Is semi-retirement a bad idea?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
grantham324
Posts: 27
Joined: Sun Jan 19, 2014 2:30 pm

Is semi-retirement a bad idea?

Post by grantham324 » Sat Oct 11, 2014 2:30 pm

I'm 32 and married with 1 child.
250k in investments.
290k/year combined income.
Living in high COL high tax area.

If I bought a house here it'd cost around 1.25M. The same house in my preferred semi-retirement location would be around 500k. In 2-3 years we'll have enough to buy that 500k house in cash (or with a very small mortgage), plus have our car paid off.

With a house and car paid off, plus kids in public schools, our expenses would be very minimal, and certainly wouldn't require our current level of income. We don't require a fancy lifestyle.

I'm thinking I could become an independent consultant and semi-retire, while my wife works part time. Target combined income would go from 290k/year to around 80k/year, which would be fine since our house and car would be paid off. Starting at birth, we'll contribute $200/mo for each child to a 529 plan (we plan on having 2-3), which should be a nice college egg for the kids over 18 years of tax-advantaged appreciation...that way college savings won't be a huge burden for us and reason to keep working full time. We have family willing to provide day care for free. With Obama Care kicking in, we should be able to reasonably provide for health insurance, plus my wife may be still able to get it via her company with part time work.

What am I missing? Why don't more people with highish retirement assets also do this? I realize we're fortunate to have the ability to accumulate this much in assets at our age, but for those our age or even in their 40s-50s, why do they wait until they reach millions in assets to retire? Why not just move to a lower COL area, pay off house and car, put kids in good public schools, and then semi-retire to provide for smaller expenses?

This seems like a much preferable future to me vs. working our arses off until we're in our 60's with millions to completely retire, if we even make it to live that long. And yet, I feel really weird about this semi-retirement plan because it's so unheard of. Reaching "your number" to completely retire seems the orthodox way to go.

I should note -- I never really want to completely retire. I'm completely fine, so long as my health allows, always doing something part time to bring in money. My wife is the same. Is that the missing link and why I feel weird? Is it that most people just can't wait to completely stop work, and so they are planning to accumulate millions vs. enable semi-retirement with long-term, part-time work?

jebmke
Posts: 8365
Joined: Thu Apr 05, 2007 2:44 pm

Re: Is semi-retirement a bad idea?

Post by jebmke » Sat Oct 11, 2014 2:33 pm

grantham324 wrote:I never really want to completely retire.
You say that now but things change. In 20 years you might have a different viewpoint.
When you discover that you are riding a dead horse, the best strategy is to dismount.

grantham324
Posts: 27
Joined: Sun Jan 19, 2014 2:30 pm

Re: Is semi-retirement a bad idea?

Post by grantham324 » Sat Oct 11, 2014 2:37 pm

jebmke wrote:
grantham324 wrote:I never really want to completely retire.
You say that now but things change. In 20 years you might have a different viewpoint.
That's true, but always wanting to do something is an ingrained part of my personality. My father is the same way and still does part time work in his 70's. I also work in a field that I find interesting. Who knows what will happen, but I'm pretty comfortable betting I'll stay this way.

rayson
Posts: 208
Joined: Mon Dec 23, 2013 2:46 pm

Re: Is semi-retirement a bad idea?

Post by rayson » Sat Oct 11, 2014 2:39 pm

It is certainly do-able, but requires a huge lifestyle change. Relocation to LCOL area, and going from $300k to $80k income are not trivial changes for most people. What is the primary reason for your semi-retirement at such a young age?

User avatar
dodecahedron
Posts: 3691
Joined: Tue Nov 12, 2013 12:28 pm

Re: Is semi-retirement a bad idea?

Post by dodecahedron » Sat Oct 11, 2014 2:45 pm

grantham324 wrote:I'm 32 and married with 1 child.
250k in investments.
290k/year combined income.
Living in high COL high tax area.

If I bought a house here it'd cost around 1.25M. The same house in my preferred semi-retirement location would be around 500k. In 2-3 years we'll have enough to buy that 500k house in cash (or with a very small mortgage), plus have our car paid off.

With a house and car paid off, plus kids in public schools, our expenses would be very minimal, and certainly wouldn't require our current level of income. We don't require a fancy lifestyle.

I'm thinking I could become an independent consultant and semi-retire, while my wife works part time. Target combined income would go from 290k/year to around 80k/year, which would be fine since our house and car would be paid off. Starting at birth, we'll contribute $200/mo for each child to a 529 plan (we plan on having 2-3), which should be a nice college egg for the kids over 18 years of tax-advantaged appreciation...that way college savings won't be a huge burden for us and reason to keep working full time. We have family willing to provide day care for free. With Obama Care kicking in, we should be able to reasonably provide for health insurance, plus my wife may be still able to get it via her company with part time work.

What am I missing? Why don't more people with highish retirement assets also do this? I realize we're fortunate to have the ability to accumulate this much in assets at our age, but for those our age or even in their 40s-50s, why do they wait until they reach millions in assets to retire? Why not just move to a lower COL area, pay off house and car, put kids in good public schools, and then semi-retire to provide for smaller expenses?

This seems like a much preferable future to me vs. working our arses off until we're in our 60's with millions to completely retire, if we even make it to live that long. And yet, I feel really weird about this semi-retirement plan because it's so unheard of. Reaching "your number" to completely retire seems the orthodox way to go.

I should note -- I never really want to completely retire. I'm completely fine, so long as my health allows, always doing something part time to bring in money. My wife is the same. Is that the missing link and why I feel weird? Is it that most people just can't wait to completely stop work, and so they are planning to accumulate millions vs. enable semi-retirement with long-term, part-time work?
My late husband and I did something somewhat similar to what you propose over two decades ago. (Moved to a much lower cost of living area where both of us could scale back the time we spent at work and the stress in our lives and enjoy more time with our children when they were young.) Sadly, my husband died of a heart attack last year (before even reaching 60. Based on family history, I think he would likely have died considerably sooner if he had stayed in his previous high stress job in our high cost of living previous location.) I am profoundly grateful for all the quality time my family had together. No regrets whatsoever. We had work we both enjoyed and did because we liked it. I intend to continue part-time indefinitely because I enjoy it but I like the freedom of knowing I don't *have* to work and I know he felt the same way too.

curmudgeon
Posts: 1585
Joined: Thu Jun 20, 2013 11:00 pm

Re: Is semi-retirement a bad idea?

