It’s soon coming up to two years since I checked out of the rat race, a good time to take stock and look at what I’ve learned. This is particularly long. I did think about breaking it over several posts, but what the hell, it is a long story. I’ve collected a few pointers to some things I’ve heard people being interested in over the years as a table of contents
- become an opportunist
- A lot of early retirement is about reducing living costs
- Retirement is a different phase of life. Making it like work without the work is not the only choice you can make
- Not having a regular income is scary
- what it feels like to live off ‘drawdown’
- The extra win a 40% tax payer gets from pension saving is much higher than that for a basic rate taxpayer
- Work and all that
- The distinction between work and not work is peculiar to the non financially independent
- Grow within yourself – or else
- The tl;dr summary
Overview
First off, I am not using any of my retirement savings – my pension remains deferred along with my linked AVC savings.What I am using now to live off is saved cash, though I also have income from ISA savings but these are reinvested. If I were to draw it now, my pension is notably above my annual running costs.
Three things contributed to this –
getting the mortgage monkey off my back
Paying off my mortgage eliminated much of the static drain of housing from my finances.It was a long job paying down the debt over twenty years. It’s not always a wise thing to do for an early retiree – anybody who is retiring before they can access their pension savings may want to consider keeping their mortgage and saving into pension savings with the aim of paying off their mortgage with the pension commencement lump sum. I didn’t do that because I was reactive and fearful. It’s a mistake that’s fail-safe – I live off less at the moment but will have more later on. It so happens that I was able to save the maximum worth saving into my pension savings and pay down the mortgage, after which I tossed what would have gone into the mortgage into ISA savings because I also saved money by
shooting the consumerism monkey
Breaking the cycle of mindless consumerism has helped me no end. Initially I did it because I was desperate to win freedom from The Man and needed to save every pound I could. I’m not going to bullshit, the first six months are hard. I never borrowed to buy consumer crap, but I wasn’t above buying Stuff because I thought it would make me happy. Only after about a year did I come to the awful realisation that
Stuff very rarely makes me happy
Now the validity of this varies across one’s life-cycle. When starting out, and you have very little, of course Stuff makes you happy, from you first iPad/kettle/car/bed/chair whatever. It’s later on, particularly in the upgrade cycle where the wheels come off the whole spending money on Stuff thing. People started to realise this, so there are some classes of Stuff that are deliberately engineered to become worthless or hard to use over time – the way Apple manages IOS to depreciate their historic gear is a classic example. Other examples are cloud services. I am using a 10-year old copy of Quicken because it does what I want it to – the rental versions introduced after 2004 have become worthless in the meantime.
I say very rarely because some Stuff does make me happy. The key to achieving a decent balance with consumerism is to know why you are buying something, and to evaluate its likely impact on your life without the spurious trappings of advertising. One of the simple rules to help with that is to wait 7 days before buying it – the initial sugar rush of ‘this will change my life’ decays over a couple of days, leaving me with a clearer head.
Mr Money Mustache has an entertaining read on this topic, titled recovering from the Pack Rat years. I came to a very similar conclusion to him independently – all the way down to no longer having a broadcast-TV capable viewing system. The only area I disagree is that I have no smartphone, because a smartphone is an absolutely shit digital camera and equally crap audio recorder1, and it seems I am more demanding of these functions than usual. However, all my camera and recording gear was bought before 2007 – I am still the limitation there. In the event that my skills and creativity become honed to get better results out of better gear and I can turn that into profit I will consider it.
savouring the moment
It took a long time to realise this, and it wasn’t the result of any conscious decision. Perhaps it’s the result of having more time – when I was working I was always chasing after being somewhere else, in space or in time. I don’t know why, maybe it’s the ‘anywhere but here’ of a drone, I spent too much life energy wanting what I didn’t have rather than wanting what I did have. I need time to appreciate what I do have, and maybe it was time I didn’t have before I retired.
There’s a corollary to this, which is
become an opportunist as a retiree. It’s cheaper, and more fun
Many of the costs associated with life are to do with controlling your world. As a wage-slave you must control your world to fit in with the strictures of your job. You have to make sure you are somewhere for specific times. Even if you are a freelancer you have to work a certain amount of the time unless you are financially independent. You have to arrange a lot of things to be just so, you have to take your holidays within so many days, often people have to match their availability with the requirements of other people’s jobs and childcare etc.
