The fear of running out of money in retirement is a rational one. After all, you've spent your entire career making and saving money, not pilfering your retirement accounts.
But as someone who has been retired, or at least semi retired since 2012, I'm here to tell you the fear of running out of money in retirement is overblown. You will most likely be financially fine in retirement because you are a rational, financially competent person. You will find ways to always be financially secure.
If you need more money in retirement, you will logical cut expenses, pick up a side job, or reposition your assets so they can generate more investment income.
My Early Fears Of Running Out Of Money In Retirement
I admit. One of my biggest concerns about early retirement was running out of money. I couldn't help but worry about what ifs. These what ifs are the reason for the one more year syndrome.
What if there was another massive correction in the stock market like we saw in 2008-2009? Well, we experienced one in March 2020 and survived. Then we went through the 2022 bear market and survived.
What if my rental properties went vacant for an extended period of time? It turns out there's even a stronger demand for shelter when the world comes to a standstill. And as inflation picked up during and after COVID, so did rents and property prices.
Or what if Financial Samurai died? Artificial intelligence is creating an existential crisis for this site. It's disappoint to see artificial intelligence steal publisher's content and not provide attribution. Hence, one of the best ways to fight against AI is to invest in AI! In addition, Financial Samurai won't die if I keep on writing unique and helpful content based off firsthand experience.
What if I accrued unexpected medical expenses? That's what health care insurance is for.
What if I underestimated how much I needed to be happy? Well, I can always try get make more money through side hustles.
So Much Uncertainty In The World Leads To Financial Fears
Such worrisome thoughts can paralyze even the best of us. But they are good to think through to understand your downside scenarios.
Whether you decide to retire in your 60s or in your 30s, I'm here to say the fear of running out of money in retirement is overblown. The media, money managers, and government officials, most of whom are still working, have fear-mongered the general population long enough! They want to manage your money to make money off of you.
As someone who left the working world in 2012 at the age of 34, let me explain why your retirement life will probably be just fine.
Making Your Money Last In Retirement
Here are some reasons why the fear of running out of money in retirement is overblown.
1) You will need less than you think.
My biggest surprise since retiring has been how much less I need to live a comfortable retirement life. Like any good retiree, we plan for multiple scenarios over an extended period of time before making a decision.
I spoke with at least three dozen retirees about retirement spending and they all said they are spending much less than they anticipated. For myself, on average I'm spending 30% less than projected.
It costs nothing to play tennis or pickleball at a public park. There are plenty of cheaper food alternatives once you no longer have to work in an expensive downtown area. You can read all the latest magazines at your local library, surf the web, and enrich your mind with classic literature for free. Take one look online and you'll find a plethora of free activities.
2) You don't need to save for retirement once you are retired.
What many retirees “forget” is that once they reach retirement, they no longer need to save for retirement. It's not so much forgetting, but being so accustomed to saving for so many years that you just can't stop! For example, if you've spent a lifetime maxing out your 401k, you've suddenly got $20,500 a year more in gross disposable income.
For the life of me, I cannot stop trying to save at least 50% of my after-tax income, while also contributing as much as possible to my Solo 401k even though I'm supposed to live it up more in retirement.
After aggressively saving since your first paycheck, saving just becomes part of your DNA due to an unknown future.
As a result, at the age of 45 in 2022, I decided to enter decumulation mode. In other words, I decided to purposefully start spending more money because I don't want to die with too much. If I do, that would mean I wasted a lot of time.
3) You will adapt to different income levels.
For the first two years after I left my job, my annual income decreased by 70% – 80%. Yet looking back, there were minimal lifestyle changes. I still lived in the same house that I had been living in for seven years prior.
I still stayed in the same house in Hawaii for the past 30 years every time I visited my parents. Further, I also drove the same paid off car for a couple years until I bought a new compact car. My old car could no longer pass the smog exam.
Yes, I had to cut back on eating steak for a couple years. But I replaced $50 dry-aged steaks with $3.5 In N' Out cheeseburgers. Yum! Instead of eating sashimi, I ate marinated tilapia. Still quite tasty.
Just like the lifestyle of a one percenter is not much different from the lifestyle of a middle income person, as long as you have the basics covered, the lifestyle of a lower income person isn't much different from a middle income person either. The lower income person has a harder time saving for retirement, which ironically gels well with a retiree who doesn't need to save for retirement.
As long as I have food, shelter, clothing, dental floss, companionship, and internet access, I'm 85% of the way there. For most of you, it's going to be the same thing. The joy of doing anything you want, whenever you want more than makes up for a lower income.
4) You will likely be in a lower income tax bracket.
