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My friend Jim retired from his career at the same age and around the same time that I did. He did, however, retire with a smaller budget in mind and less of a cushion to accommodate life’s potential changes.
After a couple of years living the FIRE lifestyle between the U.S. and Panama, they have more money than ever. While they don’t necessarily need more money, he can’t help but want more.
Below, he describes why they’re good right now, why it wouldn’t hurt to have more, and the different ways in which they could get more.
This Friday Feature, recently featured in The Sunday Best, was originally published on Route to Retire.
The guiding principle of the Financial Independence / Retire Early (FIRE) movement is to get to the point in life where you have enough and don’t need more money to cover your expenses.
Once you pull that off, you’re golden. You’re now financially independent and never have to work another day in life again… if you don’t want to.
It sounds great, right?
And for someone that pulled it off at the age of 43 a couple of years ago, I can tell you that I love early retirement (though it does come with its own set of hurdles). Being able to spend so much time with my family is such a blessing in life.
Having enough money in our accounts to cover our regular expenses like a monthly paycheck makes life pretty simple, too. We don’t have to worry about the possibility of layoffs, being fired, traffic in the mornings, or even having to get up at a specific time each day.
It really does remove a lot of the stress out of life.
But after over 2½ years of early retirement, I gotta say it… we don’t need more money, but I want it. I’m glad we pulled the trigger when we did, but now it’s time to start thinking of some ways to bring in some more income.
Today, I’ll tell you why we don’t need more money, why I want more anyway, and how we’ll try to get there.
Why we don’t need more money…
Here’s the deal, if you’re unfamiliar, a lot of the FIRE community follows the idea of the 4% rule. In a nutshell, a study was done years ago that showed that you should be able to pull 4% per year (adjusted for inflation) out of an investment portfolio every year without running out of money over a 30-year time frame.
There are several caveats to this rule of thumb and there are plenty of arguments as to why you should make your withdrawal rate more or less. Regardless, it’s a great starting point in trying to determine how much money you’ll need to be financially free.
As we sought financial independence, I used the 4% rule as one piece of our retirement planning. But, in addition to our market investment portfolio, we also had rental properties in the mix, the last of which we just sold during this crazy hot market.
In general, though, our plan allowed us to have an annual spend of about $55,000 per year (adjusted annually for inflation). That said, I would prefer not to spend that much if possible. That’s especially true during the first 5-7 years or more, while the sequence of returns risk can be the most lethal.
The first few years of withdrawing from a portfolio can be the most critical. If you’re pulling money out during a bull market, you’re hopefully withdrawing mostly gains and dividends. If you’re pulling money out during a bear market though, you’re going to be withdrawing principal and that’s tough to rebuild when you’re not working.
Our investment drawdown plan considered this with a bucket strategy. Essentially, we have 1 year of cash-on-hand as well as a 5-year ladder of BulletShares fixed income ETFs. This is structured so that we don’t need to sell stock investments during a bear market to fund our lifestyle. Although it can hinder some growth, the peace of mind we gain from protecting our principal is worth it to us.
Fortunately, though, I happened to retire during a phenomenal bull run in the stock market. On the day I retired on 12/31/18, our net worth was $1,127,049. As of 08/01/21, it’s now $1,634,608.00… even after completely funding our expenses over the past few years!
You can see our net worth by month throughout the years on my Net Worth page. If you’re not tracking you’re own net worth, I strongly recommend that you do so. It’s the single best way to know how close you are to reaching financial independence.
One of the easiest ways to do this is to use Empower. It’s free and they beautifully do the heavy lifting for you. You link your accounts and it pulls together all your data for you. It also gives you some insights that would be hard to see otherwise. I saved $50k in fees over 10-years in an instant with the knowledge and tools they provide.
I’ve been using Empower to help manage my investments for years now and I think it can be a huge benefit to you, as well.
So far, our plan has worked well. Our needs have been completely met by our investments. We’re living in a beautiful resort in Boquete, Panama. We have fun and can do some traveling as well. Most of the traveling lately has been back and forth to the U.S. a few times a year.