All of this takes optionality out of your life so you need to control your non-work life to fit in, and control costs money. If you have to be at work you have to pay someone to look after your children in the day. You have to pay commuting costs. And so on.
It takes a long time to realise that there are other ways of living, that are far less structured if you let go of the inner control freak that had to fit in with work. Roll with opportunities.
A lot of early retirement is about reducing living costs
As we go through the many decades of a working life, we tend to see some lifestyle creep. We are social animals, we spend money on things that other people do because no man is an island, entire of itself. Others may spend money on things that really matter to them, and often we end up apeing these or hankering after stuff because, well, if it’s valued by others it must be good.
In the first couple of decades of working this social pressure is stronger – as time goes by there are more differences in the way people live their lives and this pressure is less. In my twenties most of my peers lived similar lives, often flatsharing or in digs. As time went on they paired up, then many had kids. The differences in living styles diverged more, and these divergences add up, reducing the social pressure. I should add that being childfree means I don’t know about child-related social pressure, though I suspect this is high. The way people work themselves up about schools indicates this child-related peer pressure is of a quite stupendous nature!
The key to early retirement is to look at how you are living and to ask yourself how much of this spending matters to me or people dear to me, how much does it enhance my quality of life? Then stick with that, and start to eliminate the rest, and simplify things. Complexity begets cost and dependencies. And take a wider systems approach to your living – how far you are living from work, how big a house you have.
For instance I took the shaft from housing early on, so I am in a lower grade of housing than most of my ex-colleagues. There is an indirect upside to that – my house is smaller than theirs, easier to heat, less to decorate and furnish, and less council tax to pay. Year on year on year, and that adds up over time. Some of this shows in the result – I discharged my mortgage in 20 years despite buying at a stupid time, taking a hit on a relationship breakup and buying with an endowment. My ex-colleagues often still had big mortgages on their big houses as they entered their 50s. Obviously I don’t get to spread myself out over such a wide area. Unlike them, housing is not the largest capital ‘asset’ I have.
A lot of consumer complexity I seem to have avoided by a combination of luck and the fact there were fewer temptations in my formative years. ERE has a nice wiki article on this for people who want to design their lifestyle by intent rather than by happenstance. Like starting to save for retirement, ideally you try and design your life consciously by the end of your twenties, because a lot of big lifestyle costs start to get baked in to your life after that.
You can reduce living costs further by ignoring differences that don’t really matter to you. MMM has a great rant on Cure Yourself of Tiny details Exaggeration Syndrome which saves me the bother of explaining that. It often staggers me, when talking to people who in theory would like to retire early how much they cling to things like being able to run new cars every three years and regular high-cost things like the fast and furious skiing holidays of the cubicle slave. As for golf – it seems designed to be the nemesis of economy, with high course fees, club fees and equipment costs plus the depredations of the 19th hole.
Now if they have sat back and asked themselves does this really matter to them and the answer is yes, then of course that’s intentional living and to be saluted. But often if you scratch a little harder it is because they fear the loss of status. The obvious question is who are they living for, because the Joneses don’t really give a shit. But to ask it would be unkind – people can only shift their world-view at a certain speed, and it’s always better if that shift comes from within.
Retirement is a different phase of life. Making it like work without the work is not the only choice you can make.
Retirement is a different phase of life. The tradeoffs are dramatically different. If you want your retired life to look exactly like your working life but without the work, then fine, you gotta do what you gotta do, generally working to 65. You will be able to broadly maintain the same spending, provided you have paid down your house. But you owe it to yourself to at least challenge the assumption and examine alternatives. Many people at The Firm have this pathology – they’ve been there so long they struggle to imagine anything other than the same life they have, but without the work. Some indeed fear that subtracting work will subtract meaning from their lives. These types of people should never stop work – because Nature abhors a vacuum. It goes along with the general thread that flexibility and openness to new ways of doing things is important to retiring early successfully.
Not having a regular income is scary
Two years ago I went from being a wage-slave with a steady income to being some odd combination of drawdown retiree and investor, I’m not even an honest pensioner because I’m not drawing a pension. I am doing what any early (pre-55) retiree has to do for some of the time. It’s impossible to overstate how different that feels to having a regular income. People who have been self-employed or otherwise handle a variable income will find that transition easier, but I find it scary.