Post by curmudgeon » Sat Oct 11, 2014 2:48 pm

It's not necessarily a bad idea, but the consulting gigs often run down after a while, or other things happen and I see folks who went this route coming back to more standard jobs. For many people in the higher income brackets, it's not just about the money, but also the stimulation and sense of purpose the job brings.

Finding balance in your life is definitely important.

ResearchMed
Posts: 7212
Joined: Fri Dec 26, 2008 11:25 pm

Re: Is semi-retirement a bad idea?

Post by ResearchMed » Sat Oct 11, 2014 2:49 pm

If you spend your investment money in the house, and are suddenly living off of a fraction of previous income, how will you be saving for "real" retirement, including if it arrives earlier than expected due to health reasons (or layoff/etc.)?

And what about any extraordinary medical care, or just grinding/increasing costs of health insurance?

And your Social Security will be lower than it would have been if earning more each year during those working years.

Something doesn't quite add up here.
You sure you can raise your family the way you expected to (assorted experiences, camp, a few lessons, clubs, and the odd "must have" of pre- and teen year) on such a reduced level of income?
Vacations?
Etc.

RM
This signature is a placebo. You are in the control group.

flyingaway
Posts: 1887
Joined: Fri Jan 17, 2014 10:19 am

Re: Is semi-retirement a bad idea?

Post by flyingaway » Sat Oct 11, 2014 2:52 pm

At your age, I have not finished my Ph.D. yet. Now I think I am semi-retired in the sense that I do not have any ambition to a higher level position or make more money. I have not hit my numbers yet, but I predict that I will achieve that in the future with my current level of income and life style.
At your age, you may not have counted everything in your life yet, especially the kids that you mentioned. If I were you, I would not actually quit my job in a hurry. Moving to a low cost area may not be a bad idea, just it would concern me if my income changed a lost suddenly at your young age.

Ybsybs
Posts: 339
Joined: Thu Aug 28, 2014 4:28 pm

Re: Is semi-retirement a bad idea?

Post by Ybsybs » Sat Oct 11, 2014 2:54 pm

I think it is a good idea. And I would call it a "career shift" or "starting your own business" rather than "semi-retired." If your potential clients hear all about how you are planning to work less, it may scare them off. To meet your $80k income goal, you need to not scare off the clients. You can be super picky about which clients you take and how many projects you work at once, but you need a volume of companies wanting your services in order to be able to charge the rates needed to pay self-employment taxes and manage to reach $80k on two part-time salaries.

Good luck!

User avatar
VictoriaF
Posts: 18559
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: Is semi-retirement a bad idea?

Post by VictoriaF » Sat Oct 11, 2014 2:55 pm

Higher paying jobs provide not only higher income but also greater autonomy, greater respect, and ultimately greater job satisfaction. If you scale your income to a half, your job satisfaction may drop to one tenth, or even become negative.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

grantham324
Posts: 27
Joined: Sun Jan 19, 2014 2:30 pm

Re: Is semi-retirement a bad idea?

Post by grantham324 » Sat Oct 11, 2014 3:07 pm

dodecahedron wrote:My late husband and I did something somewhat similar to what you propose over two decades ago. (Moved to a much lower cost of living area where both of us could scale back the time we spent at work and the stress in our lives and enjoy more time with our children when they were young.) Sadly, my husband died of a heart attack last year (before even reaching 60. Based on family history, I think he would likely have died considerably sooner if he had stayed in his previous high stress job in our high cost of living previous location.) I am profoundly grateful for all the quality time my family had together. No regrets whatsoever. We had work we both enjoyed and did because we liked it. I intend to continue part-time indefinitely because I enjoy it but I like the freedom of knowing I don't *have* to work and I know he felt the same way too.
Thanks very much for sharing this. It really puts things in perspective.

blueleaf
Posts: 129
Joined: Fri Dec 27, 2013 8:30 pm

Re: Is semi-retirement a bad idea?

Post by blueleaf » Sat Oct 11, 2014 3:12 pm

You might find this perspective interesting

http://www.mrmoneymustache.com/

greenfire
Posts: 108
Joined: Tue Aug 26, 2014 10:05 am

Re: Is semi-retirement a bad idea?

Post by greenfire » Sat Oct 11, 2014 3:14 pm

VictoriaF, I disagree. I was a college professor at a community college, working full time tenure-track and earning $45,000. My job provided complete autonomy, lots of respect, and I loved every minute of it. I was always amazed that they paid me for something I would have done for free.

grantham324
Posts: 27
Joined: Sun Jan 19, 2014 2:30 pm

Re: Is semi-retirement a bad idea?

Post by grantham324 » Sat Oct 11, 2014 3:14 pm

rayson wrote:What is the primary reason for your semi-retirement at such a young age?
I find full-time corporate work very stressful and it's causing me to neglect my health and time with my family. If I were to continue, I know it would take years off my life, reduce my overall quality of life, and worsen my relationship with my family. All for the ability to completely retire when I'm in my late age...that doesn't seem like a good deal to me, especially when I don't mind working in less stressful conditions indefinitely.

What irks me most about corporate America is the incessant drive toward short-term growth. Above all else, despite whatever else is going on, we must grow by X% every quarter...that is kind of an absurd mandate for mature businesses, and it's especially absurd when the % is arbitrary...e.g., everyone acts devastated if we "only" grow at 10% vs. planned 15%. Meanwhile, my job hinges on these arbitrary numbers...it makes for an incredibly aggravating, stressful situation.

I would much prefer to be self-employed and semi-retired where growth above all else isn't a dominating factor in my life.

grantham324
Posts: 27
Joined: Sun Jan 19, 2014 2:30 pm

Re: Is semi-retirement a bad idea?