The great thing about making less money is that you'll be in a lower income tax bracket. Therefore, you'll have a relatively higher amount of disposable income for each dollar earned.
In 2024, not only is federal marginal income taxes lower than before the Tax Reform bill was passed, corporate tax rates and small business pass-through income tax has fallen to 21%. That said, Biden may be raising taxes again, if he holds onto power.
It felt wonderful going from a 39.6%, 35%, or 33% marginal income tax bracket (depending on my deductions and bonus) to a more reasonable 22% – 24% tax rate for a couple years.
Just imagine killing yourself at work for 70 hours a week to give over 50% of some of your income to a fiscally irresponsible government. No thank you. Such a high tax rate is why I'm thinking of re-retiring over the next couple of years.
Further, check out the long-term capital gains tax rates. Pretty reasonable nowadays for those of you who are earning passive income.
The double benefit of no longer having to work and paying less taxes will make you much happier. You'll actually start feeling like you're getting your money's worth.
If you are able to retire early, you should consider doing a Roth IRA conversion. This way, you'll potentially pay the least amount of taxes.
5) You will find many ways to make money.
If you retire with only part of your living expenses covered, logically you'll need to come up with a solution to cover the “income gap” required by your desired lifestyle.
Throughout our entire careers, we are always asking for more. Thus, in retirement it's often hard to accept less. But once we learn to control our egos, a bevy of new income earning opportunities materialize.
Since retiring, I've done consulting with four financial technology startup companies at an hourly rate 60% – 80% less than what I used to earn at my full-time job. I've taken on a new consulting job that pays over $100,000 in 2024.
There are endless number of side hustles to make supplemental retirement income. You just have to go out and do them if you need extra money.
I published a book teaching people how to negotiate a severance that generates ~$50,000 a year in passive income. Not bad. With layoffs increasing in 2023 and beyond, the book is selling even more.
I also published a traditional hard copy book with Penguin Random House called Buy This, Not That: How To Spend Your Way To Wealth And Freedom. The book became an instant Wall Street Journal bestseller that will generate royalties in the future.
What's great is that I love to write! And earning money doing what you love is wonderful.
Adventures In Uber Driving
In 2015, I really squashed my ego and spent time driving for Uber for $25 – $35 net an hour. One time I picked up an ex-client at his place in Pacific Heights. Perfect. I wanted to see if making a living driving was possible. It's hard, but doable.
The experience was good and driving added about $5,000 more gravy to my plate in 2015 and 2016 before I decided it wasn't worth it anymore.
If you don't have a car, not to worry. Recently, I hired some “Taskers” from TaskRabbit to help transport some furniture from a buddy's place to my house this past weekend. After paying a 35% (!) commission to TaskRabbit, the Taskers still made $54 an hour. You can be a dog walker or a pet sitter on Rover.
If you're allergic to all animals, don't worry. You can always sign up to be a greeter at Walmart or flip burgers at McDonald's while also eating free food. You're not too proud to work a minimum wage job are you?
If you are willing to swallow your pride and make much less than you once did, you'll have no problem making up the income gap between your covered expenses and your desired lifestyle. Running out of money in retirement isn't possible if you have your head on straight.
Went back to work in 2023-2024
After buying a new forever home in October 2023, I felt financial constraint. Suddenly, I had $150,000 less in passive retirement income since I sold stocks and bonds to buy the home with all cash.
But I didn't just sit there and do nothing. Instead, I put out a feeler in my newsletter and was introduced to a new fintech company that needed a head of content. Although I could only last in the job for four months, earning money then during my greatest time of need was vital.
If you feel financial strain in retirement, you will find a way to make more income.
6) You have more to offer than you think.
When I left finance, I thought I ‘d be done for good because I didn't think I had any transferable skills like a software engineer or electrician. When you're used to doing one thing for a large portion of your life, you begin to doubt your versatility. Every colleague I spoke to felt the same way, which is why so few ever leave.
Having transferable skills is overrated. All you really need is to be: 1) likable, 2) trustworthy, and 3) consistent. To make life easier, build a higher EQ. Anything technical can be learned on the job.
Think about how much you remember from high school and college. Not much! The CEOs earning $25 million a year aren't coding or rewiring your house. All they're doing is managing people, building business relationships, and being a good ambassador of the firm.
Given you're close to or already retired, what you've got more than most is experience. Experience cannot be taught or bought. Acquiring it takes time. Your experience is extremely valuable.
I never anticipated companies approaching me for online marketing consulting work. But at least eight firms have done so because since 2009, I've organically built my own platform into something significant. For any startup that wants to build its brand online, this is valuable experience.
