Downshifting and Early Retirement

At the intersection of personal finance and self-actualization there is a vibrant Internet community focused on the pursuit of “FIRE”–Financial Independence, to Retire Early.

Rather than accepting society’s preconception that life includes 12 – 18 years of schooling, followed by 40 – 50 years of working, wrapped up by a few years of TV and golf, FIRE aspirants optimize their spending to maximize both life satisfaction and savings, invest the proceeds wisely, and retire radically early to pursue personal growth, social connections, giving back, and more–free from the shackles of full-time work.

How does downshifting to part-time work relate to early retirement?

Is early retirement really possible?

The theoretical framework for FIRE was famously codified in Your Money or Your Life and The Trinity Study. The gist of these is that if you can invest about 25 times your annual spending in index funds, you can consider retiring.

Although this may sound far-fetched, numerous formerly “normal” people have followed this path to early retirement, including: Jacob from EarlyRetirementExtreme.com, Mr. Money Mustache, Living a FI, Root of Good, and ThinkSaveRetire.com.

The pursuit

Let’s assume you have a tolerable job with decent pay. Rather than settling in for 40 – 50 years of repetition, let’s say that you have decided that your interests outside of work should take precedence and, rather than living to work, you’d prefer to work (the minimum possible) to live. By this point, you should have scrutinized your spending (to avoid spending on anything that doesn’t noticeably improve your life), and started plowing your excess income into sound investments (e.g. passive, diversified stock index funds).

While on this journey, you start spending several minutes or more each day imagining what your life after work will look like. This is the grown-up version of daydreaming about summer vacation while sitting in class.

Maybe your perfect day looks something like this: you wake up naturally, as you do every day, fondly remembering the day you took a 24 ounce hammer to your old nemesis, the alarm clock. Maybe you squeeze in some exercise, say a cool run out in the crisp fall air. Then you put on a pot of tea and slice up some fruit for breakfast. In the later morning, you read a book or lend encouragement to bloggers who are documenting their ongoing attempts to catch FIRE. After that, you walk to the local farmer’s market and pick up ingredients for your lunch. The middle part of the day is spent cooking a delicious lunch from scratch, complete with homemade sourdough bread that you started the night before. After lunch, you settle in to get some “real work” done–this could be writing, volunteering, or helping out your aging relatives. You might even get paid for some of this work, though that is not the point. In the evening, you prepare a small meal and catch up on the latest streaming documentary you’re interested in.

And so on. This is just an example. My point is that you develop a vision for life without work.

Distilling the example above, this “perfect day” is a day that is focused around values: mindfulness, family, self-sufficiency. All of your values follow you around each day, but it’s easier to align your life with your values when you have more time.

Is it possible that all you really want is freedom? Freedom to choose how to spend your days?

At some point, you will be jerked out of this fantasy and back into the real world of time-consuming, sometimes stressful work.

While it’s great that you have found a shorter path to freedom (20 – 30 years shorter than the typical worker), that is little consolation each morning when you have to wake up with an alarm clock, scarf down breakfast, commute in awful (and dangerous) traffic, spend all day working, end up skipping lunch becauseā€¦ meetings, pop an ibuprofen because you’re getting a headache (probably from not eating and drinking enough), drive back home from (somehow) even worse traffic, wolf down a Hot Pocket (no time to cook!), and spend the evening eating ice cream, watching horrible Korean dramas on Netflix, and lamenting that you just can’t seem to lose those few pounds you put on over the holidays.

Ok, maybe working full-time isn’t actually that depressing, but the point is that you are still grinding it out at your job in your 20’s and 30’s in hopes of a better tomorrow — not when you’re 65, but still a long way off, possible in middle age.

Claim your freedom even earlier

If you have a decent job and you’ve socked away money, both for emergencies and a budding early retirement fund, you are already deferring gratification. Do not defer gratification indefinitely!

In my opinion, the next logical step is to get a taste of early retirement–now.

Downshifting early has numerous benefits. You can travel while you’re still young and able-bodied. You have no financial concerns because you’re still covering your expenses and saving for a later full retirement. You can use extra free time to work on side project or, if you’re really enterprising, build up a full-blown side hustle. A slightly lower income means lower taxes, likely netting you a higher after-tax pay rate. Existential angst won’t be a concern because you still have structure and direction from your job (if that’s your thing).

The best part of downshifting is that it will help validate your long-term goal of retiring early. First, if you do manage to earn money on the sly, you’ll realize how ridiculous it is to plan for having absolutely zero income in retirement. Second, if stepping away from work (only a little bit) makes you realize that you love your job, you can just go back to full-time and thank your lucky stars that you didn’t straight-up quit whole hog.

Downshifting might be your only chance

As much of a downer as it is, actuarial tables will tell you that some folks won’t even make it to early retirement age (let alone traditional retirement age). If you or a family member has ever had a health scare (that I truly hope ended up only being a scare), you know how sharply it focuses your perspective. Ephemeral job concerns disappear instantly and you start to reflect on how you’ve spent your time.

George Kinder proposes asking yourself three questions to help you sharpen your focus:

  1. Imagine you are financially secure. Would you change anything about your life?
  2. Imagine a doctor told you that you only have 5 – 10 years to live. What would you do with the remaining time you have?
  3. Now, imagine a doctor has told you that you only have 24 hours to live. What did you not get to do? What did you not get to be?

Given your answers to the questions above, start planning what you want to do and who you want to be. Downshifting to part-time will provide time to start making progress on these goals and allow you to better align your life with your values.

What are you waiting for?

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