i dont want to work

February 10, 2007 12:18 AM

help me to retire, and continue to live a fulfilling life.

i am going through an explorative thought process. i want to retire, not when i am 60, but as soon as possible. not stop working, but retire from big business. my question is, is there anyone who has retired "prematurely" by normal standards, that can lend some experience? was it the right choice? what did you do? how did you financially structure things? how much money do i need?
i work as an expat in asia, and am focusing on getting my finances in order. i want to "work" for 7 more years, but am starting the thought process of how to set things up after that. of course i don't want to compromise lifestyle by making a bad choice.
i am mid 30's.

posted by edtut to sports, hobbies, & recreation (10 comments total)

I started working in an office when I was 16, and by 35 I was completely burned out. Luckily, I had started saving agressively when I was 21, and so I had enough savings to start thinking about not working, but it took me until 40 to actually admit that I was retiring. Some ideas:

You have to really really want it. It takes a lot of financial planning. You have to give up on buying shiny things and going to restaurants. You also need to completely reorganize your vision of yourself and how you live. I know an awful lot of people with more money than I have, and every single one of them under the age of 60 is still working. People talk a lot about early retirement, but when push comes to shove, they don't want to reduce their expenses, they don't want to lose the self-importance they get from having a career, and they don't actually want the slower, more reflective rhythm of being retired.

Your first plans, based on a lifetime of daydreaming in the office, probably won't work. Be ready to try different things before you manage to rebuild a new life that works. If you can do a sabbatical year or work as a freelancer and start experiencing what it's like to have control over you time, I highly recommend it. I started off thinking I would work for part of the year and spend the rest of my time in a paradise I had been dreaming about since I first saw it in my early 20s. That life failed pretty miserably, for a few different reasons.

First, I discovered that it's not really possible to do anything satisfying in work without being committed to it at the same all-consuming level as everyone else. People expect you to be constantly available and ambitious like they are, and if you're not it's really hard to stay in the game. I don't believe that fantasies of semi-retirement can work well. Maybe you have the discipline to set very limited goals, work every day for a couple of hours to reach them, and then turn off the PC and the telephone, but I don't. Everything I started failed because I wasn't willing anymore to commit all my energy to it.

For me, admitting I wanted to retire meant being willing to let my skills rot and give up on any idea of succeeding at something recognizable. That can be scary, but also liberating. If your greatest satisfactions in life aren't personal and invisible, you're probably not ready to retire.

Once I gave up on the idea of continuing to have some kind of identity from my work, I lost my ability to relate to a lot of my friends, who were caught up in a rhythm of life I didn't want anymore. It's become fashionable over the last 10 years or so to always talk about how busy you are, and once you retire you'll find that your conversation has no interest for people who are still living in that world. You'll find it really hard to save money when you're going out with people who are working hard and spending hard. You won't get a lot of sympathy for the challenges of building a new life around not working, either.

The paradise fantasy didn't work out too well, either. I found out that after more than about 3 months in paradise, life became so static and empty that I got bored.

After a few years of failures and false starts, I moved to an island in the Mediterranean that's full of people who've opted to work less and live more. People do whatever minimal job they need to get by, no one defines themselves by their work, everyone devotes a lot of energy to figuring out how to live well without spending any money, and I fit right in. It helps a lot to have friends of different ages at different stages in their lives, too. Start building a new type of social life now, or else you'll find yourself adrift once you retire.

If you're in a couple, it's essential to start working now with your partner on how you want to live. How are you going to stand being in the house together all the time? Do you agree on how to reduce your expenses? Do you both want the same rhythm of life, and the same balance between travelling and staying at home, being in the city and being in nature? My parents are both still working past age 70 because they haven't sorted out these issues between them.

For the financial planning, you need to learn two things: how to manage a portfolio, and how to reduce your expenses. Here are some good intro books on portfolio management:
The Intelligent Asset Allocator
10 Steps to a Perfect Retirement Portfolio

FireCALC will teach you all you need to know about the financial realities of retiring. Spend some serious time playing with the advanced options and learning about what can happen if you retire on the eve of a major market crash.

The basic investing rules: Stop reading all financial news. You have no idea where the markets are going in the next couple of years, and no one else does, either. Invest for long-term returns and diversify to reduce risk. Put your money in low-cost index funds. Taxes and fund fees are your enemies. Almost all financial advisors will wind up making more money in fees from your portfolio over the long term than you do. Rebalance your asset allocation every year. Don't touch your investments otherwise, even if the market crashes.