Post by grantham324 » Sat Oct 11, 2014 3:18 pm

VictoriaF wrote:Higher paying jobs provide not only higher income but also greater autonomy, greater respect, and ultimately greater job satisfaction. If you scale your income to a half, your job satisfaction may drop to one tenth, or even become negative.

Victoria
I find that the higher my income goes, and the longer I work, the more I'm driven towards management...and management is deeply unsatisfying for me. I'd rather be actually doing stuff, even if it's under the management of someone else...sure, having a horrible manager is horrible, but you can always change jobs (or clients if you're self employed and your client is your "manager").

User avatar
VictoriaF
Posts: 18559
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: Is semi-retirement a bad idea?

Post by VictoriaF » Sat Oct 11, 2014 3:26 pm

greenfire wrote:VictoriaF, I disagree. I was a college professor at a community college, working full time tenure-track and earning $45,000. My job provided complete autonomy, lots of respect, and I loved every minute of it. I was always amazed that they paid me for something I would have done for free.

greenfire,

My statement is general; it does not universally apply, and your case may be an exception. But let me ask you this. If you submitted a paper for publication, and it competed with a paper by a Princeton professor, which paper would more likely be accepted, assuming the same merit? Which position would attract more grants and thus provide more opportunities for research?

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

Sidney
Posts: 6693
Joined: Thu Mar 08, 2007 6:06 pm

Re: Is semi-retirement a bad idea?

Post by Sidney » Sat Oct 11, 2014 3:26 pm

Make sure you can carry a good disability policy.
I always wanted to be a procrastinator.

anonforthis
Posts: 414
Joined: Sat Oct 19, 2013 1:45 pm

Re: Is semi-retirement a bad idea?

Post by anonforthis » Sat Oct 11, 2014 3:28 pm

I did. I took a big pay cut but I didn't make as much as you do. My job now is stress free and work from home whenever I feel like. I can totally do this job until I'm 100 year old.

User avatar
VictoriaF
Posts: 18559
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: Is semi-retirement a bad idea?

Post by VictoriaF » Sat Oct 11, 2014 3:31 pm

grantham324 wrote:
VictoriaF wrote:Higher paying jobs provide not only higher income but also greater autonomy, greater respect, and ultimately greater job satisfaction. If you scale your income to a half, your job satisfaction may drop to one tenth, or even become negative.

Victoria
I find that the higher my income goes, and the longer I work, the more I'm driven towards management...and management is deeply unsatisfying for me. I'd rather be actually doing stuff, even if it's under the management of someone else...sure, having a horrible manager is horrible, but you can always change jobs (or clients if you're self employed and your client is your "manager").
You have a good income on the technical ladder and are not interested in additional income associated with the management ladder. That's fair.

But if you wanted to significantly reduce your compensation, what kind of job would you do? Would you do the same type of work, just less of it? Would you be relegated to the secondary role where others would drop on you whatever they don't want to do? Would you be taken seriously if you could not attend important meetings, travel to customer sites, or spend nights debugging critical software?

Victoria
Last edited by VictoriaF on Sat Oct 11, 2014 3:33 pm, edited 2 times in total.
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

grantham324
Posts: 27
Joined: Sun Jan 19, 2014 2:30 pm

Re: Is semi-retirement a bad idea?

Post by grantham324 » Sat Oct 11, 2014 3:31 pm

ResearchMed wrote:If you spend your investment money in the house, and are suddenly living off of a fraction of previous income, how will you be saving for "real" retirement, including if it arrives earlier than expected due to health reasons (or layoff/etc.)?
But that's the thing, if you have paid off the house, then you only need a fraction of previous income to live...isn't that how retirement traditionally works for people? People work for 30 years to pay off their house, and then once that financial burden is removed and everything is paid off, they can live off a small pension or SS. We still plan on savings, by the way, just not as much because it won't be needed.

I also have disability insurance to cover the risk of health forcing me to stop working.
ResearchMed wrote:And what about any extraordinary medical care, or just grinding/increasing costs of health insurance?
I was under the impression that Obama Care would fix this situation, but maybe I'm wrong. If it really happened that I were forced to spend my life working simply to pay for health insurance (which is a completely ridiculous, uniquely American thing) I think I would prefer to leave America (which is an option because we have EU citizenship).
ResearchMed wrote:You sure you can raise your family the way you expected to (assorted experiences, camp, a few lessons, clubs, and the odd "must have" of pre- and teen year) on such a reduced level of income?
Vacations?
Etc.
The wife and I grew up quite well and never had any of that stuff, so we don't plan on providing it for our children either...stuff like camps and clubs strike me as unnecessary expenses, the kind that keep people chained to a high paying job to keep up their high COL. We plan on taking vacations, but that's pretty easy to budget for once a year. Plus, we will be working part time, so it's not likely we'll have zero money for expenses like this.

Sidney
Posts: 6693
Joined: Thu Mar 08, 2007 6:06 pm

Re: Is semi-retirement a bad idea?

Post by Sidney » Sat Oct 11, 2014 3:38 pm

If you haven't already done so, you might sign up and put your questions to these folks as well. There are a number of very early-re/semi-re folks on this forum that might be able to tell you what surprises they had.

http://www.early-retirement.org/forums/
I always wanted to be a procrastinator.

User avatar
dodecahedron
Posts: 3691
Joined: Tue Nov 12, 2013 12:28 pm

Re: Is semi-retirement a bad idea?

