Confidence to Pretire: Know Your Levers

“Will I run out of money?” is the most prominent question people start their pretirement planning with. After pondering it for several years myself, and as a member of a married couple, I think it is a flawed question. A much better and more liberating one is, “What are the many ways we can adapt our lives so that we always have more than enough?”

Having a plan for pretirement is comforting and exciting but it can also feel constraining.  Our Vanguard Personal Advisor Services plan is adaptable but it can also feel like driving on a freeway to reach an appointment in another city with someone important who is expecting you:  Will traffic slow me down?  Do I have enough gas?  Will I take the wrong exit and get lost?

I find that using retirement calculators, though handy, is similarly stressful.  Each one seems to be different and none are able to incorporate all of the many variables in a person or family’s life.  It’s not possible.  Retirement calculators and professional financial plans have their place in the toolkit but should be kept in perspective.  The biggest tool we have is the flexibility to adapt.

What is different about your life from ten years ago, major changes that you didn’t expect to happen?  Are you living in a new city?  Did you have more kids or no kids unexpectedly?  Are you divorced?  Married to someone you didn’t know ten years ago?  Managing an illness you didn’t expect?  In a new career?  Back in graduate school?  The point is, life is not fully predictable, which makes financial plans and retirement calculators of limited utility.

One adapts to change.  “Embracing Change” is one of those workplace cliches but it is a mandatory mind and skill set.  I’ve known people who hunker down and ignore change as a coping strategy but they often end up worse off.  Rather than hunkering down and ignoring change, it is usually more successful to keep one’s antennae in the air, making small adjustments as change is warranted rather than waiting to be forced to make really big changes that have been ignored.

Happily, as in any other sector of life, we can anticipate and embrace change by adapting our pretirement plans.  Those documents and calculators can give the impression that we only have a binary choice:  Work until we don’t have to work at all anymore or quit sooner and watch all the money run out. The problem is plans and calculators cannot encompass the nearly infinite variety of options a person has across the next 30-plus years of pretirement and retirement in a changing world.  

After years of reading enjoyable financial blogs and books, listening to podcasts and playing with partially-helpful calculators, I’ve mentally broken through to viewing pretirement as an adventure, not a calculation. Adaptation is its key rather than a huge portfolio. I am no longer as concerned about running out of money as I was when I started this journey of self-education and preparation.  Rather than the simplistic and limiting “Will I run out of money?” output, the question has evolved for me to “What levers can I pull and when that will give me the income I need to foster maximum self-determination and happiness in my life?”

Levers To Pull in Pretirement

What are some of the tools at our disposal to ensure that we don’t just sit in our chairs until suddenly, in total surprise, the portfolio fails and all the money runs out?  Here is a very partial list:

  1. Part-time work of some kind, either self-employed or working enjoyably for someone else, or maybe both at the same time.
  2. Run our house as a vacation rental.
  1. Rent out our house long-term and live somewhere else.  That would be a break-even proposition right now, given our mortgage, so there’s little value in doing it.  Someday, the economics might make more sense.
  1. Downsize our house.  Lots of people live in smaller and less-expensive condos and apartments than the house we live in.  This 103 year-old house has two sets of stairs and a big yard that we might tire of working on someday.  If we sell and downsize, buying or renting a less-expensive place to maintain, clean and operate, several points are added to the confidence level.
  1. Refinance the house.  This doesn’t make sense now but we might like to leverage our equity in the future.  I don’t love the idea of reverse mortgages but it’s another viable way for older people to finance retirement.
  2. Sell the house and buy a duplex, living in half.  Such a move could help neutralize one’s mortgage.
  3. Co-housing is a mostly-European concept but is also practiced in America.  It’s a way to share expenses and create a community of human relationships, both of which are important for a comfortable and happy life.  I plan to explore this topic more in future posts, just because it sounds interesting.
  4. Move to the country or a smaller town.  We find lots of ways to spend money enjoying our city.  If we had to, we could move to a cheaper area.  Lots of people do, which changes their economic picture.
  5. Move to a different country.  We have friends who live much of the year in Latin America and I had an uncle who hit hard times and moved to Costa Rica, where he could afford to get on with his life.  There are lots of expats living adventurous lives in less expensive countries.
  6. Simply reach age 70 before we take Social Security.  Taking Social Security at age 62, as most people do because they choose to or have to, provides a subsistence level benefit.  Waiting until 70 allows the payment to increase by 8% for each year one holds off.  This additional 8 years of compounding makes waiting until 70 a whole other proposition and can allow an above-average income in retirement all by itself.  For someone who has not saved, simply figuring out ways to literally buy time until age 70 could be the way to go for their retirement.
  7. Buy adequate insurance.  We have lots of it:  car insurance, home insurance, long term care insurance, term life insurance, liability insurance, even smart phone insurance.  Nothing can solve all financial problems and protect us from losing all of our assets in any eventuality but we can dramatically reduce the odds of and damage from such an event.
  8. Avoid debt.  Eliminating all debt beyond a low interest mortgage in pretirement gives a person flexibility to pull many other levers elsewhere.
  9. Allow for financial upsides.  So much of financial planning is anticipating and managing risks that are downsides.  What if good stuff happens, too?  The financial markets might perform better than expected.  None of the experts ever predicted the creation of Facebook, Amazon, Apple, Netflix or Google or, for that matter, any other company in the S&P 500. Other transformational companies will surely appear. Also, is your city growing?  If so, your house might go way up in value.  You might get an inheritance you didn’t expect.  Who knows?  I once worked with a woman who kept some stock in a small company she helped found decades before.  One day, she announced her retirement, completely unplanned, because her former partners had sold the business for big bucks.  We wanted to throw her a retirement party but she said, “Thanks but nah, I’m good. Bye-bye.”  The point is, optimism is no more expensive than pessimism.
  • The “Will I Run Out of Money?” retirement planning mindset is too fear-based and suffocating.  However, once you inventory all of the levers you have to pull that could prevent you from ever running out of money, you might very well find that spending your last dollar actually becomes much less likely to occur than making some of the many moves at your disposal to keep going. Maybe you’ll have less money after full-time work, as will we, perhaps, but having lots of money isn’t what makes us happy. Freedom and more time for greater fulfillment are better rewards.
  • What are some of your own levers?