Since you're outside the US, investing gets more complicated. I still haven't figured out how to balance my portfolio between different currencies, and dealing with multiple tax jurisdictions had made things a lot more difficult. Also, fund offerings outside the US tend to be gigantic ripoffs. You'll need to work hard to build a modern portfolio out of the investment opportunities available to you where you are.

Plan on withdrawing no more than 4% of the initial value of your retirement portfolio a year, adjusted each year for inflation. Another way of saying that: you need 25 times your annual expenses in the bank before you can retire. You'll find that the time you spend exploring ways to spend less money and still be happy will pay off more than the time you spend trying to make a killing with your investments.
posted by fuzz at 2:35 AM on February 10, 2007 [33 favorites]

Oh, and good luck! It's hard work, but it's really worth it.
posted by fuzz at 2:40 AM on February 10, 2007

Do you have a budget? I don't think anyone can answer your question regarding financial requirements until more details about your situation are known. For example, where are you proposing to live? Will you purchase and hold a mortgage, do you already own or will you rent?

What type of capital do you currently have, and how is it deployed? Compare that to the budget you're tracking wrt your early retirement plans, and see how far it will last. If you are thinking of retiring in perhaps ten years, then the last place you want the bulk of your capital to reside is the equity market - at least in risky shares, that is.

For someone your age the bulk of investible assets should, of course, be in the equities. However as you approach retirement, most planners will gradullay shift the asset balance in favour of fixed income instruments.

These, however, are not without risks of their own, especially across your expected horizon. I'd reccomend that you plan as if you'll live to be 100, and insure you've got adequate assets to support yourself.

Everything fuzz mentioned is good advise as well - especially the part about taxes. I've lived outside the US for ten years now, however all my investements are US based. Partially because US funds & investements have the most transparency and lowest costs structure, but also due to isssues related to double taxation on investment profits. It gets really complicated, really fast.

Most of my ex-pat buddies (there are a bunch of us here) don't have bother investing locally anylonger, once the full scope of the paperwork and filing burden becomes clear.
posted by Mutant at 2:41 AM on February 10, 2007

Since you're bent on "not retiring from working, but from big business," you're not really retiring. You're going freelance, with a modified schedule better suited to a slower pace. First order of business: drop the notion of "retirement" from your mind-set, and start thinking about how you'll structure your freelance business.

As a private contractor-slash-entrepreneur, whether fulltime or parttime, you'll have considerably more flexibility with your tax setup. Read up on subchapter S corporations and LLCs, and the tax advantages (along with some disadvantages) they entail.

Get your tax house in order *first*, *then* think about the profit angle of your work.

Also, I second not reading financial news, and putting your money in index funds. Also consider real estate, but recognize that the amount of homework needed to succeed here is a level of multitude higher than equities.

If you're in an Asian country like Japan with a favorable exchange rate, maintain your work contacts and a bank account in Asia. Then, telecommute to your Asian clients. Your money will go far when converted into US currency.

Finally, destroy your credit cards, or convert them to debit cards. Live simply. Be frugal. Get accustomed to a lifestyle in which you save more then you spend.
posted by Gordion Knott at 3:08 AM on February 10, 2007

edtut....

This is an issue I have been considering for a while, too. fuzz has some great observations and suggestions as does Mr. Knott.

I'd like to add some semantic flavor to the mix... what do you really MEAN by 'retirement'. Exit from one livelihood strategy to another, better, one? Complete irrelevance of work? Never lifting a finger again in the interest of making money?

I suggest that work (i.e., non-retirement) involves a lot more than income. Most people equate the two, but work also contains huge amounts of contribution to a healthy and fulfilling life. Socialization, status, support, common goals, community, entertainment, intellectual growth, purpose... the list is huge.

Personally, though I expect to change my employment circumstances and suffer some change to my income mix, I don't think I'll ever want to completely abandon all work in my retirement. 'Right livelihood' is an essential component to a worthwhile life.

Perhaps it's worth considering how you stack up the various components of work? Is income at the top, and driving all the other good stuff to irrelevance? Do you expect your values to change the day you quit your old job? Are you planning an 'island' existence (not literally, but figuratively in the 'self sufficient/isolated' sense)?

I plan to do some 'work' until I croak. Michaelangelo banged away to within two weeks of his death at 88. I may not make any money, but I'll do something to contribute to my personal growth and general societal good.

Nonetheless, in your 30's, if you have some money, invest to supplement your future income mix. Increase the rate at which you can do that by maximizing short term income and minimizing expenses. Lower the bar of required income by changing your habits and tastes to accomodate more meager circumstances. Have a pyramidal investment strategy with progressively smaller amounts in progressively higher risk investments. Become self-employed at the same level of income you currently enjoy as you can do more effective retirement savings with them and get tax-preferential treatment on certain things (too complex to detail here). Enlist your partner (if there is one) fully in the project. Stay healthy to minimize disasterous financial emergencies. Study the issue as if your life depended on it and make it a mission. Each year, make consistent decisions that bring you closer to your goals. Don't waver (but do give yourself permission to change your mind at any time!).

