't always like hearing about my plans. Ultimately, though, it's your life and it's a balance. I wouldn't stay in a job very long that I really hate and I would quit.

As far as the kids, explain the situation to them beforehand and tell them you'll pay in state or they can pay for the difference out of state/private. You could offer to pay more of the difference if they got into a reach school for them that fits their interests. It would be a motivator.

I agree with not counting potential inheritances in this equation. You could discuss these plans with them, though, and perhaps see if they'd like to establish a trust for their grandkids college fund...

letsgobobby
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Re: Can I take an 85+% pay cut for fun?

Post by letsgobobby » Fri Mar 09, 2018 12:40 am

fast_and_curious wrote:
Thu Mar 08, 2018 10:17 pm
Hi Bogleheads,

Synopsis: Can I quit my current job that pays roughly $275k (that I hate), to pursue a career that I'm passionate about but pays only ~ $35k?

Details:

I work at MegaTech as a software developer. With bonus & stock, my annual compensation is roughly $275k. But I've really been feeling burned out the last few years - not interested in the work at all anymore, just getting so repetitive, lots of little irritants, etc. I switched jobs in 2016, so I think it's the industry / general job description that I'm burned out on, not this particular position or company.

I have the opportunity to pursue a completely different career track that I am passionate about, and would really enjoy, but that would pay roughly $35k to start, probably moving up to ~$65k within 5-6 years. Maybe higher after that, but maybe not.

Here's the rest of our info:

Age: 45 (both my spouse and myself), assume spouse not working.
Retirement Accounts (401k, tIRAs): $920k, roughly 65/35 stock/bond
Taxable Accounts: $1.75M, again roughly 65/35 stock/bond
529 Accounts: $175k
House: ~$600k, paid off. But I'm not really counting this, as we have no plans to move.

So total investable, non-529, assets of about 2.7M.

Most everything is in a 3 fund portfolio, with a few Vanguard active funds in my taxable account that I'm holding only to avoid capital gains taxes. I can provide fund breakdown if necessary, but I don't think it really matters.

Our annual spending is roughly $135k, not including income tax or savings.

Two kids in middle school, doing great academically, so really no idea whether we will be looking at flagship in-state tuition or possibly private or out-of-state-public tuition in a few years. But some kind of tuition x 2. Plus teenage car insurance rates coming soon. :)

My own analysis:
Initially we'd need to draw $100k + taxes (spending of $135k - new salary of $35k), from our roughly 2.7M; that's like a 3.7+% drawdown. Pretty risky at our ages. But, after a few years, assuming my salary goes up to ~ $65k as expected, the drawdown would be more like $70k which is only 2.6% of our initial 2.7M nestegg. Less risky, IMHO.

Of course, we could reduce our expenditures -- $135k certainly has some room for frugality. But then, unknown tuitions, etc....

But to me, the overall plan seems risky - not completely crazy, but not a sure thing either. So, that's pushing me toward at least working 1 or 2 more years before re-evaluating whether to make the switch... maybe try to get to at least the $3M number before pulling the trigger. It's just hard to picture continuing my current job for that long. :(

One minor consideration I almost hate to mention is that as it stands now, I would eventually receive a mid-seven-figure inheritance. However, I don't want to count on this since (a) my parents are both in good health and I'm not trying to be morbid! and (b) they could end up spending all their money on anything from an internet scam to long-term-care facilities. But, knowing that there's a decent chance of a sizable inheritance also makes me think I can afford to take a bit more risk.

Thoughts appreciated!

f_and_c
It's risky, but this is also your life. You only get one, make it count.

TIAX
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Re: Can I take an 85+% pay cut for fun?

Post by TIAX » Fri Mar 09, 2018 12:42 am

Maybe you could tell us a little about the type of job that you're so passionate about but would only pay 35k. This sounds like a terrible idea and you should find some other way to enrich your life. At the very least, I would suggest working at your current or similar job until you hit your FI number.

Raladic
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Re: Can I take an 85+% pay cut for fun?

Post by Raladic » Fri Mar 09, 2018 12:45 am

TIAX wrote:
Fri Mar 09, 2018 12:42 am
Maybe you could tell us a little about the type of job that you're so passionate about but would only pay 35k. This sounds like a terrible idea and you should find some other way to enrich your life. At the very least, I would suggest working at your current or similar job until you hit your FI number.
If I had to guess, I'd say it's becoming a Pilot.

@OP - if my guess is right indeed, you could do CFI work on the side for another year or so while staying at your job to pad your retirement funds and then make the swap once you're more confident that your funds are enough.

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CaliJim
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Re: Can I take an 85+% pay cut for fun?

Post by CaliJim » Fri Mar 09, 2018 12:45 am

AlohaJoe wrote:
Thu Mar 08, 2018 11:44 pm
CaliJim wrote:
Thu Mar 08, 2018 11:40 pm
Also, kids, their college education, and helping them get started as adults can be very expensive. $500k to $700k of your savings might need to go towards the kiddy tax,
With median household income bring $59,000 a year, I'm pretty sure most people aren't spending 10-15 years of their pre-tax income on their kids college education and helping them get started as an adult. Those are luxury purchases. Part of cutting expenses is deciding what luxuries to go without as a family.
You are right. Folks do have choices. And pursuing happiness is important, and sometimes these life changes work our great.