Post by dodecahedron » Sat Oct 11, 2014 4:04 pm

grantham324 wrote:
ResearchMed wrote:You sure you can raise your family the way you expected to (assorted experiences, camp, a few lessons, clubs, and the odd "must have" of pre- and teen year) on such a reduced level of income?
Vacations?
Etc.
The wife and I grew up quite well and never had any of that stuff, so we don't plan on providing it for our children either...stuff like camps and clubs strike me as unnecessary expenses, the kind that keep people chained to a high paying job to keep up their high COL. We plan on taking vacations, but that's pretty easy to budget for once a year. Plus, we will be working part time, so it's not likely we'll have zero money for expenses like this.
Like grantham324, my late husband and I also grew up quite well without any of that expensive stuff. My kids and their friends had an amazing amount of inexpensive (often free and if not free, on a shoestring) "assorted experiences" in programs like 4-H, Girl Scouts, community center classes, recreation department programs, public library programs, state museum programs, community chorus and drama programs, community volunteer work, drama clubs that they and their young friends created and led themselves at local playgrounds, free outdoor concerts, free cultural events at nearby colleges, etc. They learned a lot of resourcefulness and problem solving skills from creating and leading activities of their own that they could never have gotten from expensive programs led by professional "experts" charging a high fee. I will acknowledge that we did have funds to send them to expensive summer camps and we actually did send them a few times, but those experiences were far from the most valuable ones they had, in retrospect. Just growing up with a big beautiful backyard full of wildlife with mountain views and cows grazing nearby--I feel sure that both my now young adult kids wouldn't have traded their childhoods here for what they could have had if we had stayed in our previous lifestyle.

User avatar
dodecahedron
Posts: 3691
Joined: Tue Nov 12, 2013 12:28 pm

Re: Is semi-retirement a bad idea?

Post by dodecahedron » Sat Oct 11, 2014 4:20 pm

VictoriaF wrote:
greenfire wrote:VictoriaF, I disagree. I was a college professor at a community college, working full time tenure-track and earning $45,000. My job provided complete autonomy, lots of respect, and I loved every minute of it. I was always amazed that they paid me for something I would have done for free.

greenfire,

My statement is general; it does not universally apply, and your case may be an exception. But let me ask you this. If you submitted a paper for publication, and it competed with a paper by a Princeton professor, which paper would more likely be accepted, assuming the same merit? Which position would attract more grants and thus provide more opportunities for research?

Victoria
People who are interested in careers in research and getting grants generally don't choose to work in community colleges. The professors I know who work fulltime in community colleges are very happy focusing on their teaching and advising responsibilities rather than competing/stressing over grants and publications. The expectation for fulltime professors at our local community college is, I believe, 4 or 5 classes per semester. If they are publishing at all, it tends to be in very different types of journals than where a Princeton professor would submit, usually journals that focus on pedagogical techniques appropriate for the population they teach or practical professional clinical issues in the professions for which they are preparing their students (e.g., nursing, accounting, etc.) rather than the highly specialized and frequently esoteric journals where Princeton professors would be expected to publish.

User avatar
dodecahedron
Posts: 3691
Joined: Tue Nov 12, 2013 12:28 pm

Re: Is semi-retirement a bad idea?

Post by dodecahedron » Sat Oct 11, 2014 4:30 pm

That said, quitting your job and moving to a new area with the idea of being a consultant is not without its stresses, due to the fact that consulting can be very much a feast or famine world with a lot of uncertainty. I would definitely encourage you to line up a significant amount of consulting contracts before you move. In our case, my husband took a salaried (but lower stress) job when we first moved here and we ultimately transitioned into consulting. We also did some part-time teaching, primarily for the generous health care and other taxfree fringe benefits. If Obamacare had been in place, we might not have chosen to do the latter.

User avatar
VictoriaF
Posts: 18559
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: Is semi-retirement a bad idea?

Post by VictoriaF » Sat Oct 11, 2014 4:49 pm

dodecahedron wrote:
VictoriaF wrote:
greenfire wrote:VictoriaF, I disagree. I was a college professor at a community college, working full time tenure-track and earning $45,000. My job provided complete autonomy, lots of respect, and I loved every minute of it. I was always amazed that they paid me for something I would have done for free.

greenfire,

My statement is general; it does not universally apply, and your case may be an exception. But let me ask you this. If you submitted a paper for publication, and it competed with a paper by a Princeton professor, which paper would more likely be accepted, assuming the same merit? Which position would attract more grants and thus provide more opportunities for research?

Victoria
People who are interested in careers in research and getting grants generally don't choose to work in community colleges. The professors I know who work fulltime in community colleges are very happy focusing on their teaching and advising responsibilities rather than competing/stressing over grants and publications. The expectation for fulltime professors at our local community college is, I believe, 4 or 5 classes per semester. If they are publishing at all, it tends to be in very different types of journals than where a Princeton professor would submit, usually journals that focus on pedagogical techniques appropriate for the population they teach or practical professional clinical issues in the professions for which they are preparing their students (e.g., nursing, accounting, etc.) rather than the highly specialized and frequently esoteric journals where Princeton professors would be expected to publish.
dodecahedron,

Thank you for contrasting professorships in community colleges and prominent universities, such as Princeton. It's what I have expected. greenfire may provide additional details based on his experience. The relevance to the discussion is as follows. Someone who has determined early in his career that his priorities are aligned with community college teaching would be happy to follow greenfire's footsteps. But an academic who has crafted his path towards getting a Princeton tenure is not likely to swap it for a community college position in order to reduce hours and stress.

Similarly, the OP is considering downscaling from a $200k+ position to a $50k position. In most cases, it's a qualitative rather than a quantitative change, and the OP may not be satisfied with the qualitative aspects of his new position.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

lululu
Posts: 1378
Joined: Thu Apr 10, 2014 4:23 pm

Re: Is semi-retirement a bad idea?

Post by lululu » Sat Oct 11, 2014 5:01 pm

ResearchMed wrote:If you spend your investment money in the house, and are suddenly living off of a fraction of previous income, how will you be saving for "real" retirement, including if it arrives earlier than expected due to health reasons (or layoff/etc.)?

And what about any extraordinary medical care, or just grinding/increasing costs of health insurance?

And your Social Security will be lower than it would have been if earning more each year during those working years.

Something doesn't quite add up here.

RM
+1

I think you need more savings before you reduce your savings to basically zero by buying that house and finding new jobs that may disappear. After that, go for it.

grantham324 wrote: But that's the thing, if you have paid off the house, then you only need a fraction of previous income to live...isn't that how retirement traditionally works for people? People work for 30 years to pay off their house, and then once that financial burden is removed and everything is paid off, they can live off a small pension or SS. We still plan on savings, by the way, just not as much because it won't be needed.
Welcome to the real world, where property taxes go through the roof and you need to fork out for homeowners and umbrella liability insurance and maybe flood or earthquake insurance. There are also easily major medical expenses even with Obamacare or Medicare/Medigap/Plan D. House repairs like a new roof. I fork out something like $6000 a year for prescriptions. Your projected college savings for the kids are likely to be inadequate based on current tuitions and inflation.

avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: Is semi-retirement a bad idea?