    Literally no one is going to sit in their chair in pretirement, look at their financial plan and say to themselves, “This says I will run completely out of money in five years.  Gee, I guess I’m doomed to having the lights go off.”  No, you’ll get up out of your chair when you start to feel concerned and will pull some of your levers to adapt.

    The inevitable changes in life and our adaptations to them imply adventure to me.  I see my inventory of levers as forms of power to manage my life.  I also like the thought of employing them to benefit our own lives a lot more than the usual American work-full-time-until-you-can’t model that serves many others’ economic interests.  I figure, perhaps the best thing I can do for others whom I love is to first try to be happy and engaged with maximizing my own one life.

     

     

     

     

     

     

     

     

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    The Pretirement Swim Through the Asset Isles

    A lot of planning in life seems like figuring out how to reach the next island.  You aim for the right college, then the right job, then a series of jobs, marriage, buying a house, kids 1, 2, 3 if you have any, moving to a new city, pretirement – all are major island destinations in Life’s Archipelago.  At each stop, one climbs onto a new shore of experience and maturity, surveys the landscape and settles in for a spell.  Pretty soon, all prior change is digested and another island of achievement and growth beckons on the horizon.

     

    A lot of planning in life seems like figuring out how to reach the next island.  You aim for the right college, then the right job, then a series of jobs, marriage, buying a house, kids 1, 2, 3 if you have any, moving to a new city, pretirement – all are major island destinations in Life’s Archipelago.  At each stop, one climbs onto a new shore of experience and maturity, surveys the landscape and settles in for a spell.  Pretty soon, all prior change is digested and another island of achievement and growth beckons on the horizon.

    During the career phase of life the journey is sustained largely by a salary or two in the household.  It is rare for a person to enter pretirement and be able to instantly command an equivalent income to the salary that got them there.  Instead, they usually have to assess the islands of assets shimmering out in their future, which they’ve created during their career, and begin swimming to the shore of one, consuming what they need there, then swimming to the next one.

    These “Asset Islands” have a lot of variety and include retirement accounts at work, IRAs and Roth IRAs, taxable brokerage accounts, home equity, rental property, work in pretirement, a new business, annuities, pensions and Social Security.

    I’ve explained how my wife and I hacked our retirement accounts at work earlier than most people do to start our pretirement by using the little-known Rule of 55 .  She is presently dialing work down and enjoying a kind of self-determined sabbatical while she explores when and how to dial paid work back up again.  Vanguard Personal Advisor Services built our financial plan specifically with such periodic sabbaticals in mind on the way toward reaching the final island in the chain, a place we might call No-Work-Atoll (sorry if that’s a groaner).

    When she finds her next job she will probably earn less money than in her last role as a busy manager.  That’s possible for us to absorb, because anticipating much lower salaries in the future is also built into our plan, as is the number of years we think we’ll work at them.  The plan’s DNA is, obviously, what we perceive will be greater happiness due to having more time for travel and individual pursuits. Money is one of the means.

    We know how we want the next 3 years or so to go.  Beyond that, it’s progressively hazy.  We also know that Stuff Happens.  If a few years from now we want to dial work and compensation up or down, based on what we think will make us most happy at that time, we can adjust the plan to project what the consequences to our stash will be.  If we decide we’ll obtain maximum happiness from working until we drop, which would be a surprise, we can rebuild our plan that way instead.

    Though I’m working full-time, as I have for decades, she has swum to the first island, which is her Thrift Savings Account (TSP), and is shaking herself dry in the shade of a coconut tree, rejuvenating for an undetermined period with a nice fresh mango.  I have not decided when I’ll swim to my 403b Island, (the 401k for the non-profit sector) so my first goal is to reach the calendar year in which I turn 55.  At that point, I’ll have the option to leave and start consuming 403b Island if I want to.  After that, our Vanguard plan calls for generally spending down our taxable assets first, the rest of our 403bs and TSP, then our large IRAs and lastly our Roths.