The problem is that the job of squaring the financial circle is easy to define to a wage-slave. Keep at it, don’t do anything to lose your job without lining up another, and don’t spend more than you earn, with some notable exceptions (housing and education). Summed up pithily by the distillation of my parents’ wisdom
Don’t spend more than you earn, son
The definition is easy, though the implementation isn’t. What you earn in a year is a number, written on your P60, and what you spend is a number too, in my case available from Quicken. Take one from the other, and Wilkins Micawber is your man
So the Ermine checks in his computer, phone and staff card and all of a sudden the inflow stops. Now I got a year’s salary as redundancy, so the intuitive answer to ‘how long to go before I have to draw my pension’ is one year, but all of a sudden everything gets more complex.
For starters I had to toss a significant part of the redundancy into my pension AVCs to avoid paying tax on it. I also want to fill an ISA’s worth every year, so doing that for a couple of years means all of a sudden I am left with less than the minimum full-time wage for a couple of years. And at the moment I don’t use any of the income on my savings; the reason for that is that at the moment I cannot turn a useful return on cash savings so it makes sense to run my cash reserves down and reinvest the dividends from the ISA.
Many aspects of finances are easier for a wage slave, with their steady flow of income. For instance I have to hold much higher cash reserves against the unexpected – fortunately this is held with NS&I so at least it doesn’t particularly depreciate over time. If you have a regular income you don’t need to do that, so simply need enough slack in the system to be able to cut back if something untoward happens like the roof leaking. You simply cut down your partying until you’ve paid the unexpected bills down. I have to hold the cash to address these hits up front.
But the hardest part of having no annual income is that it’s hard to qualify what a sustainable annual spend would be. If you ask Wilkins Micawber he’ll shoot back
expenditure > income, result misery, wrong way, do not enter, turn back now, don’t go there bud
I don’t have any of my retirement capital available to me, as I am deferring my pension to raise its annual value once paid. So my AVC savings are also quarantined by that. In one limiting case I am okay now – if I drew my pension now my spending is lower than the net amount, and that also excludes any value from my AVCs or existing share portfolio. The job of bridging this gap has also been made harder by some of the opportunities that the Chancellor has made – the greater flexibility of taking a DC pension pretty much mandates saving about a personal allowance-worth of DC pension because HMRC toss a fifth of it in the pot and the new increased ISA allowance needs filling up.
Fortunately I have a shedload of The Firm’s shares purchased under Sharesave and Share Incentive Programme, all unwrapped. These can get sold over time and the proceeds bulk up the ISA. Once I get hold of the pension the I will have the AVC funds to shove into ISA savings over a few years. In the long run my ISA savings will be about half the capital value behind my pension which is RPI linked to a point. The ISAs job is to fight inflation in the medium to long term.
what it feels like to live off ‘drawdown’
So I’m easy with the long term strategy. But obviously, I am running down the cash at the moment. And that’s not a good feeling. I fought against the depreciation of my net worth intially after I retired, before coming to the conclusion that wasn’t possible. At the moment it turns out that it was possible – this is a zero based networth chart, excluding the value of my house and any pension associated savings.
It looks okay, but I’d also have to deflate this by inflation, two years of inflation roughly knocks 10% off the real value. I don’t have an excel version of this so I used the shear function in Photoshop to drop the right hand side by about 10%2
What is, however, happening is that the balance is shifting from cash to equities, which looks in Quicken like a madcap 20-something’s asset allocation. Although the equity allocation is getting on for three-quarters equities, this also explains the strange image of networth increasing while drawing down some of the capital. I need to remember the good men in white coats (hat tip to Monevator) who rock up just in the nick of time with their ‘this too will pass’ ring and remind me that this is illusory.