Post by avalpert » Sat Oct 11, 2014 5:08 pm

grantham324 wrote: But that's the thing, if you have paid off the house, then you only need a fraction of previous income to live...isn't that how retirement traditionally works for people? People work for 30 years to pay off their house, and then once that financial burden is removed and everything is paid off, they can live off a small pension or SS.
If that is the limit of your ambition I guess that's fine - but you will be in a very financially risky position with all your savings tied up in your residence and relying on two essentially start-up consulting gigs that you don't know can work out. If the local economy were to tank for example your house could become worth little at the same time that your ability to land consulting gigs dries up.

Frankly, that isn't my goal for retirement at all (or the goal of most people on this forum if you look at the investment pools they are targeting) - the goal is to have enough of an investment portfolio to live comfortably off of withdrawals from that. To provide income of $80k a year for example you would be targeting a $2 million diversified portfolio - not $500k all tied up in primary residence.

jstrazzere
Posts: 260
Joined: Tue Feb 18, 2014 4:19 pm

Re: Is semi-retirement a bad idea?

Post by jstrazzere » Sat Oct 11, 2014 5:10 pm

I never really want to completely retire. I'm completely fine, so long as my health allows, always doing something part time to bring in money. My wife is the same. Is that the missing link and why I feel weird?
Remember - never is a long time! In 2-3 years, you'll have to fund the remaining 60-70+ years of your life. $80k per year may not be sufficient for that long.

Few people work for the entire lifetime, even on a part-time basis. Not everyone wants to, not everyone can find a job at every age, and not everyone is healthy enough throughout their entire lifetime. Often, things change over the years - sometimes expenses arise that cannot be anticipated.

Cutting your income down to $80k early would likely mean you would be unable to fund any sort of lengthy retirement.

Also consider your long term care insurance needs, taxes, and other expenses that won't go away.

It's possible if you set your sights low enough, get lucky long enough, and don't change your vision for the rest of your life. Never is just a long time, with a lot of unknowns in front of you.
Last edited by jstrazzere on Sat Oct 11, 2014 5:19 pm, edited 1 time in total.

avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: Is semi-retirement a bad idea?

Post by avalpert » Sat Oct 11, 2014 5:14 pm

grantham324 wrote: What am I missing? Why don't more people with highish retirement assets also do this?
You don't really have highish retirement assets - even $500k in a diversified portfolio can only support at most $20k a year in income for a long term retirement (and probably to be safe you would want it closer to $15k for a potential 60 year retirement). If that $500 is all in home equity the income you can take off of it is nil.

User avatar
hoppy08520
Posts: 2003
Joined: Sat Feb 18, 2012 11:36 am

Re: Is semi-retirement a bad idea?

Post by hoppy08520 » Sat Oct 11, 2014 5:21 pm

dodecahedron wrote:That said, quitting your job and moving to a new area with the idea of being a consultant is not without its stresses, due to the fact that consulting can be very much a feast or famine world with a lot of uncertainty. I would definitely encourage you to line up a significant amount of consulting contracts before you move.
I was going to write the same thing. See if you can phase your way into semi-retirement before jumping.

Phase 1: be a full-time consultant where you live now, and make sure you can pull that off.

Phase 2: if you are successful at Phase 1 for 2+ years, make the move.

Also, I'm not quite as pessimistic as many of the others.

If (and I suppose this is the big "if") you can in fact maintain an $80K salary living in a different region, than that's still twice as much as the median family income in most LCOL area, and you'll have a leg up on that median family with a paid-off house, paid-off cars that will probably last a long time since you won't be commuting, and a big retirement portfolio that can compound away. It's not exactly taking an oath of poverty.

Two other things to consider:

1. Get individual DI. Warning: this is not cheap.

2. Do you really need a $500,000 house? In a lot of LCOL areas, you can probably get a pretty nice place for a lot less. Paying less for a house will give you more to invest, more liquidity in case you need to move back and rejoin the rat race, and you'll pay less in maintenance, property taxes and insurance.
grantham324 wrote:What am I missing? Why don't more people with highish retirement assets also do this?
I think the biggest reason is lifestyle creep. Every jump in salary winds up getting spent on new "necessities". So no matter how much you earn, you're spending almost all of it. I think the other reason is being dependent on your job for affordable health insurance, although with the ACA this might become less of a concern over time.

Good luck. I'm trying to do the same thing. I need to save more first, though.

User avatar
dodecahedron
Posts: 3691
Joined: Tue Nov 12, 2013 12:28 pm

Re: Is semi-retirement a bad idea?

Post by dodecahedron » Sat Oct 11, 2014 5:52 pm

Excellent point about the $500K house. When we moved here 25 years ago, we bought a roughly $300K house (on a household income of $100K at the time, and about half of the purchase price came from profits on the home we had sold in our previous HCOL area. Under tax laws at the time, we pretty much felt we had to spend ~$300K on the replacement home. I would certainly not spend that much under today's tax laws. There are perfectly nice family homes in great school districts in our area available for considerably less.)

Also I totally agree about disability insurance. Term life insurance as well.

Property taxes are also a huge issue. A $500K home where I live could easily run close to $15K/year in property taxes. Even if property taxes are currently low, kick the tires by checking into whether there are municipal issues like unfunded pension liability that could create problems down the road.

There is a lot to be said for renting and more generally keeping your options open. When we took our big leap 25 years ago, I took a two year parental leave of absence from my job in our old area. We rented a (very nice) home for a little over a year before deciding to buy a home and committing to stay here.

bargainhuntingking
Posts: 183
Joined: Wed May 14, 2008 3:48 am

Re: Is semi-retirement a bad idea?