    A major destination on our swims is to reach age 70, we hope, at which time we’ll step onto Maximum Social Security Isle, the Big Island we’ll never leave.  That’s a major, annuitized land mass in our future budget, projected to pay about 2/3 of our needs per year.  Rather than taking Social Security at 62 as most people choose or need to do, our plan will have allowed us to wait for as long as possible, which is to age 70, giving our Social Security “annuities” time to grow as bountiful as can be.

    It would take the savings equivalent of a couple of million dollars to generate two thirds of our income needs per year sustainably like maximum Social Security will.  Yes, I know the news media, looking for doom and gloom to stimulate and scare us, tries to make us believe Social Security will disappear.  Many FIRE enthusiast assume zero Social Security. However, there are several ways to save this system that millions of voters depend on, and even the worse case, informed scenarios envision only 25% cuts to payments, which our plan can accommodate.

    If you haven’t done it, it is comforting and worthwhile to go to the Social Security website and compare how much more you will receive each year if you do not take the payments at 62 but wait until you are 70.  It’s the equivalent of an investment that grows at 8% per year for those 8 years. Multiply that largest-possible annual amount by 25 and consider that annuity value in the millions of dollars an additional component of your future portfolio.  It’s pretty compelling to think this way!

    Even after reaching Maximum Social Security Isle and setting up a permanent camp, we can enjoy the benefits of day trips to other places of non-work, most prominently our Roth IRAs, which are sizeable now, are invested aggressively in 100% stock index funds, and still have 15 and 17 years, respectively to percolate and compound for my wife and me before our plan calls for starting to bring them online if we want or need to.  The nice thing about Roths versus Traditional IRAs is that we don’t ever have to pay any taxes when we tap them, nor are we forced to start spending them at age 70.5 to begin paying back deferred taxes through Required Minimum Distributions.  As noted before, our plan’s idea is to have paid down the Traditional IRAs and 403bs so that Required Minimum Distributions aren’t much of a hit.

    We might still have our low-interest mortgage until I’m age 79.  Or, we might sell before then and move to, well, an island somewhere.  Either way, this residence contains home equity that is building up every year, which is another asset island we can draw from, sooner or later.  Even if we stay in this house until we swim no more, we have the option of a reverse mortgage to keep the party going.  Or hire a property manager to rent it out.  Again, that’s so far out into the future that we don’t think about it much.

    As I said, our plan has us working some or a lot, as we choose, for many years to come.  If we really, really wanted to stop working right now, we probably could, but it would require some fairly major adjustments that we aren’t feeling motivated to make.  We could move to a lower cost of living area or even a different country as many, many American expatriates do quite comfortably, never to see a staff meeting again.

    Maybe my wife and I will continue to find new islands of full-time work that will inspire us to swim to them.  On the other hand, maybe we won’t, in which case we’re prepared with a plan to be able to thrive on some of the asset islands we’ve built up.  Either way, the swim will be an adventure we intend to be ready for.

    Pretirement Money Management: Why We Use Vanguard Personal Advisor Services

    Vanguard owns a planning subsidiary, called Vanguard Advisors, Inc.  It exists solely  to help Vanguard clients, like my wife and me.  Vanguard’s Personal Advisor Services (PAS) program runs the gamut from simply consulting with clients to create investment plans that clients implement themselves to completely managing a person’s portfolio with an assigned Vanguard Personal Advisor.  This is the route we have taken in pretirement, and we are happy we did.  Here are some key reasons why:

    The pretirement or FIRE community seems to be mostly a do-it-yourself culture, regarding personal finance.  I enjoy sharing notes and learning from the avid posters on Early-Retirement.org and the Bogleheads Forum.  Many of those folks are highly knowledgeable and skilled investors who know what they are doing.  These smart people know that, despite the Hollywood trope of the successful stock trader as a hyperactive workaholic, usually the best way to make money in the markets is to do…absolutely nothing.  Multiple studies show that investors do better when they create long-term plans, set an intelligent highly diversified asset allocation, then leave it all alone to compound.

    If you are a person who knows a lot about investing in stocks and bonds in all of their flavors and yet can set your asset allocation and then not touch it for one or two decades, then hats off to you.  That is not me, however.  The more I learn about the markets, the more I am tempted to fiddle with my asset allocation in an attempt to optimize my portfolio based on the latest book I’ve read or piece of knowledge I think I’ve learned, which is exactly how mistakes are made and sub-par investing results earned.

    I don’t want to make mistakes, which is one of the main reasons we’ve chosen to use a financial advisor to manage our assets.  However, we haven’t chosen just any advisor on the street, because the investing world is full of bad advice.  I’ll probably write multiple posts about my strong belief in The Vanguard Group, which is a coop  owned by its mutual fund shareholders, rather than owned by some rich family or a financial conglomerate that is primarily responsible to Wall Street.  No, Vanguard is responsible to my wife and me.  That makes it unique.  Thanks to its shareholder-focused model, it has also become the largest mutual fund company in the world.  I am in no way paid to say any of these favorable comments about Vanguard but, they are different. If you don’t already know about Vanguard, do yourself a favor and study them.