Observe the increase, and increasing volatility with time. That, my friend, is what the stock market does to you. In exchange for a little bit of real return, it gives you a hellaciously rough ride with a massive noise signal to bamboozle any attempt at rational thought. Remember there isn’t any income in here3, there is some spending, and the equity ratio is increasing. And stock markets have been on a tear for the last few years, only last year people were asking ‘I don’t know what the ‘king hell we’re doing up here mate‘. Twice…
Three-quarters of my current asset allocation is in equities, and in a bad year, equities can fall by 50%. In a different world it could look like this
This sort of roller-coaster ride is what awaits anyone with a DC pension who does not annuitise any part of their capital on retirement or shift to some safer asset class. In particular, the good people who the Pensions Minister exhorted to enter drawdown rather than go buy a Lamborghini are going to be facing this. Yes, they don’t end up getting a fixed crap income of 5% of their capital, non RPI linked. But they have to accept that bronco ride. And every time an IFA asks Joe Public about his risk profile the answer comes back that he hates risk. I am in the stratospheric nutcase end of the risk tolerance (because my risk tolerance is balanced by the bond-like nature of a final salary pension)
And I don’t like it. Am I drawing down at a sustainable rate? The 4% SWR is an article of faith, and that faith is easy to come by at the moment, as the good doc said. It was probably harder to find in 2009. If it mattered greatly, I’d have to ‘fess up that I have no idea to that sustainable question. However, since I have a pension that is greater than my rate of spend waiting, plus an AVC fund that is in cash and larger than my ISA I will probably get away with it.
The takeaway is that living off a large equity based capital allocation feels like a very rough ride indeed, and let’s face it, I’ve only have the upside of that ride. For someone who has drawn a steady salary for 30 years, that is not a peaceful feeling. I have other options, and perhaps I am more fearful than others, but it would totally creep me out to rely on that4. I don’t know what the answer to that is, but I am happy to say I don’t need to find out, because I will get some of that steady income back.
I am probably underspending
It’s not a common observation in the PF universe, but I am probably running below my financial capacity. I had expected to reach the zero cash line between a year and a year and a half out (that would have been end of 2013), and to be drawing my pension already or imminently. I am six months into extra time. The reason for the underspending is because I extrapolated from spending at work, and it was also cluttered a little bit by spending on establishing a business.
Now if you’re going to err in retirement, err on the underspending side. However, da yoof is not totally wrong with YOLO and at some stage I need to review this. Even after two years, I am still in the recovery phase from a pretty rough experience of the last couple of years of work. So this spending pattern fits my needs at the moment.
The extra win a 40% tax payer gets from pension saving is counterintuitively high, compared with the BRT win.
We all know the pack drill. When you save £100, you put it somewhere and you can’t spend that £100. Easy – that’s pretty much how your ISA works, and almost all non-pension saving. The deal with pensions and taxation is different – you save some amount x and you don’t earn £100 net. The net effect is the same – you have £100 a month less to spend on beer/chocolate/paying off your mortgage.
It’s very counterintuitive, but forego £100 of net income and you get to save £166 in a pension. That’s because the £100 has been taxed at 40%, ie your net £100 is 60% of the gross amount, so the taxman gives you back 40/60 ie 2/3 of the amount you have foregone. Everybody thinks oh it’s only 40%, but in truth of the amount you can forego it is 66% – for every £100 net you don’t earn, you save £166 in your pension, a 66% bump up compared to if you earn it and bung it in an ISA.
Compare that with the basic rate taxpayer – they forego £100 and it’s made up to £125. Okay, it’s still a 25% boost but it’s nowhere near the boost the HR taxpayer gets. It was a little bit better at The Firm because they used salary sacrifice, so the BRT payer gets 32% (20% tax and 12% NI) so for every £100 he doesn’t earn he gets £47 added, which is nearly twice as much.
I hit this hard, and I started investing in a Global:FTSE100 50:50 fund from March 2009 on, so I got a 20% uplift in my AVCs from the stock market and the depreciation of the pound. But even so, I look back at my AVC savings and wonder how the bloody hell did I manage to save a year and a half gross salary in pension AVCs in three years. And fill my ISA each year and save a third of a year’s gross from net savings into NS&I ILSCs. I still don’t really understand it, but that tax relief did a lot of the heavy lifting, and the stock market played its part too, in that lift from March 2009.
This is why old gits at the end of their working lives can karate-chop the much vaunted magic of compound interest and bust its ass. They’re more likely to be higher rate taxpayers, they have more chance of having paid down their mortgage and they are a hell of a lot closer to getting the win so they are much more motivated because of the effect of hyperbolic discounting – loads of wedge in five years is a damn sight more interesting than loads of wedge in four decades. I saved a quarter of the total value of my work pension in the last three years, which is roughly an eighth of my time there.
