Peak Earnings

I was chatting the other day with someone about my plan to retire early and they noted that if things go wrong that “You may never earn this much ever again.”

To which I frowned and then replied, “But that doesn’t matter.  I’ve NEVER spent my entire salary, so who cares if I fail and go back and earn less? I don’t.”

You see that is perhaps why I’m a LOT more relaxed about my plan to retire early than most people.  I’m not obsessing about the fact I’m currently at my peak earning potential in my life.  That I believe is the logical flaw that sucks in a LOT of people who fall into the one more year syndrome.  They erroneously assume you have to keep working since you can potentially never earn this much income again.  They confusing having to work again in the future with having to have the same income and/or career.

The issue comes down to this, even if things go horribly wrong and I have to go back to work for a while I am under no obligation to go back to my current career or pay range.  Honestly, I earn currently north of six figures and only spend a bit over $30K a year.  So in reality if I have to go back to work to save some more money my actually target is to earn more than $30K a year to allow some savings while paying the bills.  So any job that pays $31K or more will work.  It’s just a matter of how much do I want to save and when I quit again.

Of course this ignore the reality that we already have substantial assets and I would likely notice things going wrong sooner than later.  Thus in fact I won’t even need to earn more than $30K to pay the bills, the fact of the matter is earning ANYTHING would result in me saving some money.   So even some mindless minimum wage job at half time would be enough to help build up my savings again.  It would just be at a slower rate than I’m doing right now.

So yes, I’m currently riding my peak earnings towards my early retirement date and if that is the case, so be it.  I can give up the really high saving rate and roll the dice on my current plan.  Yes, I may lose and have to go back to work at some point doing something, but if I win I will have an additional 25 years of time to do things that interest me.   I know what I’m choosing.

So what about you?  Would you spend an extra year or two working at my current job to buffer against ever working again or take the risk of having to do some work in the future? Would you care if you worked again in the same field or not?

13 thoughts on “Peak Earnings”

  1. That’s how I feel too. Even if I took a job now north of 6-figures that is permanent (I do not want to..) it would more than pay what I need in reality….

    So if I just got a job even at half that rate (assuming taxes take a chunk), it would be fine.

  2. When I stopped working FT back in 2001 to work part-time instead, I was earning the most I ever earned on an annual basis. But I had also reduced my expenses to their lowest level 3 years earlier when I paid off my mortgage. I was living on about half my earnings.

    Even working part-time, I was still saving a good amount. And in 2007, I further reduced my weekly hours worked. I was basically sticking around, waiting for the value of my company stock to hit certain amount. In 2008, it hit that amount, enough to replace my meager salary when invested in a particular bond fund, so I retired. Not your ordinary OMY, but the stock value actually arrived more quickly than I had anticipated!

  3. Hi Tim,

    Like you my goal is early retirement but honestly I probably would work the extra year or two for that security buffer. I know that’s it’s unlikely but the last thing I’d want to do after 25 years of retirement is be forced to go flip burgers to pay for my dentures/roof/winter tires/etc…

  4. With your plan to have $5000/year income from your wife’s work, that’s the only part I question. Obviously you know the situation better than I do, I’m just wondering if she’ll want to end sooner because you’re not working and she’ll want more time with you. I don’t think you’ve written enough on the subject, its ready for a post.

    I wouldn’t want to go back to the current job. The joy of not caring means I could try my hand at fun jobs that pay poorly. I could learn to make great coffee, be a trades assistant, delivery man or whatever else sounds fun.

  5. I guess you have to weigh the cost of working one more year [or x months etc] with the cost of having to return to work when you are less able bodied and less employable.

    When we retire, we plan to exceed our current needs by a fair margin because my dh won’t likely ever be able to re-enter his profession, and the cost of re-entering mine is prohibitive both in time and cost of re-certifying. Also, if being able in body and mind now and I have this much desire to retire, how much will I want to go back in 30 years when I am much less able bodied? I don’t need that kind of stress, and I’d rather work another year or two to vastly reduce that likelihood. Everybody’s risk tolerance is different and even a 5% chance that I’d have to return to work is too much.

  6. Every year you work costs two years. One more year of work and one less year of retirement. Work if you want, I’ll take retirement. Been retired since 2004 age 38.

  7. Here’s my dilemma.

    I thought that I couldn’t stop working until 2023, which is the earliest that I can leave my job and tap into my pension. But I had one of those lightbulb-going-off-in-your-head moments when I realized that if I sold my house I could STOP. WORKING. RIGHT. NOW.