7) Your existing assets have upside.
You might have a business that invites couples into your home to learn how to cook. Why not expand and shoot videos of the cooking sessions to sell online?
You might have rental property that hasn't been spruced up in a while. Perhaps if you did some minor remodeling, you could get a much higher rent.
Your investments might not be properly allocated based on the current state of the economy. Perhaps instead of having 50% of your assets in a Treasury bond yielding 1% in a bull market, you could double your money by allocating more to blue chip dividend stocks that pay more than a 2% yield and provide stronger capital appreciation.
Or perhaps instead of having 100% of your net worth in public equities, you should be more diversified in order to not get pummeled during the next downturn.
Who would have thought stocks and real estate would rocket higher in 2020 and 2021 during the heart of the pandemic? Sadly, the good times didn't last with the return of the bear market in 2022. However, net net, we're still up from since the pandemic began.
Future Investment Upside In Real Estate
I'm currently bullish on real estate in the heartland of America for the next decade due to positive demographic trends. The pandemic has certainly accelerated this demographic shift. As a result, I've been aggressively investing in real estate crowdfunding projects in Texas, Nebraska, Colorado, and Utah through real estate crowdfunding.
With lower valuations and higher rental yields, I strongly believe the trend is for more workers to work out of lower cost of living cities thanks to technology. Work-from-home is here to stay for a large percentage of the working population. I'm shooting for a 8% – 15% return on my investments as real estate is my favorite asset class to build long-term wealth.
It's rare that all of our assets are fully optimized. We can probably all do some fine-tuning to make our existing assets generate more income. It's just a matter of taking the time and expending the energy to make it happen. Don't let a steady paycheck make you comfortably numb!
Best Private Real Estate Platforms
If you're interested in investing in heartland real estate too, check out Fundrise, my favorite private real estate investing platform. Fundrise manages about $3 billion for over 350,000 investors. It is a Financial Samurai sponsor and Financial Samurai has invested over $280,000 in Fundrise so far.
Another private real estate platform to consider is CrowdStreet. Crowdstreet is a marketplace that mainly sources individual commercial real estate deals from various sponsors around the country. This way, you have more customization to build your own select private real estate portfolio.
Make sure you diversify your portfolio and do your due diligence on all the sponsors. Look up their track record, their management, and whether they have had any blowups before. Although CrowdStreet screens the deals, you have to do your screening as well.
8) You can always tap your pre-tax retirement accounts early.
If you so happen to retire before the age of 59.5, you can follow Rule 72(t) and withdraw money from your pre-tax retirement accounts penalty free provided that the holder take at least five “substantially equal periodic payments” (SEPPs) or until age 59.5, whichever is longer e.g. someone retiring at age 50 would have to take 10 SEPPs.
According to the IRS, the maximum you can borrow from your pre-tax retirement account such as a 401k is (1) the greater of $10,000 or 50% of your vested account balance, or (2) $50,000, whichever is less. For example, if a participant has an account balance of $40,000, the maximum amount that he or she can borrow from the account is $20,000.
Finally, you could simply pay a 10% early withdrawal penalty if you were absolutely desperate. Luckily, if you incur unreimbursed medical expenses that are greater than 10% of your adjusted gross income in that year, you are able to pay for them out of an IRA without incurring a penalty.
9) You can create your own destiny.
Let's say nobody at McDonald's is willing to hire you. Why not be your own boss? Startup costs are extremely low nowadays. All you've got to do is throw up a site for less than five bucks a month and you're literally in business.
After retiring, I wanted to take Financial Samurai more seriously. So I committed to writing at least three posts a week by spending 2-4 hours each morning before tennis.
I didn't know exactly how I was going to build the business, but I knew that if I kept on writing, opportunities would arise. After a full year of sticking to my plan and publishing my severance negotiation book, the traffic on this site grew as did its income.
My story is a classic case of “do what you love to do, and the money will follow.” To maximize profits, I should spend more time optimizing this site. But why bother when this site's income is already a bonus? I'm having too much fun to go back to a stressful work mindset.
The key is to just start your own site / business endeavor. You don't need to have all the variables pre-mapped because as you tinker, your variables will change. Overanalyzing a situation will make you do nothing.
10) Plenty of safety nets.
Let's say even with the use of free financial tools online to manage your net worth and forecast your retirement cash flow, you miscalculated how much you need in retirement.
For whatever reason, you're also unable to generate the required extra income to make up the shortfall. You're running out of money in retirement. Your savings are depleted, your passive income streams dry up, your business ideas all suck, and nobody likes you.
Not to worry! You've still got family, insurance, and the government to help out.