Work
I retired early because I was stressed and became increasingly out of sync with the way work was being run. I am still recovering from that. It is only recently that I can reliably hear what is good in music, and there’s still a while to go before I will have recovered this to what I once had. In a myriad of small ways I am still reminded that I pushed my luck flying into the storm for three years, and indeed to carry on after I had been off sick. To a large extent the emotional centre shut down, and what was left was fearful; I retained most analytical capacity. Emotion gets a lot of flack in the PF world, and people draft long lists of ways it leads us astray. And yet it relates us to others of our kind, it gives us the hope to carry on against adversity.
Emotion is the chief source of all becoming-conscious. There can be no transforming of darkness into light and of apathy into movement without emotion.
Carl Jung Psychological Aspects of the Mother Archetype (1938)
The old boy had a point, try living with that function shattered – you attempt to strike lights and they sputter and flare out, never overcoming the steely greyness of undifferentiated days. The analytical capacity did refine my investing behaviour and this was easier with a spanner jammed into the works of some of the biases. But it’s no fun, because I would see how to do things but not why. Motivating yourself when you know how but not why is sheer effort of will, not inspiration.
It’s also interesting that ERE observed
On an anecdotal note, I vastly prefer less stress to the low level stress that is present in most modern life. The stress I feel now is the “original” stress of a boat about to crash. Not the continuous stress of not being able to meet deadline after deadline.
Because the world of work changed slowly, I did not realise the low-level stress increasing at work with the gamification of the workplace. That sort of continuous stress is bad because the response of increased heart rate and adrenaline has nowhere to go, it doesn’t help. Whereas when some stupid twat got pissed up at lunchtime last year and came round a corner fishtailing on my side of the road then yes, that is stressful when you see a dark Jag incoming at 12 o’clock. But it did some good, because it did the time-dilation thing and I was able to see what was happening, brake and pull way into the side, turning a head-on crash into a glancing blow. That is one of the correct uses of stress, because it did some good in improving clarity of thought and reactions for a short while where it matters.
ERE is much younger and fitter than I am, so if he noticed that it took a while to adapt then it isn’t surprising that the results of the work stress is still washing out of my system. I crossed the finish line exhausted and no reserve capacity. I didn’t expect to be still recovering two years on and to still have significantly impaired capabilities but it is better to roll with it than fight it. It’s also a warning call for all those ‘one more year to comfort‘ merchants. You will almost always be financially better off working for another year. But you may be running out of other resources that occasionally matter more. And everybody is running out of time, 24 hours in every day.
The two years since retiring has given me some space to see where the working world and I drifted apart. The obvious reason is a combination of the 2008/9 financial crisis and changes in the way The Firm was being run. The obvious reason is not always the whole reason.
I’ve avoided the vexatious issue of making money myself, largely because I don’t want to enter the world of wage-slavery and I have no desire to fill in an income tax return for lousy itty-bitty amounts. However I haven’t avoided directed action of the sort that sometimes goes under the title of work, I’ve taken these to add value to other people’s projects. And I look at them, and I realise that there was one big thing that I missed where I was diverging from the world of work at The Firm.
I am a generalist, and worse than that the sort that Firestarter identifies as both Renaissance Man and dilettante 🙂 This runs terribly against the way work is going, which is specialising, knowing more and more about less and less. This applies particularly to IT, which was the way The Firm was going.
As they drove their way down the value chain they became much more prescriptive in structures and methodology. As a research facility it was a very wide-ranging operation for much of my career but as this was moved to become an outsourcing jobbing shop it narrowed. Specialisation is an aspect of the IT contract world too, it would be unfair to blame The Firm purely for this. For illustration, as a generalist since retiring I have programmed in assembler, JAL, Python, Perl, PHP, C and VB. I code in whatever suits the application and the platform. Raspberry Pi? That’ll be Python then. Arduino – C, Pic microcontrollers? MPASM or JAL. The Firm was trying to make everybody code in Java, and only Java. I am dilettante in seven languages and not master of one 😉 In my last project for the London 2012 project I also didn’t focus in IT – CATV was from legacy electronics and system design. Indeed, at work the one thing I didn’t do much of was Java, that policy was instigated just before I got onto the 2012 Olympics project…
When I retired I had thought that if I were to sell time or skills for money it would be in the field of engineering. But it isn’t likely, because I am running against the tide with that generalisation.
