Category Archives: Retirement

Early Retirement is Elitist

If you have been around the early retirement blogger community for a while you will notice we have a high number of members who were engineers. I initially thought that was a interesting fact as I drank the kool-aid of thinking anyone could retire early. Then after reading this article in the Atlantic, my realization that I was never middle class it hit me all over again. I have always been really am well off and honestly I like to think it is my own merit and skill but I should really should mention I was born with a significant leg up on everyone else. Yet the real truth of the matter is it extends farther than just me. The entire concept of early retirement in your thirties or forties is really a niche carve out mainly of the subset of the professional class (like engineers, lawyers and other high paying career tracks) who crave freedom more than anything else.

After all we personal finance bloggers continuously preach that it is all a matter of saving a high percentage of your take home pay and just about anyone can do it.  If you can save half that is great, but if you can push it even higher to saving 66% of your take home pay then your working career gets even shorter and starts to approach a mere 10 year career.

See by telling the story in terms of percentage we mask the little details like it a hell of a lot easier to save 50% of your tax home pay when you are making a combined household income greater than $100,000 per year (and in a lot of cases per person).  When in fact, the median family in Canada is only $70,330 per year (2015).  Now toss in the average house cost in Canada is $495,000 and suddenly saving 50% of the median income at that level gets a LOT harder when you could be spending around 40% of your income on just the mortgage payment.

I used to think I was somewhat noble for doing early retirement after all I was giving up the option to be really rich if I kept working…of course I conveniently ignored the fact I was already rich compared to most people just not multiple millions in the bank rich.

My kids for example are already better off than I was. I was the last of four kids so my parents decided to cut off my university funding after my first two years and co-signed a line of credit instead (not that I’m blaming my parents at all for that decision there were a lot of factors that lead to that decision).  But it did result in me owing $25,000 when I left university.  My kids haven’t got to high school and they already have over $40,000 each saved for their post secondary education. Not to mention the fact they now have two parents who work in the house and are available to help them with homework, attend school functions and otherwise support them in just about everything.

While I can’t predict if my own kids will ever go after FIRE themselves the reality is they would end up with a huge leg up over my own attempt as they will likely graduate post secondary education with zero debt.  Thus further enabling my kids to retire even earlier than I did if they also go after a professional  or other high paying career.

So the question becomes is FIRE really possible for everyone?  While in a pure theory sort of way, the answer is yes.  The reality is much different.  The difficulty of early retirement keeps getting higher the less income you make and the scale isn’t just linear.  For a family earning less than medium income the odds start to become vanishingly small.  You basically need to live in a low cost of living region with a higher than average local income to make it work.   So in the end I have to conclude FIRE is basically an elitist concept that is mainly limited to high income people and those that succeed at it will always be a minority as compared to the general population.

Do you think FIRE is elitist?  Why or why not?

Life After FIRE – One Year Review – Part III

I was considering stopping my one year review with the last post but then it occurred to me that I didn’t really get into something I feel is VERY important for retirees in general: self motivation.

The problem is summed up like this: your workplace typically provided you with lots of external motivation to do things.  If you don’t do your work: then you get called out on it and potentially put on a ‘plan’ to improve or face being fired from your job.  If you don’t complete something on time, you typically have to provide a reason why, a revised due date and again might lose your job if you keep doing it.  And due to this highly developed structure you typically don’t need to provide much self motivation to do your work.

But now imagine you don’t have that workplace any more and in fact there is no one checking in on your progress or lack there of on anything.  So if you don’t do anything on a project and just play video games all week and at the end of it you might feel guilty but there often is no initial consequence for not working on the project.  All your external motivation is gone in retirement for the most part and suddenly you have to use all internal motivation on everything which isn’t a muscle that you have developed all that much prior to leaving your workplace.

So this can be a very significant problem for any retiree and after a time it is easy to fall into a series of bad habits and then feel mildly depressed about the entire retirement lifestyle.  While I personally didn’t get that bad about things I did underestimate how significant this can be during my first year off.

You see I’ve always been one of those people that thought they had a decent amount of self motivation.  I didn’t typically need reminders at work about much of anything and I was proactive on keeping people informed on changes of status of projects I was working on.  But I did forget for a while the often quoted cautionary tale for engineers: what happens when you give an engineer an unlimited project budget and no deadline? They never finish the project because they keep improving it.