If you just can't make it on your own, there may be a family member who can lend a helping hand. If your parents are no longer living, perhaps you have a sister, brother, nephew, or niece who will provide shelter until you find work again. I know if anybody in my extended family needed help, I'd do so without question.
Finally, if you've just got nobody, the government has programs that can help you with food, employment and shelter. Social safety nets will grow under a Biden Presidency, not shrink. Running out of money in retirement declines under a Democratic president.
Don't Fear Running Out Of Money In Retirement
If you've been able to entertain legitimately the idea of retiring early, then you probably also have the intelligence, courage, and game plan to adapt to any unexpected changes that happen after retirement. Running out of money in retirement is highly unlikely.
Change is scary. But the fear in your head is almost always greater than the reality. Just make sure you have something you enjoy doing once you pull the ripcord. You might have so much free time you won't know what to do with yourself!
Related posts:
What Retirees Fear The Most Today And Their Top Financial Goals
The Need For Liquidity Is Overrated
The One Ingredient Necessary For Achieving Financial Independence
Recommendation To Build Wealth
Running out of money in retirement is unlikely if you track your wealth like a hawk. To do so, sign up for Empower, the web’s #1 free wealth management tool to get a better handle on your finances.
In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing.
I’ve been using Empower (previously Personal Capital) since 2012 and have seen my net worth skyrocket during this time thanks to better money management.
Build Wealth Through Real Estate
In addition to investing in stocks and bonds through your 401k, I recommend diversifying into real estate as well. Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eREITs. Fundrise has been around since 2012 and manages about $3 billion for over 500,000 investors. The platform invests primarily in residential and industrial real estate in the Sunbelt, where valuations are lower and yields are higher. For most people, investing in a eREIT is the easiest way to gain real estate exposure in a low volatile way.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with potentially higher growth due to job growth and demographic trends. You can build your own select real estate portfolio with CrowdStreet.
I've invested a total of $954,000 in real estate crowdfunding to diversify my net worth and earn income 100% passively. With ~$100,000 in passive income coming from my 18 investments, I'm not worried about running out of money in retirement.
Both platforms are long-time sponsors of Financial Samurai and Financial Samurai is a six-figure investor in Fundrise.
The Fear Of Running Out OF Money In Retirement is an FS original post. I've been “retired” since 2012. But the reality is, I've been working on FS for ~20-25 hours a week and exploring new interesting things since I left work.
“What if I accrued unexpected medical expenses? That’s what health care insurance is for.”
Please consider alternative medical care is not covered by insurance.
Alternative cancer treatments and treatments to correct the damage of chemo cost $160,000 out of pocket in 2021/2022.
We are retired the savings provided as planned.
Nice article. Was wondering if I could find someone who would agree that we have been brainwashed to work ourselves to death for retirement, then FEAR retirement. So true.
Thanks for the advice, made a lot of sense, and brought up ideas we had not really thought of.
Sound, sane, practical advice, without a “whats in it for me,” is much appreciated these days, especially now.
Thank you so much. I am struggling with my retirement decision because of fear of not having enough money which is objectively not a problem and your article really helped me put this in perspective. I’m lucky enough to have healthy SS payment plus pension with healthcare as well as private retirement savings (and have had a bit in Fundrise for a while and agree with you). Plus I have a side job of teaching at a university to supplement SS and pension so I don’t need to withdraw from retirement fund for a while. I’m very lucky and trying not to stress about this.
I was recently RIF’d. Single, 66, low amounts in retirement funds, I am utterly terrified. I was faithful to my workplace for far too long and was not remotely in the salary range apparently many, many people were. My retirement is a pittance and I have debt because I was scraping by. I have worked with my budget and I have nowhere near enough to retire without a struggle for every minute of every day. This article actually confirmed my fears instead of easing them. I’m fortunate that my house is paid for (although I need thousands in repairs now). My car is over 16 and struggling. With utilities, the other bills, feeding the dogs (one with special costs)…I have no choice and know I will have to work until death. Trying to save, I cancelled the guy who mows the lawn but now I have to buy a mower (with what?). So much for loyalty and hard work. I needed more time for more retirement to build. Instead I was used up and tossed out. The only choice is to work and work and work.
Sorry to hear about the RIF. Please apply for unemployment benefits, especially now as there is an extra $300 a week thanks to the pandemic relief stimulus.
Further, you are eligible to collect Social Security. I actually think age 66 is the ideal time to take Social Security. Please click the link and read my rational.
Please also talk to a friend or loved one about your issues. This pandemic has been difficult for so many of us.