We continue to have new adventures like taking a bus from Costa Rica to Panama after a cruise we enjoyed. And last year, during the pandemic, we bought a Honda Pilot and took an awesome road trip across the U.S.
In other words, we don’t need more money to live a pretty nice lifestyle and have some fun… life is good, my friends!
Why do I want more money…
Sounds pretty good, Jim. Seems like you guys are living the dream… why do you need more money then?
Good question! Here’s the problem: we have enough, but we don’t have a huge surplus. Right now, I still need to keep a close eye on where our money goes and I don’t like that.
I’m not talking about a few dollars here and a few dollars there, but rather when we spend a little more on things. When we go to dinner with my brother and his wife in Texas, we can easily have a $200+ bill for the three of us (they like the fancy stuff more than we care about). That’s still a stab in the heart for me to waste that much on a meal.
Then there’s some of the travel we do. We try to find the best deals and use travel rewards as much as possible, but those are drying up while we’re living here in Panama. Flying internationally is not cheap. And lately, we’ve needed to throw in hotel stays along the way as well.
When we visit folks in the U.S., we spend a lot of money in small increments getting together with everyone. Whether it’s seeing friends at bars, restaurants, or even just their houses (bringing beer or food), it costs money. Not enough money that it would normally matter, but we end up doing this probably 20 times during our month-long visits… and that adds up!
I spend a little time then looking at our budget for the month and where we stand. And then I find myself asking Lisa “Ok, but how much will that cost?” way too often.
What I’m trying to say is that we have enough money to support our lifestyle but it has the potential to get cramped relatively quickly. And that’s something I don’t like.
We’re what most folks would constitute as “regular” FIRE since we aren’t cutting back on our lifestyle to live our lives. But adding in a lot of extra spending can muddy the waters somewhat. We have enough money for our normal lifestyle but doing a lot of things out of the norm for us can make me cringe a little.
We have a small cushion built in every year but I don’t like to see that eaten up. I would prefer to not spend as much of it, which would effectively bring down our withdrawal rate. That’s my safety blanket.
Put another way, it’s not that we can’t afford the extras but those extras can make it tight enough to make me a little anxious. Does that make sense?
It’s also a reason I have a hard time with folks on the far end of the spectrum chasing after Lean FIRE. Setting yourself up for a life of cutting back is unlikely to work well for most of us over the long haul. If it works for you, great. But the restrictions you could be placing on yourself can make life almost not worth living.
How we plan to get there…
Ok, right off the rip, it’s important to realize that our expenses aren’t as predictable right now as I’d like them to be.
The travel that we’re required to do as perpetual tourists back and forth out of Panama can swing dramatically. Sometimes it can cost a small amount with our travel rewards. But as we’ve been running out of those, the cost can easily be a couple thousand dollars or more.
Spending day after day out meeting friends and family each time we visit is also a cost that’s not very easily calculable. Those get-togethers can be anywhere from $25-$100 each time. One or two of these aren’t a big deal, but 20 of them on a visit adds up.
The good news is that those big expenses will go to the wayside once we move back to the U.S. next spring. That’s not to say that we won’t still have expenses that creep up, but most of them will be a little more controllable than they are now.
Once we’re back in the U.S., we’ll see some of our living expenses go up and some that will go down. I’ll talk more about this in a later post, but for the most part, we’ll likely see our cost of necessities actually be pretty similar to what they are now. Remember, we’re living a more “lavish” lifestyle than we plan to in the U.S. No more living in a resort once we’re back!
So that should be a wash, more or less. Funny enough, without all the bouncing back and forth all the time, our expenses may actually go down slightly when all is said and done.
Regardless, I’d still like to see more money in the coffers.
Lisa plans to get a part-time job once we get back and get situated. It won’t be a ton of money coming in but even a hundred bucks here and there can make a big difference.
I hope to continue to grow Route to Retire some more as well. Right now, I’m projecting to close out this year with around $5,000 in profit from ad revenue and from affiliate income for products and services I enjoy and share with you.
That’s the most I’ll have ever earned in a year since I started this site. If I did the hourly rate on this, it would probably make me cry, but it’s still nice to see something back for all the time I put in on it. Thanks, everyone, for your support!