If you do all of this, you can increase your odds of getting what you want, but there is a non-zero chance it'll all fall apart anyway and you'll wind up destitute. Could happen. No guarantees.

Good luck. You are wise to consider these issues now.
posted by FauxScot at 5:35 AM on February 10, 2007

Isn't this what the voluntary simplicity movement is supposed to be all about?
posted by kika at 7:56 AM on February 10, 2007

Retiring from something may not make you very happy. Try to think of something you really want to do, then plan towards it. In addition, if you decide that you miss the income and lifestyle of your money job, you can always say 'Yeah, my landscape business was great, but I missed the action of being a broker.'
posted by theora55 at 1:42 PM on February 10, 2007

I retired at age 34: I had plenty of money, felt burned out, and felt like work was filling up time I could devote to more creative pursuits.

The next six months were the most miserably depressed of my entire life; my creative impulse evaporated on me and I spent most days in a websurfing clicktrance, just marking time. It took a lot of therapy and medication to figure out that I wasn't actually depressed. I was bored.

Now I work again. It's better. And I've got my creativity back. It turns out that -- for me at least -- 'work' and 'play' are not separable.

So I guess my advice is, don't spend the next seven years saving up enough cash to retire on. Spend the next seven years figuring out what you'd really rather be doing than working.
posted by ook at 10:38 AM on February 11, 2007 [1 favorite]

I'm in a not-dissimilar position -- 5 years older, expat in Asia, planning on being financially free within a decade, if things go well.

I had been thinking (and still do, to some extent) about retiring, until I met an Australian guy in a bar in Seoul while I was on a business trip a while back, and he told me about his experiences. He'd made more than enough money to retire, tried it, then unretired all before he was 45, and we talked for quite a while over many beers about the whole thing.

His point was basically that you've got to have something to do. It doesn't matter if it's 'work' in the traditional sense, but it's got to be something. Now me, I'm lazier than hell, and quite able to occupy myself for days on end with nothing much, but I do see that years on end of it would kill me. But I think he was right.

So I'm much more focussed now, as I said, on financial freedom. I define that as being able to live off passive investment income, frugally but comfortably, and have active income through work, or freelancing, or whatever be more or less optional. When I hit that point (and that point is based, of course, on a welter of what-if spreadsheets to make reasonable estimates of how much it might cost to live in various places), then it's not so much retire, in my mind, as step back and think about the rest of my life.

What and where my wife and I might choose to do and live, I don't quite know, but I'm OK with that. Life has a way of happening with or without Grand Plans, I've found.

In terms of details, well, there's a wealth of information here on AskMe about this, and elsewhere on the net. For me, it's just a matter of living frugally, and saving as much as possible. We save an average about 70% of our gross monthly income, these days, with no debt (and very few material possessions). It's a little hard, sometimes, but once you get into the mindset of living simply, it becomes its own reward, a little like regular exercise.

I lean towards the risk-adverse, but we manage to average about 6% return on our savings (leaving out my employee stock program holdings, which have more than doubled, happily, but that's just potential profit until they are actually sold). I'm happy with that return, given that they are effectively risk-free. The rule of 72 is my friend. All told, about 70% of our investments are in savings or other very low-risk vehicles, and the rest in stocks (also low risk, thanks to the deeply discounted strike price I was offered). I'm not nearly as diversified as most advisors recommend, but living where I do and doing what I do, I think I've got our butts covered.

My only fear is another crash and devaluation like we had in 1997/8 (our investments are in Korean won), but like last time, I think it would be a matter of just waiting it out. And interest rates peaked out at over 20% after the last time, so waiting it out won't be that painful, if it happens, I hope.

After that? Well, if I do want to repatriate my family and my savings (which I'm not sure I will), I'll be speaking to professionals on how best to do it. Accountants have been of great assistance to me in the past, and, while I try to educate myself on investing and money management, when it comes to compliance and tax issues, I'll always speak to a pro before making any major decisions, if possible.

(Reading the thread, I'll note that Canadian and American tax laws are very very different with regard to expatriate status, so an important first step is to educate yourself about them.)
posted by stavrosthewonderchicken at 5:35 PM on February 11, 2007 [1 favorite]

Philip Greenspun offers some wide-ranging advice about early retirement.
posted by blue grama at 9:10 PM on February 13, 2007