But contemplating a HUGE mid-life career change to me sounds more like burnout. It might not be the job itself but what OP is taking to the job.

Chasing the fantasy of happiness in a $36k job could lead to a further crisis down the road, as in "what was I thinking when I quit my high paying job". All jobs can be stressful. A low paying one that looks good on the outside can have hidden aspects to them, that may compound the financial stress the change will incur. The grass may not be greener over there.

And I'm just saying kids and especially college/grad school/etc are expensive in a way that OP hasn't factored in to his model.

Anyhow... didn't mean to stir up the bees nest.
Last edited by CaliJim on Tue Mar 13, 2018 11:34 pm, edited 1 time in total.
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cheesepep
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Re: Can I take an 85+% pay cut for fun?

Post by cheesepep » Fri Mar 09, 2018 12:46 am

I would. Life is short. Do a part-time job on the side to pick up more money. Do tutoring or something.

boglepilot
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Re: Can I take an 85+% pay cut for fun?

Post by boglepilot » Fri Mar 09, 2018 12:50 am

Are you becoming a regional airline pilot?

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randomizer
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Re: Can I take an 85+% pay cut for fun?

Post by randomizer » Fri Mar 09, 2018 12:53 am

I would bail if I were you, but you need to do something about your expenses.
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AlohaJoe
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Re: Can I take an 85+% pay cut for fun?

Post by AlohaJoe » Fri Mar 09, 2018 1:16 am

CaliJim wrote:
Fri Mar 09, 2018 12:45 am
But contemplating a HUGE mid-life career change to me sounds more like burnout. It might not be the job itself but what OP is taking to the job.
I definitely agree with this! I know a fair few people who, for instance, dropped out of their MBA style job to go into being a chef/restauranteur and after just two years of it absolutely hated it, quit that, and jumped to something else yet again.

I think the constant talk about do what you love and dream jobs and whatnot has given a lot of people flawed expectations about what jobs are like in the real world.

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Re: Can I take an 85+% pay cut for fun?

Post by b.lock » Fri Mar 09, 2018 1:17 am

Can you make it work? Yea probably. Are there alternative solutions that don't involve a 85% pay cut and would make you just as happy? Almost definitely.

Lots of jobs get repetitive and have a lot of little irritants, probably also including whatever one you are thinking of switching too. software development is pretty cushy all things considered. I also got burned out on software development, until I joined a mid stage startup which kept my days full of non-repetitive chaotic work. Now I actually like going to work, which is weird for me.

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Re: Can I take an 85+% pay cut for fun?

Post by curmudgeon » Fri Mar 09, 2018 1:36 am

I was getting pretty burned out in software engineering at one point. I quit and took 9 months off. No big changes otherwise, just decompressing and doing other things that I enjoyed. Then I reflected on when I'd been happiest in my past career, which was when I had really good teams of people to work with, even if the job wasn't as cutting-edge or prestigious. I went back to work with the best team, and was pretty content for another 10 years (and could have easily gone longer).

EnjoyIt
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Re: Can I take an 85+% pay cut for fun?

Post by EnjoyIt » Fri Mar 09, 2018 3:18 am

fast_and_curious, I love how you are thinking, but I don't like when you are thinking it.

What I like:
You are looking for ways to enjoy life more instead of being stuck at a desk doing something you hate for the rest of your life.
You are willing to make changes to enjoy your life more.
You have done the math and understand it.

What I don't like:
You are making these decisions under duress. You hate what you do, you are miserable and you want out ASAP. That is the wrong time to make a life altering decision. Something this big needs to settle in and percolate for months; preferably after a long vacation followed by 1 week stay-cation to give you time to decompress a little and think.
You need to consider that your new career choice may not be as satisfying as you think and will want to quite that as well.
I'm not thrilled about relying on a side hustle to make ends meet if the side hustle is a low paying full time job that may not be reliable.

Personally I think you are in a very good position to retire today and do whatever it is you want with your life. I would do the following
1) Take a substantial vacation and time off to think. Even if some of it is not paid.
2) Look at your household budget and see what it is you can cut. At $135k I am positive substantial cuts can be made without decreasing your family's happiness.
3) Consider selling your house and moving to a lower cost of living area. Doing that will likely allow you to retire today. A $300k home in a lower cost of living area will give you close to $3 million and should be plenty even without a side hustle. Also, moving allows you to reset your expenses to something significantly lower.
4) Create a spreadsheet to evaluate how much longer you need to work at your current job to make the math work if you stay put. I am thinking 1-3 more years depending on market conditions.
5) Discuss all your math and thinking with your family and come up with a decision that works for everyone.

I assume all of the above may take you several months to complete. I agree with you though. Life is too short to waste away at a desk doing something you hate. You have payed your dues, provided for your family and now it is time to consider your own happiness.
Good luck on your journey.

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Re: Can I take an 85+% pay cut for fun?

Post by bungalow10 » Fri Mar 09, 2018 3:28 am

If it were me, I would spend the next 12 months setting up expenses to be on a path to hit ~80k per year (60% of current spend, your house is paid off - this should be doable). If you can do that and in 12 months still want to bail, you will have a much more likely chance of success and happiness. You will have an additional 1 year of income supplement in the bank and you will need less money from savings.