Regards,
Sam
It’s a while since you posted this but I just had to say thank you for this article! I just found out yesterday that I am being laid off which at 62 means early retirement. I’m still terrified, because losing that safety net of a regular paycheck is scary, but your article has me feeling a little better.
My parents had $1M in an IRA in 2014. By 2018, my father passed away, and my mother is left with $400k in the IRA, a $70k unpaid tax bill we just found out about, and a $200k home equity loan. Some people may spend less in retirement, but others spend more than they expect. In two years, my father took out $500k from the IRA (hence the tax bill) and I just am at a loss for how their financial situation went from rather good to not so great in just four years of retirement. So your advice may work for some people, but it’s important to note others spend MORE in retirement than they do when working. They have more time on their hands and as long as they are in good health (or in the case of my father, bad health, with a terminal illness, and wanting to spend all that hard earned money before he died!) then you might end up spending more.
LOL!
Well, it appears that someone is having a serving of crow pie, hmmmmm?
I guess your investments weren’t so conservative after all, were they?
Enjoy going back to the daily grind.
You are the poster child for your DIRE movement. Folks who have FIRE’d successfully are doing just fine through the current market turmoil because they did invest conservatively. It’s weeded out those who were full of themselves, thinking they were so smart, they were qualified to give others financial advice.
https://www.marketwatch.com/story/an-expected-obliteration-of-financial-assets-threatens-to-kill-fire-movement-2018-12-18
Dogen himself is about to head back to work after seven years living the FIRE life so that he can “buffer the expected obliteration of my finances.”
His takeaway: Don’t allow FOMO over FIRE push you into making irrational decisions you may regret. This climate will punish you for that.
“If you are wise, you will embrace the realities of DIRE as the world heads south,” he said “Giving priority to caring for your family and delaying a super early retirement is the responsible thing to do.”
For sure! As the leader of The DIRE Movement, I’ve got to lead by example!
Always got to think several steps ahead BEFORE one’s finances get severely hit. Hope people are still hiring after I decide to apply in September 2019. That’s when my boy will be old enough to go to pre-school and I’ll have more time, whoo hoo!
Pretty cool MarketWatch feature of Financial Samurai though right? It’s great big media is paying attention.
Sam
FINALLY…someone speaks the truth! Don’t believe the hype america…corporate america and the fat cat executives wouldn’t have anyone to feed off of if everyone was FiRe.
Get out and enjoy life people.
According to this article you still have to work. Flipping burgers or a door greeter at Walmart. That’s not really retired now is it?
Glad you showed up to spread the greeter myth.
I enjoy reading about retirement on FinancialSamurai! I’ve visited the sight a number of times this year as I contemplate retirement. I’ve been through 3 financial planners that all say I don’t need to show up for work tomorrow. So, it’s very affirmative, but yet I still find myself second guessing my decision….why do I do this to myself? Here’s the data:
I’m 57 years old, want to retire in 1/19. My income is $235k/yr. I’ll receive a pension of $91k/yr and have $2M saved in my combined 401k and 457b. We have no debt. Home is paid and worth $900k, (2) 2015 cars paid off. A big retirement benefit I have is my health insurance premium is paid for with a $1000 family deductible. My wife has never worked, doesn’t qualify for SS. My 2 sons (34, 32) are very successful, growing their own families and no chance of them coming back on my payroll.
I made a budget and found my fixed monthly expenses (electric, gas, water, sewer, cell phones, cable TV, etc.) are $1200/mo. I added my annual bills (real-estate taxes, home/auto insurance, etc) to this for a total of $34k/yr before food/gas/entertainment. So, I’d like to think I could live on my pension, but for analysis purposes want to be comfortable pulling $100k/yr from my IRA once I turn 59 1/2. That would be a $180k/yr retirement….seems way more than I need, but I’m an Engineer by background and have analyzed this with every permutation of assumptions possible…driving the wife crazy!
So what the heck is wrong with me?….I can retire very confidently and comfortably right?
Ok, so the #’s are getting to me….4% draw on a $2M 401k is $80k, or up to $100k/yr would get me $!80-190k/yr retirement income.
Yeah me too! I own a large apt building in North Jersey. I’m bringing in about 25000 a month . The building is paid for last year but I still have high re tax bill. I’m 27 single and live rent free. I would like to retire cause I hate my teaching job but need health insurance. What should I do???
Retirement is a paradox. Leave your job and find something you are passionate about.
Great blog! Thanks to the author for generously sharing his knowledge.
“Indeed, money doesn’t buy happiness — but it can buy you time and experiences.”