After leaving work I built wooden shelters and fixed tractors, I’ve designed an irrigation system (the design part is being able to operate through winter, it’s not just going down to B&Q and buying up a load of hozelock connectors). I’ve produced and edited video. I have electronics design facilities, but this is at a fairly modest level. I have produced some IoT environmental sensors and the like. But only as part of a system design to do something else. This may point the way in future – don’t do stuff, do capabilities and services. I’m not going to be hidebound about it – a lot of the problem with Stuff is regulation; small fry can get away with a lot and if you get bigger you can afford the overhead. No small business became a big one by following all the rules…
Where I’ve actually made money, is photography and sound recording. I’ve managed to work a little bit harder than my ISA, though these guys will pay me in dollars so I have to wait until the exchange rate is better. Unfortunately this is impaired because the stress nearly wiped out any creativity I had.
But without this playing with fantasy no creative work has ever yet come to birth (Carl Jung, the psychology of individuation)
I actually see some of the recovery in the improved popularity and profitability of the photos I take…
The fact that I can tell the agency to pay me when I’m good and ready means I am safe from the Internet Retirement Police – I haven’t done that for the money and it forms no part of my financial planning. But even as a cold-turkey retiree I haven’t totally avoided the four-letter w word. But I didn’t seek it out, indeed the problem I have with work is the whole bad power play of it. Perhaps I will have to reconsider this and view that I have achieved manumission through financial independence as opposed to retiring. It’s not really catchy though, is it?
The thing that runs through these things is that there isn’t any single thread running through them, and if there is something running through them then it was only incidentally engineering, indeed much of it wasn’t even left-brain stuff.
I am probably unemployable now because of this hopeless sprawling generalisation, it’s just not what the modern workplace wants. The reason for this is the concentration of power to capital and the improved communications. Companies can concentrate the work to hyper-specialists, the distribute the results to the proletariat virtually cost-free. Look at the setup at Google. These will eventually become brains in a jar with multiple redundant high capacity optical fibre data connections. You ain’t seen nothin’ yet with Google Glass. Google employees can’t cook for themselves or do their own washing, which is why Mama Google sees to it to fix their household requirements. Free food, free laundry, free haircuts. free cars. If you want to see where white collar work is going, look at the leading edge – it’ll be most places in 10-20 years. Hyper specialisation has a dark side. I am nowhere near bright enough to work for Google. Nor are many of my fellow Britons. Specialisation is where it’s at, but it will need fewer and fewer people and require more and more of those it does need.
Generalists work well in a small scale – there are often opportunities to use knowledge across unrelated fields in small-company operations. They are more flexible, there isn’t a structure of existing practice to adapt, and they can get away with short-term fixes for temporary requirements as long as they trust their generalists of they have seen enough track record. But I have no desire to work full-time as a general fixer. The 21st century technical workplace is no place for a generalist Ermine, because of this culture shift towards specialisation and narrow but deep skillsets. But then that’s the whole point of becoming financially independent. I don’t have to give a damn.
The distinction between work and not work is peculiar to the financially dependent
because you’re financially dependent (usually on a job). So you have to do what The Man tells you, and that division is clear-cut and non-negotiable. Contractors and the self-employed soften this distinction a bit. It seems to easily end up with work taking over their life, however, because work is still not elective, it is when they work that is more elective than someone working for The Man. Not that they work.
Philip Greenspun posted an interesting article on early retirement way back in 2006. I used to read his site as photo.net just before the the turn of the Millennium, the empty dreams of a cubicle slave dreaming of making shitloads of money on the stock market from the dotcom boom and then making pin money shooting picture and travelling, those heady days when Momentum was King. And that’s when I really enjoyed work. Anyway, I came across his article, and the comments as he was seeking feedback on the article. Although I’m normally of the opinion comparisons are vexatious, part of the insight from the article does come from the differences and the similarities between two different journeys.