And if you can't do it, then I think that's a sign that maybe you don't want this downshift as much as you think you do.
An elephant for a dime is only a good deal if you need an elephant and have a dime.

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Re: Can I take an 85+% pay cut for fun?

Post by gotester2000 » Fri Mar 09, 2018 7:07 am

OP,

I was exactly in this situation - FI and burnt out in software development - I postponed a lot till one day came that I could not take it even one more day - I left and am pretty at peace with the move. I am working at leisure now though I would like to take a 40hr/week job now which is not related to coding,designing,management etc.

Judge for yourself whether this is a temporary phenomenon that can be addressed by minor job profile change/vacation or permanently cutting the cord. It can be rewarding to make the move as it will pour new motivation inside you to work for next 20 years. Many people cannot think beyond money - the effect a resentful job creates on your health.

You are in a sound financial position - bring down expenses to 80k/yr.

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Re: Can I take an 85+% pay cut for fun?

Post by Grt2bOutdoors » Fri Mar 09, 2018 7:37 am

OP - if your gross salary in dream job is $35k, you are going to spend more than $100k from portfolio if “net spend” is $135k. You may think of portfolio as being $2.7 million but thinking is faulty - you are age 45, earliest you can begin tapping is age 55 and only if you have actually “retired” is my understanding. Drawing $100k from a $1.7mm taxable account is very risky, it might work short term, but one bad market hiccup and you will be deep in the hole. You have to either cut expenses, does your wife work? and/or wait a bit longer. Burnout seems to be a recurring theme with software it seems ( have seen this personally with acquaintances of mine, who make the jump to other lower paying careers only to realize if they want to be able to retire at some point they will need to return to software industry before age 50).
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mw1739
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Re: Can I take an 85+% pay cut for fun?

Post by mw1739 » Fri Mar 09, 2018 7:43 am

Is there anyway you could work part time for your current employer to see if that improves your happiness? Or is there a way you could do tech work in your desired field to make some extra money in addition to the $35k?

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Re: Can I take an 85+% pay cut for fun?

Post by tainted-meat » Fri Mar 09, 2018 7:54 am

You can do it if you manage your spending. I'd probably crank out 2-3 more years then make the jump.

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Re: Can I take an 85+% pay cut for fun?

Post by Leemiller » Fri Mar 09, 2018 8:22 am

I would explore taking an unpaid leave of absence for a couple of months. I would also talk to your wife about getting a job to help allow you make this jump. If she brings in some money, that makes the numbers work. Personally, I think you’re viewing this 35k job through rose colored glasses. It is one thing to be aggravated at work and get a big paycheck vs getting one for 35k. If at all possible do that work part-time now, if you can’t take a leave of absence.

I also think it is common with people our age to feel this way, especially once you’ve saved some money and don’t feel as much pressure there. One of my best friends and I talk about this a lot.

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Re: Can I take an 85+% pay cut for fun?

Post by jehovasfitness » Fri Mar 09, 2018 8:30 am

randomizer wrote:
Fri Mar 09, 2018 12:53 am
I would bail if I were you, but you need to do something about your expenses.
This.

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Re: Can I take an 85+% pay cut for fun?

Post by Strayshot » Fri Mar 09, 2018 8:56 am

Why not start planning the change now and set a date for 3 years from now. You can continue to work in 3 years of the lowest personal tax environment we will probably see ever going forward and the excitement of a known date should help keep you motivated. You will build a better cushion and can take up learning or hobby activities in alignment with the job change after hours.
That is what I would do :sharebeer

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Re: Can I take an 85+% pay cut for fun?

Post by Random Poster » Fri Mar 09, 2018 9:17 am

Grt2bOutdoors wrote:
Fri Mar 09, 2018 7:37 am
OP - if your gross salary in dream job is $35k, you are going to spend more than $100k from portfolio if “net spend” is $135k. You may think of portfolio as being $2.7 million but thinking is faulty - you are age 45, earliest you can begin tapping is age 55 and only if you have actually “retired” is my understanding. Drawing $100k from a $1.7mm taxable account is very risky, it might work short term, but one bad market hiccup and you will be deep in the hole.
Now wait a minute....

Virtually everything I've ever read on this site says that one should treat their investment portfolio in its entirety, and not as separate "taxable" and "retirement" sub-portfolios, and when I a posted a similar query as the OP and said that I only want to effectively spend from the taxable account, I've been chastised for being too conservative and people have mentioned the possibility of doing a Roth Conversion Ladder.

So which is it: If one is under normal retirement age (55? 60? 62.5? 65? 70.5?) and are considering retirement or downshifting, they should only consider the value of what is in their taxable investment account, or should they consider the value of their entire investment account (taxable and retirement)?

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Re: Can I take an 85+% pay cut for fun?