Excellent point and experiences can make you happy. But if experiences and everything else money brings does not makes you happy, well in that case, as someone once famously said, money will at least help you be miserable in comfort…
That is a great article, calling out the retirement fear mongers for what they are.
I retired at 57 and have been spending about $2000/month, including unsubsidized Obamacare and rent. For those of us without substantial nest eggs that choose not to work, retirement simply requires tracking expenses and income. It can work, especially if you can delay drawing SS until age 70.
This is a good article and as an early retiree (age 53) I agree with all the points above. The only thing I’d change is one word in the first point. I’d change the word “will” to “may” when talking about how much money one will spend in retirement.
While it is true that one could cut back on certain luxuries and make do with less expensive options, I question why someone would want to retire early with that as part of their plan? After all, you only live once.
For my wife and I, we choose not to retire early until we had enough money where we could maintain our pre-retirement lifestyle (plus ramp up travel extensively). We do what we want, go where we want and eat where/what we want without any constraint as to cost because our retirement budget allows for that. While we could spend “a lot” less than we do, we just don’t see that as an attractive alternative. Having lived many years with very little money and now many years with enough money to do what we want, we would choose the latter option every day of the week.
So as someone who is walking down the retirement path, I’d recommed folks delay early retirement until they have the funds to support the kind of lifestyle they dream about when thinking early retirement. Stay an extra couple of years if that means your retirement years can be everything you dreamed they’d be. If you end up like us, you may even find they exceed every expectation you’ve ever had.
I agree. My wife and I could retire on rental and investment income. We are 32 and 33. BUT, we would have to live on ~50k a year and keep an eye on travel expenses/not buy a boat in the spring. Knowing that we don’t have to work is pretty powerful. We continue to work our flexible jobs because we enjoy it and it allows us a certain lifestyle. #leisuretimekills
This statement in the article is somewhere between misleading and inaccurate:
“If you so happen to retire before the age of 59.5, you can follow Rule 72(t) and withdraw money from your pre-tax retirement accounts penalty free provided that the holder take at least five “substantially equal periodic payments” (SEPPs).”
In order to be penalty free, the SEPPs must continue for a minimum of 5 years or until age 59.5, whichever is *longer*. So someone retiring at age 50 would have to take 10 SEPPs.
I recently signed up for the Financial Samurai. When I read your first article, it was apparent to me that we are likely kindred spirits.
Since leaving corporate America a couple years ago, I discovered a passion for the entertainment industry. To that end, I started my own successful voiceover business. And I also began pursuing an acting career….with some success. I have been cast as a principal actor in two feature films (one at the Sundance Film Festival), a few TV shows, several commercials, and hundreds of voiceover spots. So, there is life after or in “early retirement”. Starting a business is not an easy road, but being your own boss makes you work even harder to achieve your goals.
Prior to retirement, I was a big fan of the book “How to Retire Early…and live well….on less than a million dollars”.
Thanks for the input. I’m even considering starting my own blog….?
Hi Sam,
I’ve never responded to a blog in my life, but when my son who is trying to help me prepare for for retirement referred me to you I just couldn’t help but comment. the articles and advice is just great and reassuring, you speak in plain laymen’ s terns and form the heart. I have so much more confidence now from hearing you and all the other bloggers comments. As everyone knows this can be a very daunting endeavor to say the least. your site really provides us unknowing ones a great road map to follow. thanks to all of you in the pre- RT community for you input .
Glad you found some comfort! Here are a couple more articles you will enjoy reading:
Overcoming The One More Year Syndrome To Do Something New
Early Retirement Five Years Later: Reflections on Life After Work
Good luck! The fear in your mind is worse than reality.
Say ‘hi’ to your son for me.
I’m 56 and ready to retire as my husband is older and we want to be sure we have time to enjoy retirement together and travel for a few years before physical limitations could kick in.
My husband is 69, good health, and wants to work maybe one more year full-time and then find a part-time job paying around 25-30K. I make around 100K now (field is PR, large global company), full benefits. He makes around 65K and since he’s on my health plan at work, he only needs to have Medicare Part A. Combined pre-tax retirement assets are at around 1.4 million, 75K left on mortgage, no other debt.
My problem is I do not enjoy my job, dread getting up and going to work, but am TERRIFIED to quit a secure and well-paying position just because I don’t have a clue what would make me happy in retirement in terms of a hobby, part-time gig, non-profit work (w/a little pay perhaps) or even a lower-paying full-time gig, which I’m over-qualified for in most cases. And don’t want to go from one, high-paying, senior level corporate job with long hours, high stress, to another. And the low-stress part-time jobs I think I’d enjoy are becoming obsolete, like library assistant or law office receptionist.
