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Thursday, March 17, 2016

The Way Forward

And so at last we come to the pivotal post of this blog, the bridge between the old and the new.  After nine years of writing and struggling, I have finally arrived at the gates of financial freedom while still in my late 40s.  But along the way, my early retirement dreams did not stand up to the scrutiny of what I really wanted to do with my life.  Unlike many, I don't aspire to hang out at the pool in the afternoons and play video games in the evenings.  I still want to work hard.  I still want to learn and create.  And I still want to make a difference.  Yet I refuse to put my life on autopilot as a corporate citizen into my 50's and 60's.  I will not go gentle into that good corporate night. :-)

I have eventually produced a plan which would have seemed so foreign to me even five years ago, and yet now I cannot imagine it being any other way.  In an earlier post, I urged readers to keep an open mind.  Indeed, on one large personal finance blog, when the author merely announced he would be paying down his mortgage early, a number of readers commented that they "felt betrayed" and "wanted to throw up."  Since paying down one's mortgage early is a fairly minor point, I can only imagine the fury of such individuals upon hearing my plans in the next paragraph.  Fortunately, my readers only number in the low hundreds and comments have been turned off long ago.

So the way things will unfold is as follows: I am going to continue working (for now), but we are now going to "spend" nearly all of the money that we have previously been saving each year.  More specifically:

The New Plan
  • Continue working until 55 or until triggers are reached
  • No more saving money, except to get employer matching
  • Spend all dividends and previous savings
The New Spending
  • New spending will all be on new creative projects
  • There will be no net increases to existing spending items
  • Some money may be spent on tools and other "enablers" to save time
The Existing Money
  • Don't touch the principal; it will continue to grow
  • There will still be some savings (matching)
  • The longer I work, the fewer years of drawdown and private health insurance
Since it's my life, I don't really feel like I owe anyone a lengthy rationale, but in case you think this is absolutely crazy, I would suggest you consider the following:
  • Because of sequence risk and health insurance risk, I'm just not comfortable with a traditional retirement in my late 40's.  And I'm not likely to be comfortable with that approach until I'm near 65, which is too late to accomplish what I want to do.
  • On the other hand, every model I've ever looked at says I could already completely stop saving money and still be fine at retirement, as long as I don't start drawing down assets now.  Continuing to work means I can avoid drawing down existing assets.
  • Continuing to work, but (mostly) ceasing to save is actually now the low-risk option for maximizing wealth/happiness in my life, and this meshes nicely with the seed money that will be necessary for other ventures.
  • Other family members have been taken into account.  There is ample savings for college tuition, life and disability insurance are adequate, and there are multiple buffers and safety nets in place.  No one is going to wind up in poverty even in adverse circumstances.
  • Lastly, don't assume all money will be spent on myself.  It is anticipated that a good chunk will be spent on partnering with other people to accomplish certain things.
Although this approach isn't reckless, it's also not timid.  We are not talking about small changes.  I make a good salary, we do not live like paupers, and we still have a saving rate of 40%.  Obviously you can do the math: that's a lot of additional money to spend.  Additionally, we will also now be spending the dividend income.  So all this additional spending is considerably larger than our existing budget, yet will be concentrated on a few items.  This is not a trivial amount of spending to manage properly.

So where will the money go?  Well, that's a topic for another post.  And while I'm not going to elaborate in great detail, I'm not going to be completely vague.  In a future post, I will attempt to wrap things up here and give you a brief roadmap of where I'm heading.  For now, all I have to say is that I'm very excited about 2016.  Thanks for reading.

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