Post by mac808 » Fri Mar 09, 2018 9:18 am

Strayshot wrote:
Fri Mar 09, 2018 8:56 am
Why not start planning the change now and set a date for 3 years from now. You can continue to work in 3 years of the lowest personal tax environment we will probably see ever going forward and the excitement of a known date should help keep you motivated. You will build a better cushion and can take up learning or hobby activities in alignment with the job change after hours.
That is what I would do :sharebeer
Speaking of taxes, I suppose it's more tax-efficient to quit earlier in the calendar year rather than later, to lower taxable income. All else being equal, of course.

cjcerny
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Re: Can I take an 85+% pay cut for fun?

Post by cjcerny » Fri Mar 09, 2018 9:30 am

I would just tough it out for another 5 or 10 years at the job you hate and then retire. Seems highly feasible given your current savings rates.

fast_and_curious
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Re: Can I take an 85+% pay cut for fun?

Post by fast_and_curious » Fri Mar 09, 2018 9:48 am

OP here. Thanks for all the well-reasoned and helpful responses. I was afraid my initial post was so long that I might not get much feedback, glad you all took the time to read it. Interesting to see responses ranging from, "this is a terrible idea" to "I would". :wink: I admit I have had both of those thoughts myself!

To answer a few of the questions:
Perhaps if you let us know what the 35K job would be, you might get some suggestions for something less financially risky.
Raladic and boglepilot guessed correctly, not sure if my previous posts gave it away or what, but yes, some kind of flying job. I know a fair amount about the downsides to that lifestyle (I know several people who fly for regionals or charter), but there are also many positives. FWIW, this isn't some new hare-brained idea; I actually started college in the 90s in an aviation program before switching partway through to engineering (aviation was in the dumps at that time), and have been flying for fun continuously since then. So I do think I'm going in with open eyes. Where I live there are a couple of regional low seniority bases, so wouldn't have to commute. Or, there's also some local charter operators that would also be in the same pay ballpark. While the hours would be different, and irregular, I'm working well over 40 hours/week now, so it's not like I'm home all that much in the evenings today.
If our withdrawal rate goes above 4% then the wife needs to get a job.
Up till now, my wife has had a small business that contributes ~25-30k to our income, while also being primarily responsible for getting kids to/from school, being home when they're sick, volunteering at school, etc. But given the irregular days/hours that my proposed career change would entail, she would probably have to cut back or drop that work in order to ensure child care coverage (and she is happy to do so; it's not viewed as a sacrifice on her part to give up that business). So, I did not include her income in my original numbers, and made the assumption she would not be working.
You may think of portfolio as being $2.7 million but thinking is faulty - you are age 45, earliest you can begin tapping is age 55 and only if you have actually “retired” is my understanding. Drawing $100k from a $1.7mm taxable account is very risky
Like "Random Poster", I am also confused by this comment. Yes, some of our nestegg is inaccessible for now (in retirement accounts), but almost 2/3 is in a taxable account. With "only" 10 - 15 years before we can access the retirement accounts, it seems to me that excluding these accounts when thinking of the portfolio would not make sense?

Some additional background of how I came to this point: A little over 5 years ago, soon after finding this wonderful forum, I had made a plan to early retire when our nestegg (taxable + retirement) reached the $3M-3.5M range; at the time, our annual spend was closer to $100-110k so this was in the 3-3.3% withdrawal range. My thinking, as I get a little more burned out, was that by having a paying job -- even one that pays just $35k+ -- would mean that it might be possible to switch careers several years earlier than I would be able to outright retire. And, at 45, I'm not sure I necessarily want to retire completely anyway.

After reading and considering all the thoughtful replies so far, I think the best plan for me would be: Over next 12-24 months, continue saving (so balances go up), reduce spending (to get the potential withdrawal rate lower), and re-evaluate throughout this time. Hopefully this does not turn into OMY syndrome. :happy

Thanks again!
f_and_c

fourkids
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Re: Can I take an 85+% pay cut for fun?

Post by fourkids » Fri Mar 09, 2018 9:52 am

try an interim step first before making a drastic change.
ask your job if you can go down to 3 or 4 days/week. and/or ask if you can work from home a couple days/week.
most companies now would rather be flexible than lose a good employee.

or ask if you can take a 6 month or 1 year sabbatical. many more large companies are offering/allowing these.

I understand how you feel. I'm also 45 and not sure how much longer I can keep up this pace. but I've determined before I ever quit, I'm going to do the above for a while and see how it goes.

Dottie57
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Re: Can I take an 85+% pay cut for fun?

Post by Dottie57 » Fri Mar 09, 2018 10:07 am

Leemiller wrote:
Fri Mar 09, 2018 8:22 am
I would explore taking an unpaid leave of absence for a couple of months. I would also talk to your wife about getting a job to help allow you make this jump. If she brings in some money, that makes the numbers work. Personally, I think you’re viewing this 35k job through rose colored glasses. It is one thing to be aggravated at work and get a big paycheck vs getting one for 35k. If at all possible do that work part-time now, if you can’t take a leave of absence.

I also think it is common with people our age to feel this way, especially once you’ve saved some money and don’t feel as much pressure there. One of my best friends and I talk about this a lot.

+1. The change in salary is huge. Take a leave of absence and decompress. Maybe you need a less stressful job but one that makes more than 35k.

EnjoyIt
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Re: Can I take an 85+% pay cut for fun?