Post by bargainhuntingking » Sat Oct 11, 2014 9:34 pm

Don't work a job that you hate, though it's no doubt hard to find a job that one loves. As mentioned earlier, Mr. Money Mustache has some good essays in his blog that offer a refreshing and inspirational perspective on leaving the rat race. I think you are doing the right thing.

clacy
Posts: 109
Joined: Wed Apr 20, 2011 8:50 pm

Re: Is semi-retirement a bad idea?

Post by clacy » Sat Oct 11, 2014 10:01 pm

Maybe you could meet in the middle. Instead of only working 2-3 more years, why not work 5-6? That way you can exceed your financial goals. 5 years flies by so fast, you will barely tell the difference.

I like the idea of semi-retiring. It's my goal by the time I'm 50.

User avatar
market timer
Posts: 5943
Joined: Tue Aug 21, 2007 1:42 am

Re: Is semi-retirement a bad idea?

Post by market timer » Sat Oct 11, 2014 10:30 pm

OP, your situation is very similar to mine before I retired a few months ago. I think you have a good plan and are following your values. Try to live frugally for the next 2-3 years and save your high income, if you can tolerate it. It helps reduce job stress to keep in mind that your work situation is temporary. If you can save enough to buy your house and car in cash, I think you'll find $80K affords a nice life in most of the US.
What am I missing? Why don't more people with highish retirement assets also do this? I realize we're fortunate to have the ability to accumulate this much in assets at our age, but for those our age or even in their 40s-50s, why do they wait until they reach millions in assets to retire?
It's possible there's a selection bias that you're missing. You live in a HCOL city where people have chosen to continue striving. You won't encounter people who left the rat race. We typically choose to leave HCOL cities.

EnjoyIt
Posts: 1581
Joined: Sun Dec 29, 2013 8:06 pm

Re: Is semi-retirement a bad idea?

Post by EnjoyIt » Sat Oct 11, 2014 11:26 pm

I think it is a great idea and doable. I am looking to semi retire in about 7 years myself. I think your plan needs a bit more thinking and a bit more savings for the following reasons. Your numbers hedge on keeping two unstable consulting jobs. That is way too much risk. A bad recession lasting several years can force you out of your home if you can't afford taxes and utilities if no one is hiring. Or it could eat into your savings. Not to mention 15 years down the line you are still relying on your semi retired salaries. Times may change and your consulting may not be profitable anymore. I recommend you continue as is for a few years longer so that you have a reasonable nest egg, and then semi retire without worries.

I think you need to do the math first before making such a huge jump. Taking into account a load of work possibilities, lower social security payments in retirement, increasing health costs, increasing college costs.
Last edited by EnjoyIt on Sun Oct 12, 2014 2:31 am, edited 1 time in total.

letsgobobby
Posts: 11577
Joined: Fri Sep 18, 2009 1:10 am

Re: Is semi-retirement a bad idea?

Post by letsgobobby » Sat Oct 11, 2014 11:37 pm

When you pull this trigger, how much do you envision having saved? You'll have no debt, and believe you can live off $80k per year (presumably including taxes and health care, and $600 per month in 529 contributions), and probably won't be saving any more money for retirement, so need to have everything you'll need by then.

We hope to reduce my hours to about half time in 5 years but we plan to have 25x expenses saved in retirement by then, and college completely separate. We'll be 45. You'll be considerably younger, with considerably less saved, and with college not taken care of. Your plan could work, but on the other hand a lot of things could happen to blow your plan out of the water (disability, unemployment, illness, etc). It seems a little early to be bailing.

bluejello
Posts: 428
Joined: Sun Sep 21, 2014 9:40 am

Re: Is semi-retirement a bad idea?

Post by bluejello » Sun Oct 12, 2014 12:27 am

grantham324 wrote: What am I missing? Why don't more people with highish retirement assets also do this? I realize we're fortunate to have the ability to accumulate this much in assets at our age, but for those our age or even in their 40s-50s, why do they wait until they reach millions in assets to retire? Why not just move to a lower COL area, pay off house and car, put kids in good public schools, and then semi-retire to provide for smaller expenses?
Everyone has a different objective function. My husband and I are in our 30's, and we are also fortunate to have enough assets that we really could retire if we wanted to, especially since we don't really care for a fancy lifestyle either. However, we honestly just love working. We both have big ambitions, like challenging ourselves, happily put in 50-60 hours a week and sometimes even more. We also love being in a community of like-minded "go go go" type people. Quite honestly, retirement or semi-retirement would be miserable for us.

That said, it is fantastic that you and your wife are being honest with yourselves about what you want out of life. And you should stay true to that, and go after what you want. You really shouldn't give a damn about what anyone else is doing or what the "recommended" life path is if you want something different.

I'm sure you're smart enough to run the numbers and figure out what will realistically work for you. As other posters have suggested, there are plenty of forums and resources on the web where people do share their experiences around early retirement or semi-retirement. Check out Tim Ferris's 4 hour workweek. Best of luck!

grantham324
Posts: 27
Joined: Sun Jan 19, 2014 2:30 pm

Re: Is semi-retirement a bad idea?

Post by grantham324 » Sun Oct 12, 2014 11:44 am

avalpert wrote:
grantham324 wrote: What am I missing? Why don't more people with highish retirement assets also do this?
You don't really have highish retirement assets - even $500k in a diversified portfolio can only support at most $20k a year in income for a long term retirement (and probably to be safe you would want it closer to $15k for a potential 60 year retirement). If that $500 is all in home equity the income you can take off of it is nil.
That's the type of viewpoint that I'm wondering why so many people are married to -- the idea that retirement = lump sum * 4% withdrawal rate, and that you can't retire until that equals your current level of income. I'm asking why don't more people plan on working part time and semi-retiring earlier, so they don't have to wait until that lump some grows so large that it can support their income at 4%? Why is it either black or white, retire or not-retired? Why doesn't the area in between appeal to more people? To me it seems to be the best option because it's a reasonable compromise.

