I had two jobs in the last 11 years: one full-time job at my employer and one part-time job writing this blog, and more recently, helping people find Advice-Only financial advisors. As of yesterday, I’m left with only one job. Although the full-time job paid very well and I don’t hate it, it still takes hours in the day I’d like to spend on my own initiatives. So I resigned.
If I sensationalize it I would yell I RETIRED! Nowadays to be inspirational you have to be willing to say something untrue. As Andrew said to me on Twitter, the bar for the untruth also moved higher and higher.
But seriously, I don’t see going from two jobs to one as retirement. Neither do I see going from working for an employer to self-employment as retirement.
I will still work on this blog. I will still work on helping people find Advice-Only financial advisors. I started writing another book a few years ago but I just didn’t have the time to finish it. Now maybe I will. As Jonathan Clements wrote in his blog post Second Childhood, people in self-employment often work harder for less money than when they worked as an employee.
I didn’t retire. I pivoted to self-employment. More than 9 million people in the U.S. are self-employed. It’s not that unusual.
The opportunity cost of leaving a job is huge. Every day I don’t go to the office I lose $1,000, after tax. Saying no to a good salary is a luxury lifestyle, the opposite of being frugal.
One change in this pivot is in how we will support ourselves. After our first pivot when my wife quit her job in 2015, my salary still covered our expenses. We still had health insurance through my employer. Starting in 2019, we expect the income from self-employment will cover some but not all of our living expenses. We will have to withdraw from our investments to make up the difference. For the first time in many years, we’ll have to go by a budget.
Because the stock market valuation is high and the bond yields are still low, we will have the risk of lower returns in the future. Vanguard said the rate of return for a 60/40 globally balanced portfolio will only average 4-5% in the next 10 years. That number is before inflation. This is far lower than the historical return of 5%+ after inflation.
On top of lower returns, we will also have the risk of a poor sequence of returns. The current bull market has been going on for quite long. The tide may turn soon. Maybe the tide has already turned and we just don’t know it yet. If returns are especially bad in the early years of taking money out of our investments, it will further reduce the amount we can safely withdraw.
Because we will buy health insurance on our own now, we will have the risk of adverse changes to the Affordable Care Act and adverse changes to the health insurance market in general. The health insurance we buy has a $9,600 deductible (I will have a detailed post on this next week). Practically speaking we will be paying 100% of our day-to-day healthcare expenses. We will be subject to higher inflation in healthcare costs.
Because this blog has always been about sharing what I learned about personal finance along the way, I will continue to write about what I run across. To those who already retired, I will finally write more about taking withdrawals, whereas previously it was mostly about putting more money away. To those who are still working, you will get a preview of what happens when you start taking withdrawals.
Our income will be much lower. So the topics will also shift, from backdoor Roth when your income is too high to the Saver’s Credit when your income is so low that you get extra help.
Because I value quality over quantity, I never committed to any preset schedule for publishing new blog posts. It was about once a week recently. Now I can’t say whether I will post more frequently because I will have more time or I will post less frequently because I will have other pursuits. If you haven’t done so already, please subscribe by email. You’ll get a new post automatically when it comes out. When I go silent, you know that’s because I’m busy with something else. So please don’t be surprised when you don’t get an email. You are still on the list. You will get it when I send an update.
I will also experiment with opening the blog for guest posts from subscribers. If you have something to share and you don’t want to bother setting up a blog of your own, you can send it to me, as Steve did last week on maintaining and executing an estate plan.
Thank you for staying with me on this journey. The journey continues. Let the second childhood begin.
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always_gone says
Congrats on the Pivot, Harry!
Frugal Professor says
Congrats on the new journey!
Are you relocating as a result? I saw a 408 area code on a contact form of yours (I believe). I grew up in the bay area. While it’s appealing from a weather standpoint, it’s tough to pull off financially.