Post by EnjoyIt » Fri Mar 09, 2018 4:54 pm

fast_and_curious wrote:
Fri Mar 09, 2018 9:48 am
OP here. Thanks for all the well-reasoned and helpful responses. I was afraid my initial post was so long that I might not get much feedback, glad you all took the time to read it. Interesting to see responses ranging from, "this is a terrible idea" to "I would". :wink: I admit I have had both of those thoughts myself!

To answer a few of the questions:
Perhaps if you let us know what the 35K job would be, you might get some suggestions for something less financially risky.
Raladic and boglepilot guessed correctly, not sure if my previous posts gave it away or what, but yes, some kind of flying job. I know a fair amount about the downsides to that lifestyle (I know several people who fly for regionals or charter), but there are also many positives. FWIW, this isn't some new hare-brained idea; I actually started college in the 90s in an aviation program before switching partway through to engineering (aviation was in the dumps at that time), and have been flying for fun continuously since then. So I do think I'm going in with open eyes. Where I live there are a couple of regional low seniority bases, so wouldn't have to commute. Or, there's also some local charter operators that would also be in the same pay ballpark. While the hours would be different, and irregular, I'm working well over 40 hours/week now, so it's not like I'm home all that much in the evenings today.
If our withdrawal rate goes above 4% then the wife needs to get a job.
Up till now, my wife has had a small business that contributes ~25-30k to our income, while also being primarily responsible for getting kids to/from school, being home when they're sick, volunteering at school, etc. But given the irregular days/hours that my proposed career change would entail, she would probably have to cut back or drop that work in order to ensure child care coverage (and she is happy to do so; it's not viewed as a sacrifice on her part to give up that business). So, I did not include her income in my original numbers, and made the assumption she would not be working.
You may think of portfolio as being $2.7 million but thinking is faulty - you are age 45, earliest you can begin tapping is age 55 and only if you have actually “retired” is my understanding. Drawing $100k from a $1.7mm taxable account is very risky
Like "Random Poster", I am also confused by this comment. Yes, some of our nestegg is inaccessible for now (in retirement accounts), but almost 2/3 is in a taxable account. With "only" 10 - 15 years before we can access the retirement accounts, it seems to me that excluding these accounts when thinking of the portfolio would not make sense?

Some additional background of how I came to this point: A little over 5 years ago, soon after finding this wonderful forum, I had made a plan to early retire when our nestegg (taxable + retirement) reached the $3M-3.5M range; at the time, our annual spend was closer to $100-110k so this was in the 3-3.3% withdrawal range. My thinking, as I get a little more burned out, was that by having a paying job -- even one that pays just $35k+ -- would mean that it might be possible to switch careers several years earlier than I would be able to outright retire. And, at 45, I'm not sure I necessarily want to retire completely anyway.

After reading and considering all the thoughtful replies so far, I think the best plan for me would be: Over next 12-24 months, continue saving (so balances go up), reduce spending (to get the potential withdrawal rate lower), and re-evaluate throughout this time. Hopefully this does not turn into OMY syndrome. :happy

Thanks again!
f_and_c
Thanks for some clarification.

You can 100% pull money from a 401k without penalty before 55. You just have to follow a process.
https://moneymanagment.info/72t/?gclid= ... _UQAvD_BwE

Next, it seams like moving to a lower cost of living area is not feasible for you therefor I love your plan. Look at lowering expenses while working another 1-2 more years.

I think putting together a budget would be eye opening on where exactly your money is heading and if some of those expense add any real value to your lives. I remember when we studied our own expenses and evaluated our lives while looking to semi-retire in our 40s. Which is very similar to your plans. Remember every $5k you can cut from your budget is equivalent to $125k you now don't need to save for retirement. If you can cut your spending down by $15k your plan is comfortably doable right now.

May I recommend to do a budget case study on the Mrmoneymustcahe.com forum. They are a bit extreme but can really help you hone in on your expenses.

Also consider analyzing how you will be withdrawing money from your accounts in regards to taxes. I am sure you will be pleasantly surprised how little taxes you will be paying. Even when living on $135K/yr.

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Re: Can I take an 85+% pay cut for fun?

Post by Grt2bOutdoors » Fri Mar 09, 2018 6:22 pm

Random Poster wrote:
Fri Mar 09, 2018 9:17 am
Grt2bOutdoors wrote:
Fri Mar 09, 2018 7:37 am
OP - if your gross salary in dream job is $35k, you are going to spend more than $100k from portfolio if “net spend” is $135k. You may think of portfolio as being $2.7 million but thinking is faulty - you are age 45, earliest you can begin tapping is age 55 and only if you have actually “retired” is my understanding. Drawing $100k from a $1.7mm taxable account is very risky, it might work short term, but one bad market hiccup and you will be deep in the hole.
Now wait a minute....

Virtually everything I've ever read on this site says that one should treat their investment portfolio in its entirety, and not as separate "taxable" and "retirement" sub-portfolios, and when I a posted a similar query as the OP and said that I only want to effectively spend from the taxable account, I've been chastised for being too conservative and people have mentioned the possibility of doing a Roth Conversion Ladder.

