Quitting the Rat Race at Age 39
My husband’s office at the university is closing this fall. While he was offered another position (with a raise!), he turned it down and he’s taking this opportunity to finally quit the rat race. He will be 39. Congratulations Scott!
Later this year, my husband is finally joining me on a new adventure. Just like when I quit my job, I don’t really know what to call it… does this milestone in our lives really need a label?
Leaving the corporate rat race is really a combination of being able to spend more time as stay at home parents, pursue part-time enjoyable self employment, and the freedom to leisurely explore our own interests. Our independent financial plan that continues to make this possible is based on safe withdrawals from our savings and retirement money.
Over five years ago, I left my corporate job. Since then my husband has continued to work part-time since he enjoyed his job. While he was working part time for the university, he also worked on growing his consulting business on the side.
He carried our health insurance, and we have used his salary to max out both his 403b and 457 plans since Public Employees can Double-dip on Retirement. (You can also double dip on a 401k and an IRA).
Since we saved all of his salary anyways and haven’t relied on his income in years (especially after he cut back to 50% years ago), the biggest change from a financial standpoint will be purchasing our own health insurance going forward.
Side Income Minimizes Risk
Yes, obviously, we both still make money on the side from a variety of income sources. This diversification of income does reduce our risk and our need for withdrawals from our portfolio. As we’ve seen many times in previous years, it sometimes covers our entire yearly budget.
However, this plan is not reliant on the actual income from any of our self employment ventures (especially since none of them have much, if any, long term predictability). I love to make money and take advantage of free money, but since those are my hobbies and passions, I do not include them in our long-term financial plan so we can quit them at any time! It’s very important to me that I don’t turn my hobbies into a job or rely on income that isn’t reliable.
Planning Our Independence
I’ve had a year to plan since he was first notified. Now that tax season is winding down, I have time to put together a more specific planning list. Getting organized is the first step to making this all happen! I like to start with a review of our Retirement Planning Checklist: 43 Tasks to Get You Ready!. In addition to individual tasks, here are the larger topics I need to tackle (and probably a good indication of things I’ll be writing about soon!)
Healthcare. The majority of my time will be focused on finding health insurance. We’ll take a look at our private options, COBRA and ACA/Obamacare. In addition, since I assume we’ll be moving to a High Deductible Health Plan I also plan to open a new HSA.
Investments and Cash. I’ll update our asset allocation, which is currently at 60/40. Specifically, I plan to review the fixed income portion so that I’m comfortable with our cash flows, CD ladders and emergency funds. I want to make sure our accessible fixed income matches our yearly budget needs.
Budgeting. I use a multi-option budget. Our base budget for the year is created completely on our SWR. Then I create a working budget that factors in the possibility of income reducing withdrawals. Finally, I model a budget that accounts for our outside income that completely covers our budget. Since our outside income is variable, by using this approach I can avoid the risk of reliance on any of the bonus income, but I can still minimize our tax obligations when the income is greater than expected.
Taxes. Planning our new tax projections for future years will take some additional work. Depending on the health insurance choices we make, this could involve some level of managing our MAGI in the future.
Rerunning the Calculations. I am spending time running, and rerunning all of my calculations to finalize our new withdrawal plan using Firecalc, Optimal Retirement Planner, retirement calculators and countless spreadsheets and notes from Unveiling The Retirement Myth Book.
What other topics should I add to the list?
I hate to see you pull off your retirement at this early at age. This will compromise your retirement up the road. Good Luck.
Thanks for you feedback! I agree with you that early access to retirement money could compromise even plans with the best intentions.
However, I also believe that a well thought out plan (with various safeguards to minimize risk) to follow your dreams using an appropriate SWR is the opportunity of a lifetime!
There is obviously some opportunity here for me to write more and expand on the hows, whys, and details of our plan…
Good luck! I’m hoping to do something similar in a few years. I’ll be interested to hear more about your experiences.