Harry Sit says
Staying put for the moment until we see somewhere more appealing. When you don’t have a large mortgage, the cost isn’t that high. The real estate appreciation offsets the opportunity cost of the money tied down to the home. We should meet when you visit the bay area next time.
Frugal Professor says
I’ll look you up next time I’m there. My folks still live in the south bay. Would be fun to meet the famous TFB in person.
If you happen to travel to Denver CO or SLC UT at all, I spend a lot of time there, particularly over the summers.
sai says
A brave new step, May luck be in your favor.
My very best wishes.
indexfundfan says
Congratulations!
While my numbers work in the bay area, I find that in moving out to Georgia (for both financial and family reasons) , they work even better.
You have work ahead of you to restructure your portfolio and manage your MAGI if you don’t want to fall off the ACA cliff.
Good luck on your new journey!
Thefiadventurer says
Congrats on the change. We look forward to seeing your new posts from the other side of the tracks now.
Vikash says
Congratulations Harry.
It seems like there is race as you said it “bar for the untruth also moved higher and higher.”
i feel the most important thing is to do what keeps you content.
All the best.
KD says
Congratulations, Harry and family! This is wonderful news! What an accomplishment!
Enjoy your time!
Eager to learn from you about about ACA cliff management, Roth conversion vs capital gains harvesting etc
Do you think what happened with your wife will also happen with you? Classic hedge fund move – the moment you say no to current employment, consulting offers with higher pay and fewer hours pour in.
desper-otto says
Congrats on your pivot. Don’t forget at tax time next year that your health insurance costs can be deducted as a business expense against your self-employment income — a much better deal that itemizing.
John says
Congratulations Harry. Finally a blogger who retires in the Bay Area. Sam is the only other blogger I’m aware of but his second job income is better than most first jobs. Been a long time reader and your post should help me decide if I pull the cord next year
Doug @ The-Military-Guide says
Well done, Harry. It’s great to see the good guys win once in a while.
I still remember our brief chat at FinCon12 about website traffic and monetizing.
While all of your FI concerns are justified, you might find that variable spending (and occasional side-hustle income) smooths out the speedbumps. I think your budget will also help you decide what you really want to spend your FI money on, and it might be less than your current spending.
C’mon in, the water’s fine!
Harry Sit says
Thank you Doug. I intend to increase spending from current levels, not spending for spending’s sake but deliberate spending on experiences we like.
Don says
Sincere best wishes, Harry. Thanks for the insightful guidance over the years. I definitely look forward to following your new journey and continuing to keep in touch.
Congrats!
Van says
I heard you discussion regarding FIRE at the South Bay Bogleheads last month. Congrats on your next step.
EscapeVelocity2020 (Steve) says
Congrats TFB, appreciate the intentional non-sensationalizing of the move as Early Retirement! Look forward to hearing more about where the pivot takes you.
Sam Seattle says
Congratulations, Harry!!! Congratulations on your pivot! Wish you the best! We definitely look forward to reading your posts on your new journey.
Nick says
Congrats Harry, and Good Luck with your next adventures now that you are off the treadmill and no longer answerable to The Man. Thanks for your blog and all the information that you shared from the time I came across TFB while searching for instruction on backdoor Roth conversion, Its been very useful and I look forward to your insights that you share on TFB. I’m in 408 as well, and if there is any meetup, would love to come in. Thanks..
Financial Samurai says
Congratulations on retiring early Harry 🙂
Losing $1000 a day after taxes and income is a huge salary to forfeit. How many days a year were you going into work? How did you overcome leaving the $300,000 plus gross salary behind?
My wife and I pay about $1600 a month in healthcare and were both healthy. It’s kind of insane. At least it’s a business expense!
Sam
Harry Sit says
When you meet your calling you just have to do what you are called for. The health insurance premium should be seen as a tax. It has little to do with whether you are healthy. When compared to the taxes we paid, the health insurance isn’t that insane any more.