So which is it: If one is under normal retirement age (55? 60? 62.5? 65? 70.5?) and are considering retirement or downshifting, they should only consider the value of what is in their taxable investment account, or should they consider the value of their entire investment account (taxable and retirement)?
I would normally think about the portfolio as “one” but in this instance I believe the OP is going to need more than $100k since it’s not entirely clear to me whether OP is talking about “net spend” or “gross spend”. Further with income in the low to mid six figure level, undertaking Roth Conversions may simply accelerate cash burn when you want to do the exact opposite. I am playing conservative because I am conservative- I don’t believe his burn rate with low income job is sustainable into retirement over next 10-15 years and should there be a real correction, not a 10% blip down, assets will run out sooner.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

blinx77
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Re: Can I take an 85+% pay cut for fun?

Post by blinx77 » Fri Mar 09, 2018 6:54 pm

You are spending a LOT.

Go on Mr. Money Mustache and post your spending. Then cut it down to $100k. Then get the new job.

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DanMahowny
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Re: Can I take an 85+% pay cut for fun?

Post by DanMahowny » Fri Mar 09, 2018 7:11 pm

CaliJim wrote:
Thu Mar 08, 2018 11:40 pm
Sounds a little like mid-life crisis.

I always advise against dealing with an emotional crisis by making huge life changing decisions that affect not only your self, but spouses and young children.

Also, kids, their college education, and helping them get started as adults can be very expensive. %500k to $700k of your savings might need to go towards the kiddy tax, leaving you with less than $2m perhaps retirement in 20 years.

If future investment returns are as slim as some predict, your standard of living in retirement may well be lower than you desire.

Make some changes in the work/life balance area. If you are not exercising hard 3 to 7 hours a week... hit the gym. It's often as effective as counseling and SSRIs.
Every now and then, I read a post that's just flat out brilliant.

This is one of them.
Funding secured

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Re: Can I take an 85+% pay cut for fun?

Post by aj76er » Fri Mar 09, 2018 7:25 pm

I can relate to the feelings expressed by the OP. I'm a 41 yr old software engineer and struggle with burnout. At 38 I set a goal to early retire at 45. Over the past few years, I've worked very hard to reduce my budget, and I'm proud to say that I've trimmed by about 33%. I think you could easily get to 80k or 90k of spending, which would simultaneously reduce the amount you need to draw while also allowing you to save more aggressively before pulling the plug.

Also, going a few more years and being able to fully retire (and not needing to work) would be a good option, if you can tolerate it. Then you could fly whenever and wherever you darn well please :)
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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aj76er
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Re: Can I take an 85+% pay cut for fun?

Post by aj76er » Fri Mar 09, 2018 7:27 pm

DanMahowny wrote:
Fri Mar 09, 2018 7:11 pm
CaliJim wrote:
Thu Mar 08, 2018 11:40 pm
Sounds a little like mid-life crisis.

I always advise against dealing with an emotional crisis by making huge life changing decisions that affect not only your self, but spouses and young children.

Also, kids, their college education, and helping them get started as adults can be very expensive. %500k to $700k of your savings might need to go towards the kiddy tax, leaving you with less than $2m perhaps retirement in 20 years.

If future investment returns are as slim as some predict, your standard of living in retirement may well be lower than you desire.

Make some changes in the work/life balance area. If you are not exercising hard 3 to 7 hours a week... hit the gym. It's often as effective as counseling and SSRIs.
Every now and then, I read a post that's just flat out brilliant.

This is one of them.
I can attest that working out hard a few days a week really helps to fight burnout :).
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

Random Poster
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Re: Can I take an 85+% pay cut for fun?

Post by Random Poster » Fri Mar 09, 2018 7:37 pm

Grt2bOutdoors wrote:
Fri Mar 09, 2018 6:22 pm
Random Poster wrote:
Fri Mar 09, 2018 9:17 am
Grt2bOutdoors wrote:
Fri Mar 09, 2018 7:37 am
OP - if your gross salary in dream job is $35k, you are going to spend more than $100k from portfolio if “net spend” is $135k. You may think of portfolio as being $2.7 million but thinking is faulty - you are age 45, earliest you can begin tapping is age 55 and only if you have actually “retired” is my understanding. Drawing $100k from a $1.7mm taxable account is very risky, it might work short term, but one bad market hiccup and you will be deep in the hole.
Now wait a minute....

Virtually everything I've ever read on this site says that one should treat their investment portfolio in its entirety, and not as separate "taxable" and "retirement" sub-portfolios, and when I a posted a similar query as the OP and said that I only want to effectively spend from the taxable account, I've been chastised for being too conservative and people have mentioned the possibility of doing a Roth Conversion Ladder.

So which is it: If one is under normal retirement age (55? 60? 62.5? 65? 70.5?) and are considering retirement or downshifting, they should only consider the value of what is in their taxable investment account, or should they consider the value of their entire investment account (taxable and retirement)?
I would normally think about the portfolio as “one” but in this instance I believe the OP is going to need more than $100k since it’s not entirely clear to me whether OP is talking about “net spend” or “gross spend”. Further with income in the low to mid six figure level, undertaking Roth Conversions may simply accelerate cash burn when you want to do the exact opposite. I am playing conservative because I am conservative- I don’t believe his burn rate with low income job is sustainable into retirement over next 10-15 years and should there be a real correction, not a 10% blip down, assets will run out sooner.
Okay, fair enough. Thanks for the response.