    Vanguard owns a planning subsidiary, called Vanguard Advisors, Inc.  It exists solely  to help Vanguard clients, like my wife and me.  Vanguard’s Personal Advisor Services (PAS) program runs the gamut from simply consulting with clients to create investment plans that clients implement themselves to completely managing a person’s portfolio with an assigned Vanguard Personal Advisor.  This is the route we have taken in pretirement and we are happy we did.  Here are some key reasons why:

    1. My investor psychology is simply different during this new Spending Phase.  When my wife and I were just working and saving, investing was pretty easy.  We each contributed automatically at our work places in funds that had really high allocations to stocks and then we basically did nothing but watch the balances grow.  My wife and I are now tiptoeing into the Spending Phase and it feels completely different to actually need to consume some of the milk our herd of mutual fund cows produces.  Earlier in this phase, I found myself checking balances constantly instead of annually, worrying more about daily swings in the market and, worst of all, making some modest changes in our portfolio due to my emotional reactions to global events, like elections or my perception of where the economy lies in the business cycle.  That’s certifiably dumb.  Even though I made no huge mistakes, I know I shouldn’t fiddle. I found that I was becoming an active investor, convincing myself that I was smart enough to time the markets here and there.  Turning over our assets to an objective manager, who is in regular consultation with us, made the fiddling stop, which is to say my potential for making mistakes was removed.  Our portfolio is a globally diversified, low cost stew of about 55% stock index funds and 45% bond index funds.
    2. Vanguard is smarter than me.  Vanguard spends millions and millions of dollars to provide its clients the optimal investing experience with regard to asset allocation, tax-efficiency, fees, projecting how much we can spend sustainably from our portfolio, and a myriad of other factors.  I could spend all of my free time becoming expert in those and many other disciplines, as many people on the above-mentioned forums seem to enjoy doing, yet I still wouldn’t be nearly as smart about any aspect of investing as Vanguard’s people and software.  I’m at least smart and humble enough to know that.
    3. Rebalancing is assured.  Rebalancing is not difficult to do.  I could, and did, rebalance our asset allocation before we hired our Vanguard advisor to do it for us.  We have all recently been living through one of the longest bull markets in history, when investing mistakes have actually been difficult to make.  But here’s the thing I have significant self-doubt about:  When our stock funds inevitably tank again when the business cycle changes, and when the economic news is terrible, with people losing their jobs, businesses imploding and our portfolio shrinking, will I be able to do the annual rebalance?  Meanwhile, as stocks are in retreat, our bond funds will likely remain content as a patch of flowers finally enjoying their day in the sun, maybe falling a little at first as panicked investors sell everything and move to cash, but then perhaps growing as the Fed cuts interest rates to stimulate lending to spur the ailing economy.  In that emotional environment, will I have the guts to do what I need to do, which is sell my bonds to buy more stocks?  Maybe.  I’ve invested right through sharp bear markets before and didn’t flinch that much.  However, we now have a lot invested and, as I said, we’re depending on it more.  I know myself well enough to question whether I would do what needs to be done when the tide next turns.  My Vanguard advisor, however, won’t hesitate to aim right for the jugular of those big fat happy bonds and trade them for scary, depressed stocks, right on schedule.  That certainty is worth paying him for.
    4. My wife is more included than ever before.  “I trust you to manage our money” was the blessing and curse of my days taking the lead financially while we built our nest egg.  She has saved up about a third of what we have, so it never felt quite right to me to make our financial decisions all on my own.  Now we have a friendly, patient and neutral third party in our discussions, whom she and I both respond well to, married couple that we are in all of the usual complications. It feels really good to be on the same page with her, finally.
    5. Help if something bad happens.  I also really like knowing that, if I am somehow incapacitated, Vanguard PAS will be calling her at least quarterly, as usual, to make sure the money she depends on is there for her.  Vice versa, too.
    6. We will know, with high confidence, exactly how much we can spend safely.  Vanguard Advisors has spent a lot of money to create its Dynamic Spending Model.  It is very powerful and very cool.  Using Monte Carlo analysis of all of the known investing history of every asset class that we own, our advisor will be able to tell us with some 95% confidence how much we can spend, sustainably, through age 100.  If things happen, as they do in life, we will adjust the plan, aiming to stay above the 85% confidence threshold. Our plan includes every input we want to add, such as how long we think we want to work full and part-time, how much we think we’ll earn, when we think we’ll buy cars next, some home renovations we want to do, when our mortgage gets paid off and when we think we’ll start taking Social Security.  Annually, our advisor will tell us how much we can safely spend for the coming year.  That amount will be indexed to inflation but won’t go up more than 5% or down more than 2.5% in any single year, which is totally manageable.  Doing what Vanguard’s Dynamic Spending Model tells us to do beats the heck out of arguing on the online DIY forums over whether the vaunted  “4% Rule” or some other % is sustainable or not, as seems to be the constant discussion online.  I don’t worry about that stuff anymore, which feels great.  Bonus News:  We get to spend significantly more than 4% with 95% confidence.  We will be able to live well in pretirement while sleeping well at night .
    7. The costs are pretty reasonable.  We pay .30% of the assets Vanguard manages for us, plus the normal super-low expense ratio of the underlying Vanguard mutual funds we own, for a total of approximately .4%.  Those numbers sound tiny but they have real impact over many years.  On the bright side, such management and advice service at most any other firm is going to cost 1 to 2% per year.  If planning wisdom says that an investor should aim to spend no more than 4 or 5% of their portfolio each year to sustain it, 1 – 2% is a huge, stupid bite out of one’s pretirement lifestyle to fork over to an advisor.  Vanguard’s PAS fees aren’t nothing but, in an investing world that is designed to separate you from your money through fees you don’t understand, Vanguard is on the side of the angels.  I’m happy to pay Vanguard’s relatively small fees for all of the service we get.
    8. I have stopped all fretting and fiddling with my portfolio, providing a lot of new time and mental space for other pursuits, like blogging!