I’m nowhere near as rich as Greenspun and I earned less. There’s at least one order of magnitude in it, probably two, possibly more. This is not something that particularly bothers me, I don’t have the desire for flying. However, I can see it gives you more options in the US, where distances are much greater and people disperse over a wider area; Greenspuns college pals are more important to him (Even for couples/people with kids they get a little more important to people after most have gone through the baby/children tunnel of 30s to early 50s)
He is/was single and is about 10 years younger than me. He had to take special measures to address the social life issues that I just don’t have – he’s clearly given it some thought and does it well. He’s more outgoing that I am. In particular his angle on that being single has a very strong effect on where you choose to retire to have a decent chance of stimulating human interaction is quite an eye-opener. I didn’t appreciate there was this difference, but what he says makes sense. A single early retiree (~40) probably does need more money than someone who has a partner. However, since the single fellow probably doesn’t have kids he probably does have more money, so there’s some auto-compensation.
Time management (pinched directly from Greenspun)
How much work does the average college student get done? Almost none. Yet the same person, injected into a corporate bureaucracy, becomes a reasonably effective worker. Why? Most people have terrible time management skills. This limitation is of no consequence in public school. The school tells you where to sit and what to do and when, at least for six hours per day. This limitation is of no consequence at most jobs. The employer tells the workers where to sit and what to do and when, at least for eight hours per day.
If you’re retired, however, nobody tells you how to organize your life. If you have goals that you’d like to accomplish and your time management skills are poor, you might end up disappointed in yourself.
Now an ermine isn’t an enormous fan of the self-help industry, though I’m happy to accept it helps a lot of people and occasionally indulge. There’s a very heavy thread of self-discipline and virtual Calvinism in the personal-finance world, but it is nothing to the apotheosis achieved by some of the American writers – Steve Pavlina is over 1000 times more effective than I could ever be, and it’s not like I disagree with the efficacy of what he says. But to me seems me as a joyless way of living – life needs dynamic contrast and empty spaces for reflection and understanding. I didn’t stop work to reproduce the problem again in a different place. Each to their own.
However, Greenspun has a point. I found it helpful to take the time out in the morning to centre and actually write down what I wanted to achieve that day. The idea is roughly pinched from a book The Artist’s Way at Work, which I bought way back as a cubicle slave looking for a way out. It didn’t work for me, I produced trash because I was trying to make money which shuts down the playful creative side. Presumably people who work in the creative arts don’t have this problem, or the fact they start off with a damn sight more talent makes up for it. It was in the box of to get rid of books until I read How to get Unstuck, and figured I should reread it from a point other than desperation.
That rough orientation is generally enough for me. though I have used the basic tools of project management for longer projects, such as the open source Gantt Project, and of course Excel has its place in the finance area. It’s not mandatory to leave all the useful tools untouched when you stop work.
Work, cold turkey, rentierism, aristocracy and the Ermine
I went cold turkey, or so I thought, because the word work became associated with a traumatic experience. This made the transition easier. And unwittingly, I overlooked some of the positive aspects of making stuff happen in the world for pecuniary reward, because it was associated with having to suck up to stupid crap. The two aren’t inherently linked, provided you don’t need the money. The money has some value – it is an estimation and recognition of exchanged worth.
And I’m left with a load of inconsistencies and conflicting attitudes because I have simply buried this subject and left it, so it is still linked with outdated psychological forms. To live intentionally I need to dig this out, untangle the knots and live my values.
The trouble is I have spent 30 years being motivated to work for money because Bad Shit would happen if I didn’t. That’s a terrible way to motivate anybody – it’s the Bad Shit that puts the slave into cubicle slave5
for a man is rich in proportion to the number of things which he can afford to let alone
Thoreau, Walden, delivering a message for the 1% that they will not hear
And now, curiously, I have the edge on a significant part of the 1% – who all earn far more than I did. But they spend more, whereas I am within spitting distance of becoming a rentier. Much of the secret, as Thoreau observed above, is to reduce spending. If that works for you, of course!
So the whole reason I worked for money has gone. The empty space still speaks – I cannot relate to some of the ways the retired ‘work’. I don’t volunteer. I don’t understand it, and at some level I find the concept demeaning, of working for nothing . Maybe I am just a bad person, maybe I will chill on that in time, though I doubt it. There’s still the echo of work being a four-letter word, and ending up in a situation where other people tell me what to do still reminds me of that fateful February day in 2009 in a one to one where I realised that the Ermine was out of luck, out of time and out of options but needed to suck it up for long enough to buy freedom. I have added value to other people’s projects without being paid, because of this
Still, it’s hard to suddenly turn off an educated brain.