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Re: Can I take an 85+% pay cut for fun?

Post by celia » Fri Mar 09, 2018 9:00 pm

1. What does your spouse think of your plan? Remember that it will impact your entire family.

2. Cut your living expenses to $50K + taxes and actually live on that much for one year. If you can do that, you are ready. (I selected a number lower than others have since you already own your home.) Maybe you would need to move to a lower cost of living area.

3. Where would you get medical insurance and how much would it be for the family?

4. Why not try out this new job area one day a week (on the weekends) to find out the good and bad of it.

5. Remember that your Social Security benefit will be a lot lower if you have not earned money for 35 years.

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Re: Can I take an 85+% pay cut for fun?

Post by bdpb » Fri Mar 09, 2018 9:52 pm

fast_and_curious wrote:
Thu Mar 08, 2018 10:17 pm
Synopsis: Can I quit my current job that pays roughly $275k (that I hate), to pursue a career that I'm passionate about but pays only ~ $35k?

One minor consideration I almost hate to mention is that as it stands now, I would eventually receive a mid-seven-figure inheritance. However, I don't want to count on this since (a) my parents are both in good health and I'm not trying to be morbid! and (b) they could end up spending all their money on anything from an internet scam to long-term-care facilities. But, knowing that there's a decent chance of a sizable inheritance also makes me think I can afford to take a bit more risk.
You might consider a discussion with your parents. Do they know how you feel? Would they be willing to set aside some of their assets for your retirement to let you pursue something else now?

mnnice
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Re: Can I take an 85+% pay cut for fun?

Post by mnnice » Fri Mar 09, 2018 10:14 pm

celia wrote:
Fri Mar 09, 2018 9:00 pm
1. What does your spouse think of your plan? Remember that it will impact your entire family.

2. Cut your living expenses to $50K + taxes and actually live on that much for one year. If you can do that, you are ready. (I selected a number lower than others have since you already own your home.) Maybe you would need to move to a lower cost of living area.

3. Where would you get medical insurance and how much would it be for the family?

4. Why not try out this new job area one day a week (on the weekends) to find out the good and bad of it.

5. Remember that your Social Security benefit will be a lot lower if you have not earned money for 35 years.
I wholeheartedly agree that 1 and 3 are key. I doubt anyone currently both as old and high-earning as the OP has too much on the line with regard to social security. He is likely past the second bend point already.

fast_and_curious
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Re: Can I take an 85+% pay cut for fun?

Post by fast_and_curious » Fri Mar 09, 2018 11:09 pm

mnnice wrote:
Fri Mar 09, 2018 10:14 pm
celia wrote:
Fri Mar 09, 2018 9:00 pm
1. What does your spouse think of your plan? Remember that it will impact your entire family.

2. Cut your living expenses to $50K + taxes and actually live on that much for one year. If you can do that, you are ready. (I selected a number lower than others have since you already own your home.) Maybe you would need to move to a lower cost of living area.

3. Where would you get medical insurance and how much would it be for the family?

4. Why not try out this new job area one day a week (on the weekends) to find out the good and bad of it.

5. Remember that your Social Security benefit will be a lot lower if you have not earned money for 35 years.
I wholeheartedly agree that 1 and 3 are key. I doubt anyone currently both as old and high-earning as the OP has too much on the line with regard to social security. He is likely past the second bend point already.
OP again. Thanks to all for the continued responses, I am reading each of them and considering them closely. To answer some of the questions here:

1) Spouse is on board so long as the finances work out (i.e. we don't end up broke in retirement and don't have to make huge lifestyle/spending adjustments). I think my general dissatisfaction with work is also sometimes noticeable at home, unfortunately, so my being more fulfilled is viewed as a good thing, I think.

2) Hmmm... I agree with the many posters here that we need to look at our spending - I think we could get it down to $100k-ish without really feeling much lifestyle change. $50k seems a bit extreme - not that you can't live on $50k; obviously many people do. But if we were living on $50k with a $35k job, that would mean a withdrawal rate of ~0.5% from our nestegg, so I just don't see the need to cut back to that point. (Even with no job, $50k expenses would be ~1.8% withdrawal rate...) Yes, not considering taxes in the calculations, but still.

3) Medical insurance would be provided by the new job, presumably (haven't looked into it in that detail) at roughly the same cost as my current job - which has adequate but not stellar medical coverage. The medical insurance is one reason, among many, that I am considering a career switch rather than just working a few more years and retiring completely (since in that latter case, insurance would be a bigger concern).

4) This particular job is hard to do one day a week, but certainly I understand the logic of your suggestion.

5) As mnnice guessed, I am past the 2nd bend point of SS. So yes, moving to a lower paying job will affect SS, but not hugely.

Thanks again to all for the thoughtful suggestions and replies. Again, I don't want to use up forum space by replying to each response, but I am reading and thinking about each of them.

f_and_c

aqan
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Re: Can I take an 85+% pay cut for fun?

Post by aqan » Fri Mar 09, 2018 11:14 pm

since you're a software developer you can probably find another developer job with similar salary in case your dream doesn't turnout to be as good as you thought. I'd say go for it. BTW if you don't mind sharing whats the other profession? just wondering what could be worth loosing $250k a year.