    Pretirement Using the Rule of 55: Access the Stash before Age 59 1/2

    One little-known worm-hole in the financial universe is The Rule of 55.  It only applies to certain workplace retirement plans, like 401ks, 403bs and the Thrift Savings Account. The rule does not apply to IRAs or Roth IRAs.  It does not even apply to every single 401k plan and their equivalents.  You have to research your own employer’s plan’s rules to see if it’s in the fine print.  I have done that research for my wife’s plan and mine, which required calling the fund companies that administer our work place plans.  I did not find our in-house Benefits staff knowledgeable about it.  Thanks to my research, low and behold, The Rule of 55 applies to both of our plans, meaning that we can access our workplace retirement funds for pretirement in the year in which we turn 55 or later – if we separate from employment.

    If you’re a saver, you probably have a lot of your funds squirreled away in IRAs, a 401k, 403b or another tax-advantaged account.  If you have been contributing throughout your career, these funds likely comprise a large part of your nest egg.  There might be enough in your 401k to pay off your mortgage, buy the nicest BMW, or a second home. For cash!

    Of course, you’re not going to do those things with your hard-won “retirement accounts”, because they are intended to support you later in life.  For that reason and to incentivize your own protection, the retirement account rules are that you generally need to be aged 59 1/2 to access those funds without incurring a large 10% penalty, in addition to the usual income taxes.  Not many portfolios are large enough to withstand that kind of assault.

    However, there are various little-publicized yet legal caveats that allow an investor to access those funds earlier, if needed or wanted, without the 10% penalty.   Different plans allow for loans and they have provisions for educational or emergency purposes. There is also a method called the 72t Rule, which allows a person to tap his or her IRA before age 59 1/2 using “substantially equal periodic payments.”   Others have hacked the Traditional and Roth IRA rules so that they can withdraw the funds that they deposited five years earlier or more, using a “Backdoor Roth”.

    If any of those financial gymnastics appeal to you, you can Google around to learn about them.  I have used none of them, because they seem complicated and, regardless, I’m not here to provide anyone any financial advice whatsoever.  Though I have an avid appreciation for the benefits of smart personal finance, you should know that I was a history major in college.  Technically, I was an economic history major but that still does not qualify me to give you financial advice.

    What I can tell you is what we’ve done in our family, which is to access our stash earlier than 59 1/2 so that we can lean on it as a third leg of the stool along with our two careers.

    One little-known worm-hole in the financial universe is The Rule of 55.  It only applies to certain workplace retirement plans, like 401ks, 403bs and the Thrift Savings Account. The rule does not apply to IRAs or Roth IRAs.  It does not even apply to every single 401k plan and their equivalents.  You have to research your own employer’s plan’s rules to see if it’s in the fine print.  I have done that research for my wife’s plan and mine, which required calling the fund companies that administer our work place plans.  I did not find our in-house Benefits staff knowledgeable about it.  Thanks to my research, low and behold, The Rule of 55 applies to both of our plans, meaning that we can access our workplace retirement funds for pretirement in the year in which we turn 55 or later – if we separate from employment.

    Let’s break down that last critical, guiding phrase into two components.

    To access our workplace retirement funds penalty-free, we must have reached the calendar year in which we turn 55.  In other words, we can be 54! Happily, like me, my wife has been an avid saver, maximizing her pre-tax retirement account savings for years, enjoying the large benefits of tax-deferral, her employer match and the “catch-up provision” that allows a saver to save even more starting at age 50.  Also happily, she’s a little older than me.  So, when she decided to step down from her last position for a needed break at age 54 she qualified for The Rule of 55, because her 55th birthday was coming soon in that same calendar year.  Since her separation from employment, she’s been making withdrawals from her own retirement fund, penalty-free, to support her enjoyable sabbatical.  Regular income taxes will still be due, just as if she was working.

    As we joke about, I’m a mere pup at 52. I, too, will qualify for The Rule of 55 with my employer’s plan only 14 months from now.  How?  Thanks to my parents, my birthday is very late in the calendar year, meaning that the calendar year in which I turn 55 will begin just after I’ve turned 54, so I get nearly a twelve month head start on The Rule of 55.  Thank you Mom and Dad!