Over time, I expect that income to continue to grow… slowly but surely. I can’t envision it ever being full-time money. However, while I enjoy doing it, it’s some nice supplemental income.
I don’t plan to go out and get a part-time job once we move back, but that could change over time, too. Faith will turn 12 right after we move back. The time she’s going to want to spend with dear-old-dad is inevitably going to diminish… such is life.
And Lisa and I have been together for over 20 years. She’s probably been ready for some time away from me for at least the last 18 years!
So I can see my free time growing soon and, well, we’ll see what happens then.
Gaining more free time could also be a good opportunity to spend more time on Route to Retire. Or maybe it could be a chance to write another book (I’ve written two computer books over the years). Writing a personal finance or children’s book (or a personal finance book for kids!) has been on my list to do.
As you can see, we’re not planning on going back to big-time careers anytime soon (read that as never!). But our supplemental income should continue to grow over the next few years. And that’s what I’d like to see – just a little more cushion in our yearly paycheck.
Should I have worked longer to save more? I’m going to have to say no to that. I needed to be done at the time… it was the right time for me mentally. And the supplementary income we’re working on should fill the gaps in nicely.
But if you’re planning to retire from your job and don’t hate what you’re doing, this is something to think about. If you don’t have a big cushion more than your anticipated spending in place, you may want to consider working a little longer to build that up. Don’t get stuck in one more year syndrome but be sure you’re comfortable with what you’re heading into freedom with if you don’t want to ever work again.
For us, it’s not that we need more money. However, having that extra income can help bring down our withdrawal rate a little more. It can also make it easier to plan more fun vacations down the road. Life is good and we want to continue enjoying every moment of it!
Plan well, take action, and live your best life!
Thanks for reading!!
— Jim
7 thoughts on “They Don’t Need More Money, But He Wants More”
For some reason the article cuts off after the line “Sounds pretty good, Jim. Seems like you guys are living the dream… why do you need more money then?” in Firefox. Switching browsers allowed me to see the rest of the article. Seemed odd.
That is odd!
This is a very valid point that Jim brings up. For physicians, there’s a small complication in that coming back to work requires maintaining a bunch of requirements- some of which can prove cumbersome and/or expensive during an extended retirement- such as certifications/MOC/hospital privileges etc… something to consider before a young physician decides to hang up her white coat.
PFB
I actually had something similar, PFB – but I’m sure on a much lower scale. I spent most of my years building up higher-end IT certifications, even after my days as an engineer when I was in management. Thinking about losing these certs was a tough decision, but early retirement won out in my case.
I would guess that the certs and privileges are a bigger investment than my undertaking, but I do think you bring up a valid point. It’s a personal decision that’s probably going to be different for different people, but it’s something to seriously contemplate before making the decision to bail… especially if it’s considerably early in a career.
Heya – seems like at the time of writing this comment, the post sort of just cuts off in the middle?
But I’d say even if I FIRE and have enough money, I always would want a lot more money. There’s nothing wrong once you’ve reached the first stage of retirement (FIRE) to be able to want to reach fatFIRE / obeseFIRE where you want so much money that you can buy very expensive things and take all the lifestyle inflation without worrying about your net worth at all.
And even after I’ve earned enough money to basically be able to spend it on anything I want for the rest of my life, I’d still want more money as long as the game of making money is still a fun game (which it has been for me, and will likely continue to be).
That said, at FIRE and beyond we’ve all got the choice of optimizing for the other things in life, like relationships/time with family/health and so on. Having that initial FIRE is crucial because the optionality to take a step back means that even in the midst of a relentless pursuit of wealth, one can just say, at any time, “yeah I don’t want to play this game for a while” — whereas pre-FIRE you’re kind of stuck playing that game until you reach FIRE.
Well said, Angie! I don’t regret early retirement one bit – it’s been an incredible time with family and experiences thus far. I also don’t see myself going back to a full-time gig anytime soon. But earning a little more “play” money through some side hustles is a game I’ll continue to play for a while. 🙂
@Angie It looks like the problem is with FireFox. I had to switch browsers to see the full article.