    Since than I’ve been miserable. I have a government job so it requires putting up with a mind-numbing amount of BS. I used to shrug it off because (a) I had great work life balance and (b) I take every 4th year off as a sabbatical year. But now that I know that I don’t have to be here at all, it’s so much harder to shrug it off. I have become, what organizational change management consultants label, an actively disengaged employee.

    Of course, if I sell my house, I will be a Financially Independent Homeless Person.

    I rather like that juxtaposition of words. “Financially independent” suggesting that one is rich while “homeless person” will get you profiled by the cops and more than likely thrown in jailed, or at least charged with some transgression that offends the WASP establishment that runs this city. But I digress….

    What to do? What to do?

    For now, I’m doing that typical Canadian thing of….thinking about it.

    I have two windows to make my decision: January 2018 (for tax reasons it only makes sense to quit at the beginning of a new tax year) or September 2020 (the deal is I have to work a full year after returning from a sabbatical year).

    What would you do?

  8. @FI3000 – I understand the feeling, but it all comes down to personal choice. Good luck.

    @Jay – Good point. I haven’t really gotten into that. Thanks for the post idea!

    @Rick – Oh, really good point. Interesting way to think about it.

    @veronica – It depends a bit on the numbers. When you say you will be FI once you sell the house, are you adjusting for the fact you would have to pay rent somewhere? If so, give it some serious thought. If you are in a inflated housing market and are willing to move outside of it you could bring in a big chunk of money. I would tend to say sell it. Of course, the other side of the coin is if you do leave, what are you going to do? Yes you can do nothing for a bit as a detox, but after you have to have some kind of meaning in your life. So, do you know what that is? If so, great. If not, take the time to sort that out now. Good luck on what ever you choose.

  9. I actually just wrote about this as a “golden handcuffs” issue. For me, it’s worth saving up more because I have a high income and I save a ton of money from my job. Even though I very likely don’t need the extra money, it’s hard to walk away from yet. Plus I generally like my job. My answer would be different if that’s not the case. I think you need to balance how much benefit you get by working vs how much you want to do something else. A few years more for a lot more security or future spending options is worth it to me but it depends on your situation and preferences.

  10. @veronica: you are living my life. I too am stuck in a mind numbing government job that pays me far too much money and gives me that so-called work life balance.
    It’s a demoralizing environment when you need three layers of approvals to get one idea through. But before it gets approved (if at all, i.e. next to never), you need to provide layers of papers to justify it till the cows come home. Lots of busy work in the public service. The claim working hard is no joke. It’s a lot of busy work.

    I have found contract work outside my regular job just so I can transition out. But I would like to find something full-time, or at the very least a 6 month contract. I am at the point of tossing away those golden handcuffs they call benefits and security, and saying ‘eff you, I’m outta here’. Ever hear of the Fuck off Fund

    My mortgage is paid off. I have no debt. I have a somewhat healthy investment portfolio. But I am cautious. And the question is can I do it? Can I jump ship? It’s scary.

    What to do? What to do?

  11. No matter how many years extra you work – 2 years, 10 years, 50 years – it is IMPOSSIBLE to avoid ALL future risk of running out of money. Things like extreme, costly health issues or even expensive lawsuits could exhaust ANY amount of savings.

    So what is left is the value of time versus the fool’s errand of trying to have a contingency plan for everything.

    My vote is to enjoy my time now instead of trying to be my own personal ultimate insurance provider.

  12. @Deb I bet you that you can do it.

    The fact that I’m thinking/talking about it suggests to me that the decision is already made on some level. I just have to get comfortable with pulling the trigger.

    This reminds me, years back, when I was thinking about becoming car-less. I spent a whole year thinking about it. Every time I used the car I thought to myself how I would do whatever activity I was using the car for without one. Most things I found an alternative. Some activities I gave up realizing that they weren’t that big a deal. Some parts of my life were rearranged to make them car-less friendly. Bottom line, when I did get rid of the car it was painless.

    I think I’m going through the same process now with selling the house/quitting work. So if it takes me a whole year to decide, so be it. It’ll be worth it if it makes the transition painless in the end.

    Good luck with your decision.


  13. @veronica, it’s like everything you say is what I have been thinking about for myself. I feel like I have decided as well, but it’s the idea of getting comfortable with pulling the trigger, as you say.

    I understand about the whole car thing. Although I do own a car, I try to drive it as little as possible so that I am not car-dependent.

    I also look for ways to reduce the expenses in my life, i.e. cutting cable – but that’s only ~$30/month.

    I’ve been trying so hard to find employment outside, so that I can transition out. Maybe I’m being unrealistic to think that I can find something full-time/permanent. Those are becoming less and less available.

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