    The big catch is, of course, I would need to leave my employer, which I am not ready to do.  I’m enjoying my work and my salary and am still in full Benjamin-stacking mode.  Still, the peace of mind of knowing that my wife and I don’t have to wait until 59 1/2 to pretire, assuming the rest of our Vanguard plan checks out, as it does, is huge comfort for us.  My wife is taking a pretirement break while I work, because we choose to.

    Pretirement Motivation: The Bosses I’ve Had

    The longer I work, the more the quality of my relationship with my supervisor seems to count toward my job satisfaction.  I’ve had several managers in my life with whom I worked for significant stretches of time.  I was really fortunate with most of them but, two of them, well, hoo-wee!  They did more to plant me on the long path to pretirement freedom than anything else.  More later about what I learned from working for them, and getting away from them.  If it’s true that we learn the most from the challenging people in our lives, then I am grudgingly grateful for this pair’s abundant gifts to me.  Or something.

    The longer I work, the more the quality of my relationship with my supervisor seems to count toward my job satisfaction.  I’ve had several managers in my life with whom I worked for significant stretches of time.  I was really fortunate with most of them but, two of them, well, hoo-wee!  They did more to plant me on the long path to pretirement freedom than anything else.  More later about what I learned from working for them, and getting away from them.  If it’s true that we learn the most from the challenging people in our lives, then I am grudgingly grateful for this pair’s abundant gifts to me.  Or something.

    When I started out in my career, trying to get my first foothold on the rock face of the mountain climb ahead, I didn’t care to whom I reported.  “Just gimme the job and I’ll figure it out.”  In my twenties my attitude and best plan was that I wanted some kind of a coherent non-profit career.

    What a strange thing the manager/report relationship is, when you step back.  You’ve had maybe one or two interactions with the person in an unnatural competitive interview process.  The next day, that near-stranger holds a huge amount of power over your every day existence and entire professional future.

    Managers matter, too.  In college, one of my very best friends and I held part time jobs working at a golf club with a team of other students.  We took golf bags off carts, cleaned the clubs and kept the driving range stocked with balls.  Clearly, the job was not complicated or demanding, which was a perfect counterbalance to working so hard for good grades.

    One day, the assistant golf pro who managed us, an easy-going fellow, was suddenly gone. I never learned why.  In his place was a new guy, Wade, who was memorable to me only because he was wound so tight that it was comical to other people.  It was a golf course, not a hospital emergency room, but Wade was prickly, ambitious and clearly insecure in his new assistant golf pro role.  I don’t actually remember any words he ever uttered but, as with nearly everyone we humans encounter in life, I recall perfectly my inner reaction to him:  Poor Wade’s vibe was, “Saguaro Cactus.”

    In fairness, the assistant pro job was probably an important promotion for Wade, because this private club was selective, expensive and had an influential membership.  Wade sometimes manifested his innate stress by snapping at us about this or that inconsequential thing.  He caused the fun tone we had previously enjoyed to evaporate from our little team of eager college kids, who were mostly there to earn a few simple bucks without a lot hassle.

    I never had words with Wade but my friend did.  I don’t remember when Wade left my life or vice versa, but I happily and instantly erased him from my mind.  Years later, his name came up when I was talking with my good friend.  Right out of college this talented friend had started his own software company at the dawn of the dot.com era.  His company followed the classic tech startup script: Identify a niche, write some code, create a product, secure some sales, attract  venture capital, grow the staff to hundreds and, in a few years, sell the company.

    He still works full time for himself, though he probably doesn’t have to anymore.  I once asked my friend his motivation for starting his own companies, which always awed me as a person who gravitated to what I felt was the comfort and safety of large organizations.  He didn’t hesitate:

    “You remember that guy Wade?”

    It took me a beat before I did. “Oh, that guy.  Ha!  I wonder where he is now?”

    My friend said, “I don’t know, but I couldn’t see myself working for jerks like him the rest of my life.  That guy made me determined to never have a boss.”

    I, on the other hand, proceeded to have several bosses, and I take responsibility for my choices.  I always assumed I had no business having a business, and I think I was 100% right about that.   I also never saw myself as an S&P 500 corporate type, because corporations seemed to me dog-eat-dog environments, where the profit motive caused people to step on someone’s head while competing to climb the ladder.  Now that I have some career experience, I’m sure that’s mostly an incorrect Darwinian stereotype about major corporations.  Nor did I see myself in the military, though I really admire people I know who did go that route. I think I might have liked the Navy or Coast Guard, but that’s just my current self speaking to my earlier self, which is pointless.

    Rather, I distinctly decided during my senior year in college that I wanted to pursue my passion for trying to make a difference through some kind of public service, and that I’d probably do so working for a larger non-profit organization or government agency.  I assumed non-profit organizations filled with passionate people who worked to make a difference in the world were also places where I stood the best chance of being treated as a human being myself, rather than an expendable corporate cog, which seemed kind of important, too.

    I’m not qualified to judge corporate life with any accuracy but I think I was basically correct about non-profits.  I’ve generally been treated well and I feel that, frequently, I’ve enjoyed the satisfaction of having helped make a difference.  For the most part, I’ve reported to humane leaders who appreciated my contributions and who coached and rewarded me fairly.  I’ve tried to model my own behavior as a manager on what I learned from those fine leaders, some of whom remain mentors and even friends.