Yes, there's risk that your semi-retirement income doesn't add up to what you thought it would, but the same risk exists on the other side of the coin for people living off a 4% WDR -- the market could hand out a large enough series of poor returns that your WDR makes your money run out too soon, or that you outlive your money (IMO people underestimate this risk by looking at the near history of US market returns and assume the future will be the same, and they also under-estimate future health advances extending lifespans given exponential technology growth)...at least in the case of indefinite semi-retirement, you never really stopped working and you could more easily return to full time conventional work. I'd really hate to be in a situation where I'm older and it turns out that I need to go back to work after not having worked for 10 years. Always continuing a small amount of work + earlier retirement seems to be the best of both worlds and mitigate risk nicely.

User avatar
Hub
Posts: 394
Joined: Fri Jul 13, 2012 8:56 am

Re: Is semi-retirement a bad idea?

Post by Hub » Sun Oct 12, 2014 11:59 am

My plan is similar to yours OP. We don't make what you make, but by age 40 we'll have between $650k and $900k in invested retirement assets. That's enough for me to mark saving for retirement completely off my to-do list (could probably stop sooner even). At that point I intend for wife and me to do self-employed part time work from then on. The only requirement is that we don't get to spend more than we make at least until we're 50. Knowing what we spend now, bringing in $80k per year part time is a realistic goal for us and it would equate to a nice increase in what we'll be able to spend. Then if the part time gigs accidentally do better than planned then we get to really let our hair down.

ThankYouJack
Posts: 2147
Joined: Wed Oct 08, 2014 7:27 pm

Re: Is semi-retirement a bad idea?

Post by ThankYouJack » Sun Oct 12, 2014 12:11 pm

I'm in a similar situation. There's too much in life to enjoy compared to working 40+ hours a week.

I'll probably save until I have 4% SWR for the bare essentials in life -- housing for LCOL, food, basic transportation. Continuing to work (say 20 hours a week) will allow me to live in a HCOL, save extra for kids college, spend money on expensive hobbies, travel, dine out quite a bit, etc. Don't forget about the added cost of health insurance too.

I would love to live like a nomad for a year or two since I can do my work on the road. The quandary I have though is that by the time I could semi-retire and do this, my daughter will be in grade school so we'll probably need to stay put.

Also, it'll take a shift mentally to go from saving a bundle each year, to possibly having to dig into our portfolio.

letsgobobby
Posts: 11577
Joined: Fri Sep 18, 2009 1:10 am

Re: Is semi-retirement a bad idea?

Post by letsgobobby » Sun Oct 12, 2014 12:21 pm

grantham324 wrote:
That's the type of viewpoint that I'm wondering why so many people are married to -- the idea that retirement = lump sum * 4% withdrawal rate, and that you can't retire until that equals your current level of income. I'm asking why don't more people plan on working part time and semi-retiring earlier, so they don't have to wait until that lump some grows so large that it can support their income at 4%? Why is it either black or white, retire or not-retired? Why doesn't the area in between appeal to more people? To me it seems to be the best option because it's a reasonable compromise.

Yes, there's risk that your semi-retirement income doesn't add up to what you thought it would, but the same risk exists on the other side of the coin for people living off a 4% WDR -- the market could hand out a large enough series of poor returns that your WDR makes your money run out too soon, or that you outlive your money (IMO people underestimate this risk by looking at the near history of US market returns and assume the future will be the same, and they also under-estimate future health advances extending lifespans given exponential technology growth)...at least in the case of indefinite semi-retirement, you never really stopped working and you could more easily return to full time conventional work. I'd really hate to be in a situation where I'm older and it turns out that I need to go back to work after not having worked for 10 years. Always continuing a small amount of work + earlier retirement seems to be the best of both worlds and mitigate risk nicely.
You're still missing the uncertainty part of it.

You don't even have kids yet - that changes perspective, income/spending needs, etc.

It's not easy in many professions to be part-time - some yes, some not.

And for many of us, our jobs provide us excellent health care - even with the evolution of the ACA, I would not count on having affordable health care 5 years from now until facts on the ground bear that out.

As you say it's not black and white. In my situation, by age 45, we anticipate several things to happen concurrently:
  • 25x expenses saved for retirement
    private college tuition for 2 kids completely saved for (likely not enough for living expenses - we'd have to fund those some other way)
    higher earner will have surpassed the second bend point in SS PIA calculations
    oldest child will be entering middle school, and (we expect) will benefit from more hands-on guidance and presence from both parents (whether she likes it or not)
    clarity on health care insurance landscape
    clarity on older parents' health and other needs
    clarity on an educational program my children are interested in
    outside chance I will have pursued and completed certification in an tangentially related field, opening up new business opportunities
If all that aligns, then sure - my wife will likely cut back her hours from 30 to 20 or less; I'll probably go down from 40-70 to 30; we'll take more vacation time, etc. But as you can see a lot on that list is unknown right now, and I wouldn't feel comfortable pulling the trigger on partial retirement until we have a lot more clarity.

newlawyer
Posts: 21
Joined: Mon Nov 22, 2010 2:29 pm

Re: Is semi-retirement a bad idea?

Post by newlawyer » Sun Oct 12, 2014 12:27 pm

I actually have a very similar goal to yours, though a different strategy to get there. I'm 34 and work as a corporate attorney in a high stress environment in a high COL area. I'm certain that I don't want to be an attorney for the long term, yet I'm having a hard time leaving the high compensation behind. In about 5 years, I hope to have enough saved where I can leave the law and make a career change into a less stressful job, and which is more in line w/ my values and personality (prior to law school, I was a social worker and would like to get back to something in that field). However, rather than saving enough to buy a house outright, my plan is to put my savings into retirement accounts while also saving enough for about a 33% down payment on a modest home in a lower COL area. I think that within 5 years, I will have about $1M in retirement savings - this would be money that I would not touch until I'm ready to fully retire, i.e. 60-65 years old. With a large down payment on my home, I will really only have to pay for my family's ongoing expenses (which I also figure to be around $80K) and will not have to worry about saving for retirement. In my mind, this strategy takes advantage of compounding in my retirement accounts while the house payment would act as an inflation hedge. My goal isn't to retire early or even to "semi-retire" early - it's really to be able to leave a high stress job for a more modest lifestyle. I still have not thought through all the details, but this is my general plan. If anyone has any thoughts on whether I'm missing something major here, I would certainly appreciate it.