Thus I fell into a trap of endless research on my next book and kept delaying starting on writing it.  It was only over the summer when I finally told myself this was getting nuts did I start with writing out a table of contents and then start writing every weekday to actually get some progress done.  And so far that has helped, I can have weeks where I fall off the wagon a bit and not get as much done as I should but overall I’m much further ahead then I had been for the last four months or so.

So this is your cautionary tale for any retiree: do not underestimate how important self motivation is for getting anything done.  Feel free to use any and all tricks you need to keep it going: offer yourself rewards for getting things done, tell others about your deadlines so they can help remind you to keep working, sign up for specific training or appointments in the future to help drive you to get something done.  What ever you need, feel free to use it.

In the end, if you want to get anything big done you are going to need to figure out how to manage your own internal motivation.  And this is key because one of the major components of long term happiness is working towards a project you find meaningful.  You need to accomplish something that you care about and it doesn’t matter what that project is (running a race, being a better parent, helping out in your community) you need self motivation to get there.

This concludes this series of posts on my one year of FIRE.  Of course, please  continue ask any questions you have in the comments.

Life After FIRE – One Year Review – Part II

Well welcome to part II of my series on my one year of early retirement.  Today, we get into some of the nuts of bolts of how this entire idea of early retirement works: let’s talk about the money.

So in the interest of a proper review let’s look at where I was at during the end of Sept 2017.

  • Investments: $595,030
  • Net Worth:$990,030
  • Spending Previous 12 months (less renovations):$35,305

Meanwhile, my end of August 2018 numbers were:

  • Investments: $619,850 (increase of 4.2%)
  • Net Worth:$1,014,850 (increase of 2.5%)
  • Spending Previous 12 months :$35,814 (increase of 1.4%)

Of course keep in mind I was officially on vacation for my first six weeks of early retirement and getting paid and still saving so the comparison to exactly one year ago is a bit off.  But overall the investments and net worth went up even with the choppy stock market of the last  12 months.  Of course I was sort of hoping to see my spending go down a bit not up during the first year but such is life.

A good part of our family’s income for the year was my wife’s daycare business which she has chosen to keep doing for a few more years (roughly $8000 for the year).  Then the rest came from cash we had pre-saved for the year and dividend income (roughly $10,000).

Now according to my last net worth update I’ve exceeded my goal for the year as our money in from investment gains and income was 108% of our spending. This was even with our spending being a bit higher than predicted and our investment returns did lower than expected. Of course this is somewhat of an illusion because in fact it is only because without my tax refund of just under $4000 this won’t have occurred, with out that I would have been under my target. And of course going forward that large of a tax refund isn’t like to happen again as it was somewhat a left over from my previous job. So am I screwed going forward? Not really.

Why? Well there are two items that come into play. First the low investment returns, had those been closer to my expected long term average of 4.5% we would have still covered our spending without the tax refund. I purposely left some slack in the numbers to cover this very scenario. The second reason I’m not really screw going forward is I’m expecting some additional income in the future.

The two main increasing sources of income will be when I actually like publish a book or two (or take on some other ‘fun’ work which pays) and our Child Tax Benefit is set to swell dramatically in 2019 (estimates have it increasing from around $340/month to closer to $1000/month).  Also we have stopped adding money to our kids’ RESP account as of this summer so know we can actually use our current Child Tax Benefit for our kids day to day expenses.  We stopped adding money to the RESP because we broke our $80,000 target (the actual account balance is closer to $80,500 if you want to know).  Of course a concern would be changing of the Federal government in the 2019 election, which even if they did roll things back to the old program amount we would still get around $730/month.

So going forward we should definitely have more income coming in even if our spending stays at the current level.  Later this year I’ll take some cash from my RRSP account to fill up our high interest savings account which we use to help ‘pay’ ourselves an income twice a month.  I use automatic transfers twice a month to simulate a paycheque.

So short term, I really don’t expect any problems for the next year or two.  But with the long term we do have a potential issue that if our investments continue to perform below our planned long term average for the next five years my wife’s full retirement might get delayed.  Yet even if that did occur we do have options like me doing some part time work to help boost savings and/or downsizing the house or any of my other back up plans.

The point is we will deal with that if it occurs in the future.  Life never goes according the plan.  You just adjust as you go which is honestly how we go to this point in our lives.  We adjust as things happened.

Any questions on the money side of things?  Or any other questions you would like to know about? If so, please ask in the comments.