    I also learned a lot from surviving the more toxic leaders I reported to.  A couple of my many educational takeaways from them were:

    1. “Don’t wish for my boss to change.  I’m the one who needs to change something.”  When I have realized in the past that I’ve lost respect for my manager, I have learned that I am one who needs to act.  People above them have different relationships with them, so no one is likely going to act because I’m unhappy.  It was easy to remain stuck by fooling myself that “This is just how work and bosses are”.  That is simply not true.  I need to analyze the situation and calculate my happiness level in it then, if necessary, start sharpening my resume and cultivating my network.
    2. Life is too short to be unhappy at work.  Some of the most miserable people I have ever met address their unhappiness with work by trying to cement themselves in place more firmly.  Their hate for their jobs and unwillingness to solve it through taking action puts them in a posture of constant pain, which manifests in all kinds of toxic behaviors.  They seem to me like a child who thinks that if he holds his breath long enough, the person he’s angry at will pass out.  Not me.  I believe in monitoring my work happiness and remaining prepared to leave when the organization I once worked for has changed around me unsatisfactorily in some way.  I try hard to stay entirely positive and grateful about being employed but also committed to freeing myself to do something else, if needed.  We work in this modern world of few pensions, few protected unions, no contracts and “At-Will Employment.”  If there is to be any fairness at all in such a lopsided world, we have to approach the agreement to hold a job as a two-way street.

    Though my current situation is a good one, a big point of this blog is to help me plan for how to spend my time after I eventually retire the sword and want to do something else, as nearly everyone my age seems to be contemplating.  What I want is still a work in progress.  I hope through this blog that I can explore myself but also learn from others’ experiences in creatively tackling this common question stemming from a growing desire for more work freedom.  In other words, I want to start defining my pretirement.

    That exploration is still ahead of me but I realize after nearly three decades of working for organizations, during which I’ve had several significant supervisors, some of whom were wonderful to know and others whom I was relieved to flee, I think I am evolving to the place that my good friend started out with:  At some point, I want to be done with bosses.

    What about the bosses you’ve had?

    Pretirement Freedom

    As apt and evocative as the FIRE acronym is, the “Early Retirement” half of it is not our mindset.  Like lots of people, we find ourselves somewhere on the middle of the continuum of paid work-to-unpaid activity.  The best alternative word to “retirement” that I’ve encountered that more accurately describes what we’re about is “pretirement”*.  I look forward to learning and sharing in this blog our own and others’ unique journeys of pretirement.  I think the next enjoyable phase of life will feature dialing economic pursuits up, dialing them down and dialing them all around as we choose how we work.

    Have you noticed how the word “retirement” isn’t very useful?

    There’s nothing wrong with being retired, spending one’s days however one wishes.  My grandparents had an idyllic retirement in many ways.  They lived in the Georgia countryside, had a giant garden, drove huge American cars, went fishing whenever they wanted, and cooked fresh food nearly every day.  Their retired friends visited them, often unannounced and bearing gifts of produce, leading to spontaneous pea shelling or corn shucking sessions under the car port, where the most entertaining homespun story-telling imaginable occurred.  Best of all, they lavished time and attention on my brother and me as kids, taking us on summer road trips for weeks at a time.  When we were with them, the only time our grandparents weren’t spoiling us with their love and attention was when their soap operas came on, at which time we were hustled outside to play.

    The paradox is, they were “retired” but they were also busy.  Today, too, when people finally unchain themselves from paid work many of them soon say, “Wow, I thought I retired but I’ve never been so busy!”  They are volunteering, running errands, traveling, doing house projects, and visiting friends.

    Sounds pretty good, right?  So, what’s my problem with the word “retirement”?  In our work-oriented culture, it implies that one’s paid career is over and now the retiree is dedicated to full time leisure.  It’s binary:  You work until you don’t have to any more.  Earning is either happening full time or it’s never happening again.  On/Off.

    The problem is, On/Off is not what I observe in very many post-career people.  To be sure, some former workers are dedicated to unpaid leisure.  Bully for them, if they can afford it and if it’s what they choose.  Other people encounter health challenges or care-taking situations that require their focus.  Still, I observe a lot of post-career people doing a variety of activities, which is a mixture of leisure, service and paid.  A lucky few can’t tell the difference.

    People no longer working full time might still be at their traditional employer but on reduced hours, or consulting a bit, or driving for Lyft, or running an Airbnb.  I am secretly envious of the clerks down at the hardware store working a few hours per week and seeming to enjoy cheerfully welcoming customers and helping them find what they need.  When I visit REI I seek out the staff my age and ask if it’s fun to work there (yes, apparently, though it’s tempting to buy too many gadgets and clothes).

    Even my retired grandparents were economically active their whole lives, considering that they owned some commercial property in town and regularly sold timber from their land to the local paper mill.  My own parents are in their late 70s and are still engaged with part time work.  My dad experimented with full blown retirement at age 75 but soon discovered he liked being an engineer too much, so his former company gladly rehired him to continue designing machines 3 days per week.