User avatar
Captain Sensible
Posts: 24
Joined: Sat Apr 05, 2014 11:17 pm
Location: North Carolina

Re: Is semi-retirement a bad idea?

Post by Captain Sensible » Sun Oct 12, 2014 12:28 pm

grantham324 wrote:I'd really hate to be in a situation where I'm older and it turns out that I need to go back to work after not having worked for 10 years. Always continuing a small amount of work + earlier retirement seems to be the best of both worlds and mitigate risk nicely.
I've come to the same conclusion. It's much harder to restart from a dead stop, especially in tech, so ongoing practice is my best insurance against uncertainty.

We've also realized that market returns now add more than we can contribute with new savings. After 20 years of pushing the wagon, we might finally get to ride for awhile, or at least walk alongside. :)

So I'm hoping to spin down the consulting practice to half time, which sounds just about perfect. Earn enough to cover our expenses, and let the nest egg compound for another decade or so.

User avatar
Hayden
Posts: 1154
Joined: Tue Apr 16, 2013 5:13 pm

Re: Is semi-retirement a bad idea?

Post by Hayden » Sun Oct 12, 2014 12:30 pm

I am trying semi-retirement right now, and I have to say that I am failing retirement. The problem is that I have commitments to clients, and when they want something, I jump. Now, it is true that I set my own hours and can work from anywhere, but I am still working closer to 40 hours than I would like. I think it is much harder to work a set 20 hours per week (or whatever number you pick) as a consultant, than as an employee.

User avatar
Hub
Posts: 394
Joined: Fri Jul 13, 2012 8:56 am

Re: Is semi-retirement a bad idea?

Post by Hub » Sun Oct 12, 2014 12:30 pm

ThankYouJack wrote: I would love to live like a nomad for a year or two since I can do my work on the road. The quandary I have though is that by the time I could semi-retire and do this, my daughter will be in grade school so we'll probably need to stay put.
My kids will be in grade school by the time I pull this off also, but I envision an entire summer or 2 (or more) living somewhere other than home with them for a couple months. Maybe abroad, maybe just another place in the US. Somewhere where we can live like locals, get some part time work done, and still not really spend all that much more than we would have at home.

letsgobobby
Posts: 11577
Joined: Fri Sep 18, 2009 1:10 am

Re: Is semi-retirement a bad idea?

Post by letsgobobby » Sun Oct 12, 2014 12:40 pm

Hub wrote: My kids will be in grade school by the time I pull this off also, but I envision an entire summer or 2 (or more) living somewhere other than home with them for a couple months. Maybe abroad, maybe just another place in the US. Somewhere where we can live like locals, get some part time work done, and still not really spend all that much more than we would have at home.
That is a goal of ours as well. My 2nd grade daughter is (and my 5 year old son will be) in a Chinese immersion program. When they hit middle school we'd like to travel each summer for a month at a time, of course to Taiwan or China but also to Europe or Latin America where we can be immersed in local language and culture for more than a quickie one week tourist stop. My current job simply won't allow that, and my wife won't go without me.

User avatar
kramer
Posts: 1631
Joined: Wed Feb 21, 2007 2:28 am
Location: Philippines

Re: Is semi-retirement a bad idea?

Post by kramer » Sun Oct 12, 2014 12:40 pm

grantham324 wrote:
jebmke wrote:
grantham324 wrote:I never really want to completely retire.
You say that now but things change. In 20 years you might have a different viewpoint.
That's true, but always wanting to do something is an ingrained part of my personality. My father is the same way and still does part time work in his 70's. I also work in a field that I find interesting. Who knows what will happen, but I'm pretty comfortable betting I'll stay this way.
I started college late and so I didn't finish graduate school and start my career proper until age 29. I would have sworn that I would never get burnt out and anyone that knew me would have sworn the same. But I burned out at age 40. Also, I came to the conclusion that high paying jobs are inherently stressful -- a lot is expected of you and your performance is monitored. That is just life and I am thankful for my career and I wouldn't trade that growing experience. But I had achieved my career goals already and I got out at age 41, no regrets 7 years later.

flyingaway
Posts: 1887
Joined: Fri Jan 17, 2014 10:19 am

Re: Is semi-retirement a bad idea?

Post by flyingaway » Sun Oct 12, 2014 1:07 pm

greenfire wrote:VictoriaF, I disagree. I was a college professor at a community college, working full time tenure-track and earning $45,000. My job provided complete autonomy, lots of respect, and I loved every minute of it. I was always amazed that they paid me for something I would have done for free.
I work at a university. I consider the three unpaid summer months (and one paid winter break month) to be my vacation time, so I consider I am semi-retired. I had years of managing several research projects concurrently and made summer money, and enjoyed those years. But I do not plan to do that again. I cannot say that I love my job, I now just consider it as a source of income and otherwise I would get bored quickly. (Even when I wrote more than 10 proposals a year, I did not feel stressful).

letsgobobby
Posts: 11577
Joined: Fri Sep 18, 2009 1:10 am

Re: Is semi-retirement a bad idea?

Post by letsgobobby » Sun Oct 12, 2014 1:23 pm

kramer wrote: I started college late and so I didn't finish graduate school and start my career proper until age 29. I would have sworn that I would never get burnt out and anyone that knew me would have sworn the same. But I burned out at age 40. Also, I came to the conclusion that high paying jobs are inherently stressful -- a lot is expected of you and your performance is monitored. That is just life and I am thankful for my career and I wouldn't trade that growing experience. But I had achieved my career goals already and I got out at age 41, no regrets 7 years later.
what do you do now?

tj
Posts: 2146
Joined: Thu Dec 24, 2009 12:10 am

Re: Is semi-retirement a bad idea?

Post by tj » Sun Oct 12, 2014 1:24 pm

One concern would be how many other kids would there be in these LCOL retirement regions? Would it be easy for your kids to make friends?

Post Reply