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Watty
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Re: Can I take an 85+% pay cut for fun?

Post by Watty » Fri Mar 09, 2018 11:34 pm

Here is an "outside the box" suggestion of something to try.

That is to simulate working as a pilot for a month by;

Arrange to have a month off work.

Rent a plane for a month.

Every day in the morning take off at 8:00AM and fly to an airport that is four hours away, have lunch, then fly back. Tweak this as necessary to follow a realistic schedule that you would fly as a commercial pilot.

Do the exact same thing the next day, and and every day except for Mondays and Tuesday. This would simulate have having to work weekends and being away from your family then.

At the end of the month decide if that is the lifestyle you really want. I suspect that it will become routine pretty quick.

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mhadden1
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Re: Can I take an 85+% pay cut for fun?

Post by mhadden1 » Sat Mar 10, 2018 3:04 am

I don't consider myself old-fashioned (though I am old-ish) but my response is sort of old-fashioned. At age 45 you have developed a set of general expectations for your family, and you appear to have the ability to deliver on those expectations. I don't think making 85% less money will allow you to do that.

You must be a very clever guy to make the kind of dough that you do. I gotta think you must have employment options that would likely be more satisfying, perhaps making less, but still plenty. Anyway, with luck and cleverness, you could, in a reasonable time, get to the kind of FI that would allow you to fly your own plane pretty much as you wish.

Sure, you deserve to be happy (enough.) But choose 85% less money to get there? I would not.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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Re: Can I take an 85+% pay cut for fun?

Post by HongKonger » Sat Mar 10, 2018 6:40 am

You have to really love flying to fly. My ex partner was a commercial pilot. He did this after 15 years in the police force. He flew long haul for a national carrier.
All I have to say is that you need to 100% understand how pilot pay scales/promotions etc work and realise that unless you are flying for small regional carriers, its hard to move around. Consider your type rating carefully. Also, be aware of the physical toll on your body. 45 is young but the difference I saw in my partner from mid 30s to mid 40s was quite something. And be aware of the potential impact on your wife. Pilots wives become neurotic and riddled with jealousy - it takes a very special female to not go that route.
If money becomes an issue, there is always a move to the sandpit ...ready vacancies, good money, tax free, great experience for your family.
Just my 2 cents from experience.

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Re: Can I take an 85+% pay cut for fun?

Post by TIAX » Sat Mar 10, 2018 2:39 pm

fast_and_curious wrote:
Fri Mar 09, 2018 9:48 am
Raladic and boglepilot guessed correctly, not sure if my previous posts gave it away or what, but yes, some kind of flying job. I know a fair amount about the downsides to that lifestyle (I know several people who fly for regionals or charter), but there are also many positives.
I realize that flying is a fun hobby since most people don't fly planes on a regular basis. But if you become a professional pilot, how is it different than, for example, being a taxi driver? That is, why would you assume piloting a plane 40 hours a week is more fun than developing software 40 hours a week?

mouses
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Re: Can I take an 85+% pay cut for fun?

Post by mouses » Sat Mar 10, 2018 2:56 pm

HongKonger wrote:
Sat Mar 10, 2018 6:40 am
Pilots wives become neurotic and riddled with jealousy - it takes a very special female to not go that route.
Why on earth would that happen?

Snuffycuts99
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Re: Can I take an 85+% pay cut for fun?

Post by Snuffycuts99 » Sat Mar 10, 2018 2:57 pm

Boy, that's tough. That is one huge decrease in pay. Could you make it work? Possibly but it's more risk than I would want. If it were me, these would be my options, in order of preference:

1. Keep grinding for a few more years. Trim expenses and save, save, save to hopefully make FI more comfortable.
2. Cut expenses significantly and go ahead with your plan
3. Ask wife to consider working at least part time to help you enjoy your 'dream' job

Your plan very well might work out fine, but clearly you know the risks involved. With a family to support that depends on you, I'd err on the side of caution. Good luck.
Last edited by Snuffycuts99 on Sat Mar 10, 2018 3:01 pm, edited 1 time in total.

mouses
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Re: Can I take an 85+% pay cut for fun?

Post by mouses » Sat Mar 10, 2018 2:58 pm

bdpb wrote:
Fri Mar 09, 2018 9:52 pm
fast_and_curious wrote:
Thu Mar 08, 2018 10:17 pm
Synopsis: Can I quit my current job that pays roughly $275k (that I hate), to pursue a career that I'm passionate about but pays only ~ $35k?

One minor consideration I almost hate to mention is that as it stands now, I would eventually receive a mid-seven-figure inheritance. However, I don't want to count on this since (a) my parents are both in good health and I'm not trying to be morbid! and (b) they could end up spending all their money on anything from an internet scam to long-term-care facilities. But, knowing that there's a decent chance of a sizable inheritance also makes me think I can afford to take a bit more risk.
You might consider a discussion with your parents. Do they know how you feel? Would they be willing to set aside some of their assets for your retirement to let you pursue something else now?
Uggh. Someone in his forties who makes $275K a year should not be mooching off his parents who probably have decades to live yet and unknown expenses ahead of them.

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