    “Retirement” also doesn’t seem to fit the new generation of “FIRE” enthusiasts.  If you haven’t yet encountered the burgeoning FIRE community online, it consists of thousands of avid savers and investors aiming to decouple themselves from job-dependence just as soon as possible by becoming Financially-Independent/Early-Retired.

    People pursuing FIRE are committed to their goals and to living their lives intentionally to a degree that really impresses me.  The simple idea of FIRE is to leverage one’s job to create permanent financial security.  They limit debt and moderate consumption, using the resulting large marginal income to build an investment portfolio as quickly as possible that is sufficient to support their required spending forever.  Portfolios usually consist of simple, low-cost and entirely passive stock and bond index funds, though a few are building up rental real estate holdings or other businesses.

    Someone who can achieve financial independence in their 30s, 40s or 50s thanks to visionary goal setting and uncommon financial discipline is probably not the type of person who will gladly pivot easily to the hammock of full-time traditionally-conceived “retirement,” umbrella drink in hand.  No, these people are so productive that they probably can’t help but continue attracting earned money, only now these “FIREd” folks work creatively on their terms.  That’s what I want to do.

    I have been consuming the abundant and inspiring FIRE-related blogs, podcasts, books and other media for years now, so I count myself a fan and avid participant in this friendly, positive and supportive community.

    At age 52, I’m also getting very focused on acting on what I’ve learned.  Long before the FIRE acronym was coined and its online community emerged, my wife and I lived beneath our means, saving and investing 30-50% or more of our income starting in our 20s, even as we worked in the non-profit sector our whole careers.  We’ve never felt that we have sacrificed anything important to us.

    I lead us on this path, though my wife certainly does her part.  I was compelled to take advantage of the tax reductions and employer matches in our 403b plans (the 401k equivalent of the non-profit sector), which together amounted to a half-price sale on dollars.  There was nothing we really wanted to consume that made us want to dial back savings and turn away from the opportunity to save with the helpful tailwind from the government and our employers.  Rather, we always found little ways to increase our savings rate every year, little by little, until we maxed out all of our tax-advantaged savings vehicles, so we then started saving and investing after tax dollars.

    We simply directed our savings and employer matches automatically into stock index funds until our late 40s, when we started gradually adding a total bond index fund into the mix for some ballast to the stocks’ inherent volatility.

    We also bought and renovated a few old houses, one at a time as we lived in them, making some profit along the way.  We aren’t aggressive “fixers and flippers” but we discovered that we enjoy learning new skills to beautify our living space as a satisfying creative outlet.  In hindsight, renting places to live would have probably been the better choice from a purely-financial perspective but, then, we obviously do not live our lives in order to obtain maximum money.  After all, we’ve had non-profit careers and, as Jerry Seinfeld once said, “‘Non-profit’.  That does not sound like a good business model!”

    I enjoy my full-time job raising money for a wonderful organization that a lot of people rely on.  I still feel a strong sense of mission about my work in philanthropy. Still, like most everyone I know at my age, my wife and I are sort of looking to do something different.  The marginal returns of habitually expanding our careers feel to us to be diminishing a bit.  We’ve accomplished a lot of our career goals.  We’re not as willing to prioritize work over the rest of our lives.

    Some people I know, however, have identified things they want to do and are not waiting to do them.  One work friend, a model for our field and at the peak of his earning potential, now that his kids are out of college is dialing down his career in his late 50s to become a clown.  Literally.  He’s reduced his work hours and will attend clown school with a plan to entertain people in nursing homes.  He’ll be the best clown ever, too.

    I am not driven to be a clown but I celebrate his intention and want to model it.  Fortunately, I am inspired by the possibilities of freedom in the state of FIRE and its many avid practitioners.  I am making plans to leverage the reasonably strong financial position we’ve built over several decades, using the portfolio as a kind of 3rd salary to support some exploration and discovery that might be different than what I’ve been doing for years now.  I’ll look forward to chronicling the journey in future posts.  I want to learn how other people, like my clown friend, are making the leap, too, and to feature their unique experimentation here.

    My wife is taking a needed break this year from her career, which gets me back to the title of this blog:  Through our own longstanding FIRE habits, we realize we can work and live, pretty much as we choose to.  We can dial it up or we can dial it down.  Right now, I’m dialing work up and she’s dialing it down for a while, because we choose to.  If we choose something different later, we’re in a position to act.  For example, we plan to both dial it down in a few years for a gap year or so to travel internationally.  That goal is another adventure I want to chronicle here so we can learn about others’ rich experiences while traveling.

    As apt and evocative as the FIRE acronym is, the “Early Retirement” half of it is not our mindset.  Like lots of people, we find ourselves somewhere on the middle of the continuum of paid work-to-unpaid activity.  The best alternative word to “retirement” that I’ve encountered that more accurately describes what we’re about is “pretirement”*.  I look forward to learning and sharing in this blog our own and others’ unique journeys of pretirement.  I think the next enjoyable phase of life will feature dialing economic pursuits up, dialing them down and dialing them all around as we choose how we work.

    *The Wikipedia page for Pretirement describes “the emergence of a new working state, positioned between the traditional states of employment and retirement.”