What I really want to avoid is an ongoing commitment. It’s far more satisfying to start in the morning, get some tools together and wrangle something into a more useful form and then get out.
That favours Stuff and kind of runs counter to the Don’t. Do. Stuff argument, but most of the objections are lifted when other people have the problem of buying the Stuff and storing it, and all I have to do is show up sometime and turn it into a working system.
So there are loads of inconsistencies and conundrums in my approach to work. None of them are urgent, though resolving and drawing the sting from the psychological hangups is probably worth the investment of time. I want to live intentionally, and not shadowboxing the psychic wreckage of past injuries is part of that goal.
Grow – or begin to die within
You have more opportunity for self-development and individuation when you own your time, but you have to engage and work at it. Many people really hate that – they feel they are adults and have it all sorted, that was the whole point of the first 20 or 30 years of their life. Individuation involves being more reflective, writing about what you feel or even things like the Artist’s way journaling. There’s often not enough time to fit that sort of thing into a busy working life, so it easily gets put on hold. It takes time to unstick that.
Your vision will become clear only when you look into your heart … Who looks outside, dreams. Who looks inside, awakens.
I’d really like to say I had done well there, but progress is slower than I had expected. I have started, and of course the process of individuation does not have an explicit end target. Journey, not a destination etc. There’s no point in wasting too much time trying to describe this because it’s very different for different people. Just remember that
the day you stop growing is the day you start to die.
William S Burroughs, Junky
Observation shows that one of the big ways people go wrong when they retire is they stop growing, because most of their challenge was at work. Too much TV and too little curiosity kills the cat…
Luck plays a big part in the story
More than I had realised, and while it’s easy to point at the things that went wrong far more went right. I had rotten luck in two big areas at the beginning and at the end of my career – I bought a house at a terrible time, and I lost the last eight years of earnings by retiring early. I’ve had good luck in other areas – joining a final salary pension and getting nearly 24 years out of the design 30 in it is a large stroke of luck as is never losing a job since getting my first one6. And if I was going to bail out 8 years early, then being a higher-rate taxpayer and recognising the open goal of the stock market next to me and taking the opportunity was another piece of luck – if I started now my ISA and my AVC savings would both be a lot lower after five years, assuming we aren’t about to enter the mother of all bull markets 😉
The tl;dr version
Looking back after two years I have spent about half of what I expected, and largely got away with retiring early. I am still not drawing on my retirement savings. I have a decent measure of what running costs are in retirement, I am probably underspending and have space to adjust upwards. Cutting costs helps greatly – it helped me save more when working and reduces the drawdown when retired.
I have learned that being a generalist is also very bad for the way work is going, particularly in big firms. And the recovery from getting knocked out of the workplace by stress has progressed but by no means finished – even after two years.
Retiring early is good -I can allow the generalised interests that were becoming toxic in the workplace free rein, and they help me live cheaper than would otherwise be the case because of the various reasons skecthed out by ERE
Flexibility and openness to new ways of doing things seems key to retiring early successfully.
- a smartphone has no optical zoom, and is preset for a good first-person shot of a human-sized object about 2-5m away. Which is what most people want and makes great Facebook posts. Audio recording seems to be stuck in mono and doesn’t take external microphones. Again, great for facebook video. To make a smartphone into a good camera or audio recorder, you end up with a great big smartphone which is stupid as a smartphone ↩
- which is obviously a linear interpolation of an exponential function, but it’s okay with such a short period and relatively modest inflation. ↩
- ]this isn’t strictly true, as the HYP ISA pays a shade under 5% dividend and there is some unknown amount of capital appreciation too. But I don’t spend this ↩
- This is a peculiarity of the short timescale of my DC savings of less than a business cycle. If my savings were the result of a typical DC pension this concern would be softened because I would have entered the market over many decades, the 4-5% SWR would have greater validity because I would have a better idea of what the true value of my savings really was after saving across many business cycles ↩
- I use the Americanism cubicle slave because it is common shorthand in the personal finance world. However, the enslavement is just as much for anyone who has to sell their time or skills for money to keep Bad Shit from happening in their life – whether they’re a office worker, a CEO, a coal miner or a Big Issue seller. ↩
- there is a year’s hole when I took time out to do an MSc but I was sharp and did that in an economic boom so it was easy to get a job afterwards ↩
Simple Living In Somerset 
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