My company re-organizes a lot, so could get laid off at any time, which would make the decision to retire for me. Am trying for age 60, but I’m not sure I can last that long.
I’m so glad I found your blog as it is giving me a lot to consider and think about.
I think it’s better for most people to work at something and stay occupied. I find I am most productive in general when my schedule is full with lots of things. Also given unlimited time to pursue hobbies they aren’t quite as fun as when they are escapes or distractions from work.
A lot of this advice seems oriented toward people who make six figures and plan to retire early. Most of them seem to work stressful jobs. I would want to quit that too. I work an easier job and like the people I work with, but I only make about $50k. My benefits however are really good and it feels like I get more vacation time than I can use, and my schedule is flexible which lets me pursue a part-time low-paying job that I enjoy and hobbies on the side.
I could see myself doing this for the rest of my life and enjoying myself. Is this wrong? Should I be pursuing higher income work that I don’t enjoy as much?
FinSam, Nice article, just what’s always on my mind. I left the corporate world in 2010 and moved to a modernized city in China (lower health care costs, lower monthly expenses, etc.). After six years of working at expenses level, and watching my US Assets grow, I’m looking for the right time for my wife, daughter and I to return to the US, and stay FI without having to work at all. Health Insurance was a major concern as I remember paying COBRA payments over $1000 a month at one point in the early 2000’s. Also worried about University costs 10 years from now, can my portfolio possibly grow faster than they do…
You see, living in China and not spending money is easy, but during the 2 months we come back to the US in the summer, watch me walk through Home Depot, WalMart or a Supermarket, I’m like the deer caught walking in the middle of the highway. All that stuff you can buy, and in one place.
Last year I worked (for myself, ha) every day of the week, what am I doing? I just can stop it and relax. That’s the worse trade off, work all day, save no money, no boss to blame. Well, I’ve sold the half of my business that was losing money and draining time, now I’ll only work 5 days a week… The decision to make: Should I ratchet myself to zero, then move back to the US, or just make a cold plunge to the no work, walk around WalMart without my wallet, enjoy the free time lifestyle?
Well thanks for listening… JG
Congrats on all of your success and your retirement. What age do you think early retirement is possible? How much should you have in your bank account / net worth before you consider this retirement? What about people with kids? Or women who typically spend more on things to just look societally acceptable as they get older (now women don’t HAVE to spend more on these things but are more likely to – guys get away with spending next to nothing.) I can’t remember – do you have a partner and do they earn any income?
This is SO good. Part of our motivation for taking a year off was to test out early retirement. Some things you just don’t know for sure until you try. Part of the test was to not save this year… and I hate it. Hate it. I had no idea that would be an issue. Our spending has dropped quite a bit too. We cook from scratch more instead of Costco pizza. And there are so many amazing things to do for free, that we don’t really have time for the more expensive entertainment. We also have time to learn to fix things ourselves. Which is part fun, part cost saving. Mr. Mt just bought a blow torch and learned to solder. He was really happy about his fun new tool, and I was happy we have a new outdoor faucet. =)
Thanks for the article. My wife and I will be retiring next year as the last of our debt is paid off(not including mortgages). We have 4k/month of profit from our properties and have a few online business ideas that we are getting going now for some additional income. My concern would not be running out of money, it would be not being able to qualify for a mortgage. I know we want a single family in the burbs and maybe a lake house.. Who knows maybe a 4th rental prop. By quitting too early are we shooting ourselves in the foot for future purchases?
Hi Sam,
You are right. It is overblown. I go to MSN and Yahoo Finance websites daily as a habit. I am disappointed that 25-35 year olds are financial advisers.
They cannot be.
They have not reached a stage in their life to support their old parents. They have absolutely no idea what it means to raise a child through HS or College.
But they quote numbers as to what Fidelity says an average 401K saving is? And write a few paragraphs around it.
Really?
When one’s parents cannot walk by themselves. When you child gets admission in Stanford, and you plan to pay for it.
No one who is financially prudent, enjoys the money and what it can buy. Will a person like me get happiness with a BMW 7 Series? If I could, I would have bought it long ago.
We belong to a breed, who does not enjoy what money can buy, but to feel financially free.
As you’d grow older one day, you’d realize that your parents’ medical needs, emotional needs (forces you to travel), your kids HS, College (Stanford or Harvard if they get admitted) – are the events you are planning for.
Its not the goal, but the means or the journey to be prepared – which makes us who we are – financially.
We can. Is the feeling I always want to have, when it comes to finances.
Regards.
