2014 was a great year for my family. Our net worth had a healthy increase. We are ready to launch the second phase of our long term strategy in 2015.
2015 will mark the beginning of significant changes in our life. My wife and I had significant changes at this level only a handful of times in the last 20 some odd years: the year we came to the US, the year we finished our education, the year we bought our home, and the year I took my current job. 2015 will be another year we will remember for a long time.
We are expecting to take a voluntary 1/3 cut of our income in 2015, another cut in 2016, and another cut in 2017. We expect our income in 2017 to be about 1/3 of our income in 2014, maybe even less. Naturally the income cuts will directly reduce what we save each year, and our taxes. We will move from aggressively saving and accumulating toward living paycheck to paycheck, eventually to spending more than we make.
We are not calling it retirement. It really isn’t retirement. We give up a large chunk of our income for more freedom, but we will still earn money from our labor, just not as much as before. This blog will still continue.
It’s not financial independence either. We still need the money from our labor. If we completely stop, we won’t be able to withdraw as much as we’d like. It’s also our way to deal with the sequence of returns risk. We minimize the sequence of returns risk when we don’t withdraw from our portfolio. I may even take a chance at a startup-type company to satisfy some personal aspirations. If I win the startup lottery, great. If not, it won’t affect our long term plan. Many options open up when you only need to break even on cash flow.
The new life path is unfamiliar to us. It will require many adjustments. We are nervous, but we are also excited. After all these years we feel we are finally charting our own course. If you already went through a similar transition, from saving to not saving and to spending, please share your experience and wisdom. Thank you.
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Mike says
All the best to you and your wife…seems to me your instincts have served you well — move forward with confidence.
Chuck says
I would like to do the same thing in the next ten years. Can you do a follow up post saying what multiple of net income you have saved and the percentage you plan to withdrawal annually. Also, what percentage are you withdrawing from a Roth or other tax sheltered account versus non-tax sheltered accounts.
Best of luck!
Erik says
Exciting to follow you and this blog along your journey. Have fun!
KD says
Bravo & Brava! Super excited for your family! How are the kids reacting to this change? I believe your family will do just fine. Would the jobs scale up to full-time should there be a need?
My parents retired when I was in high school. They were happy. I wasn’t particularly pleased though.
John says
I, too, offer my congratulations! and best wishes for your success.
Mike Piper says
Congratulations! That’s very exciting. I’m eager to hear more. 🙂
David Ning says
Good for you Harry!
Prepare for the worst case scenario, but don’t think about the income reductions as a sure thing. Your blog might be so popular by 2017 your income could set a record. You just never know!
Darrow Kirkpatrick says
Yes, congrats on this upcoming change Harry. I made a similar transition when I was 50. It was strange for a while, to be “breaking even” with cash flow instead of stashing away a major percent of our income. But we got used to that and love the freedom. Having a small business on the side (my retirement blog) provides an avenue for creativity and supplemental income. Best wishes on your journey!
DTSC says
Congratulations! What do you plan to do with the extra time?
serbeer says
Harry,
in About overview of your blog you wrote:
“We came to the US in our mid-20′s with only a few hundred dollars in our pockets and no other family members in the country. Today, we are on track to be able to retire in our 40′s.”
So, you decided to postpone attempting “real” retirement till your 50’s, at least, since you say “It really isn’t retirement?”
Harry Sit says
See my definition in Internet Retirement Police Rule Book. We face these choices:
1) Completely stop now and retire on $X; or
2) Full steam ahead for some years and retire on $Y; or
3) Reduce speed for some years and retire on $Z.
We are able to retire on $X but we’d like to be able to spend more and enjoy more. We want our expenses in retirement to be higher than when we are working.
By coincidence Jim Dahle also posted an article on the same subject today: What Would it Take For You to Retire in 5 Years?
DS says
Congrats. I’m planning on the $X route, hopefully in 8 years (I have my retirement date nailed down to the month…economy depending ; ). We have been living on half of our income for the last 3 years as practice, and saving the rest. With kids leaving the nest our expenses are noticeably lower, sort of like a ‘war bonus’ when a conflict ends.
Will be interested in reading of your journey, Harry, and am pleased you’ll be keeping the blog going.
Very best of luck to you and your wife.
John says
Congratulations Harry. Very excited for you and I’m sure your blog will be even more useful as you document your investment shifts closer to retirement.
Malav says
Congratulations…following your blog everyday. Hopefully will get more information from you…
Thank you..
D says
Good luck. Its an interesting approach and I look forward to following along. In my little world my profession lends itself to full throttle or probably about 30% of effort for 15% of pay. This leaves me defaulting to full throttle. Perhaps I don’t see the possibilities though.
Sam R says
Bravo, Harry. Please share more. Are you and / or wife quitting job or change to part time at the office?
The White Coat Investor says
Congratulations! Lots of people never get to this point!
Gen Y Finance Guy says
Congrats Harry! Looking forward to see how the transition goes in the coming months and years.
Cheers!
M says
Many congrats on making the decision to forge your own destiny! I would venture that few are as astute or prepared as you to make such a leap. I too recently have taken a voluntary career/monetary excursion into the unknown – as I have veered away from corporate life into freelancing. As I am in my 20s, I have a ways to go before retirement, but have begun to appreciate that while money is important to an extent, using our time in a way that leaves us fulfilled is far greater than money. All best wishes to you!