Actually if your kid get admitted to Harvard or Stanford it would be to your advantage to have as little income and assets as possible. They have amazing financial aid. I think if your family makes less than 50k a year you pay nothing and they keep the fee at 10% of your household income for incomes between 50k and 250k. After that amount they don’t give you any aid and you have to pay full sticker price.
Hi David = Thanks for sharing those facts. There is a reason that folks who make > 250K do not feel rich. The system does not help them, and they are not making millions like the top rich. The system helps to a point, and people like us are crushed in between, to a point that we may even think about making less than we can! Perhaps, I should leave my job and take a less than 50K job while my kid is in college, to qualify so I could still come out better financially. It does not make sense. The upper middle class has to choose to become poorer, or be unfairly treated like rich.
interesting take re: upper middle class choose to be poorer vs. unfairly treated as rich. Sam, there may be an article hiding there – “Strategically reduce your income during specific life events”
Strategically, every parent who has a high schooler should look to lower their income to as close to $0 to get grants and aid. Morally, it’s up to you.
I wrote about the cost of Princeton University when I visited last year: https://www.financialsamurai.com/average-student-loan-debt-is-at-a-record-high-no-big-deal/
A lot of private schools really are very generous with lower income families. They try and charge the rack rate to wealthier students.
In this case you’d have to stop working a few years before they apply to school and be pretty sure they were going to college. Or you can just save more money and pay for it…
I went to a talk at my local university by a literature professor from Harvard. It was about different philosophies on when you should transfer your wealth to the next generation. Some cultures think you should give most away before you die and others think you should wait. He talked about how Shakespeare’s King Lear was a warning to not give away too much too soon. The best joke of the presentation was when he said that his employer was the best in the world at getting parents to part with their wealth for their children.
“There is a reason that folks who make > 250K do not feel rich. The system does not help them, and they are not making millions like the top rich. The system helps to a point, and people like us are crushed in between,…”
Seriously, no family in this country who is making 250k a year should feel “crushed”. Jeesh.
That’s not even a “first world problem”.
It’s a “Top 1.5% first world problem.” Cry me a river.
If you can’t make ends meet and save money on that income, it’s your own fault.
We make less than that, live very well, own 6 houses (4 outright and one at 80%), and have a 60+% savings rate on our after-tax income. And have a good-sized stock portfolio, too.
And if we had learned how to manage our savings and invest them properly when we were young, we would have at least double that.
Totally right. Good work on the 6 houses.
You may enjoy this post: https://www.financialsamurai.com/should-your-financial-adviser-be-smarter-and-wealthier-than-you/
The funny thing about financial freedom is that once you’ve got it, you ALSO start taking it for granted. Then you start wondering what else can your money buy, so you test the waters slowly about spending more than you normally would.
Very good post!
I also tend to overthink this aspect, but what happened in the few (not so few, actually) cases I’ve thrown myself into the void of uncertainty has always been happiness and more money.
We spend a life saving and investing and spending less than we earn than we’re scared by having our Nest Eggs depleted. It doesn’t make sense, that’s why people like JL Collins claim to withdraw 5-6% of his NW per year.
The two factors I see at work here that prevents a newcomer to be more aggressive are:
– you have a family, thus there are unpredictable expenses and you can’t go turbofrugal as you wish
– you’re scared that the job market won’t hire you back in case you’d need.
These fears are all true. And the job market may very well not hire you back. But the consulting opportunities in your field are MORE than you know. Lots of employers are much happier to hire consultants than FTimers.
I’ll have to check out JL Collins again. I read his stuff, and it was kinda dry, so I stopped. But will give it a go again as you are the 3rd person to mention him recently. Personal finance has to be entertaining for me, otherwise I’ll just nod off.
Here’s my take on the ideal withdrawal rate in retirement.
I have been struggling with the retirement decision. I have a defined benefit plan and can start taking reduced ss survivor benefits at 60. My employer will still pay half of my health insurance til I an eligible for Medicare at 65. I keep running the numbers and with a 3% withdrawal of my 401k, mutual fund and savings plus my dbp I can match my current gross less the difference in taxes and my annual retirement savings if I retire anytime after my 60th bday. My coworkers say I should put in the additional three years to max out my dbp. Your blog offers a different perspective. Thanks for the insight, I am good to go.
I enjoy when people who are saving little for retirement tell me that we might run out of money if we retire early. We’re very close to reaching financial independence (have 90% of funds). However we won’t pull the plug right away, unless works gets annoying, since we want to save for a few other goals (funds to help parents, funds in case we want to buy a house in the future). If we had to retire today we could, we’ll just move to a less expensive area and try to make some sort of income to cover the 10% of missing retirement funds.