Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Determining your Financial Independence number

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By Mark Seed, MyOwnAdvisor

Special to the Financial Independence Hub

Passionate readers of this site have long understood I’ve never been fully convinced about the “retire early” element in the Financial Independence Retire Early (FIRE) movement.

I mean really, what 30- or 40-something is never going to work for any money ever again??

(Answer = you know it.)

Surely some of them will hustle a blog, a course, a book, a podcast or other at some point. The list goes on.

Such FIRE-seekers and very early retirees are not likely misleading people on purpose: some are just simply entrepreneurs …

Forget “RE”, “FI” is the worthy goal

While I couldn’t care less about the retire early part of FIRE, I am working towards the FI part and have been doing so for at least a decade now.

I think most people should absolutely strive for FI instead of early retirement. (See this 2019 blog, Strive for Financial Independence, not Early Retirement).

How much do you need to save for any comfortable retirement?

“It depends.”

According to Fidelity, to be on track for a healthy retirement:

  • You should have x1 your annual salary saved up for retirement by age 30.
  • You should have x3 your annual salary saved up for retirement by age 40.
  • You should have x6 your annual salary saved up for retirement by age 50.
  • You should have x8 your annual salary saved up for retirement by age 60.
  • You should have x10 your annual salary saved up for retirement by age 67.

As a 40-something, according to the pros we should have at least x3-x6 of our annual savings in the bank.

I’m glad I don’t listen to Fidelity. We’re beyond that milestone and we’ll be better off financially (sooner) because of it.

Here in Canada, MoneySense did some similar work on this a while back:

 

MoneySense - how much is enough

Do you really need this much? $1 million or $1.5 million? More?

“It depends.”

I can’t tell you unfortunately: since that answer comes with a complex set of income needs and wants and everyone’s spending goals are very, very different.

I can say with a rather firm set of certainty that if any Canadian or U.S. citizen that amasses this much portfolio value by age 65 and has modest spending needs they will be far better off financially than most.

Our FI number

For years, I’ve pegged our FI number to be around the $1 million portfolio value mark not including any home equity (and our soon-to-be debt-free home: we have to live somewhere!), excluding our workplace pensions, and excluding any future government pensions such as Canada Pension Plan or Old Age Security.

I largely arrived at this number by using a rather standard FI formula.

Financial Independence means:

  1. earning enough passive income from my assets such that my asset-producing passive income is > general expenses, and/or
  2. amassing a portfolio value such that reasonable withdrawals will be > general expenses for many decades on end.

What are reasonable withdrawals???

You could argue the birth of any reasonable and therefore any safe portfolio withdrawal formula was originated by U.S. financial advisor William Bengen.

4% rule

You can read about his genesis for the 4% rule and why it still makes sense by reading this blog from earlier this year: Why the 4% Rule is (still) a decent rule of thumb.

Following Bengen and largely reinforcing his work, three professors at Trinity University published a paper about safe retirement withdrawal rates.

Those professors looked at stock and bond data from the mid-1920s through to the mid-1970s and their conclusion was that essentially over any 30-year investment period in that range, a retiree could safely withdraw 4% of their total assets per year without much fear (meaning barely any fear) of running out of money. Only in a handful of cases, the very worst cases in any 30-year period, would the portfolio go to absolute zero.

So, let’s look at that context when it comes to our goals:

If we managed to enter retirement with our desired $1 million goal of invested assets (along with no debt of course), then we could reasonably expect to assume we could withdraw $40,000 per year for our living expenses from that portfolio with very little fear of running out of money.

Henceforth, the study by those three professors from Trinity University, The Trinity Study, have set the framework for a gazillion FI number crunching exercises to this day and likely the same number into the future …

Determining your FI number 

Here are some options to crunch your math. Continue Reading…

There Is no greater virus than Fear

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Akaisha feeling the wide-openness!

By Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

We have a choice; living a life of fear, or one of hope and optimism.

Fear

Dwelling on fears clouds the mind.

It creates anxiety, emotional contraction, judgment of others and it becomes difficult to make a clear decision about anything. Moving forward becomes arduous because there is so much doubt. Fear sees limitation, lack of options, and darkness of mind: it’s called depression.

When we are in the middle of it, fear seems very real. What I’m talking about is not the kind of fear when someone has a knife to your throat, threatens your family, or if a wild bear is chasing you. I’m talking about the fear we manufacture in our minds in response to something that we have little control over.

Optimism

When we consider our abilities, good fortunes, and the possibilities of the future, we are able to see windows instead of walls. It’s the place where we have ideas, dreams, solutions to existing problems, and create new inventions.

Yes, currently we are in the middle of some fear-full stuff that is going on. And how you choose to see it makes all the difference.

There will be hundreds if not thousands of new businesses and inventions born out of this present crisis. Perhaps the next Amazon, eBay or Genentech will be leading us into the future. Human beings are very creative. Remember the saying “Necessity is the Mother of invention”?

This is how society, the human race and free enterprise has propelled us forward through the previous decades and centuries. Even Winston Churchill said “The empires of the future are the empires of the mind.”

A little perspective

Few of us were around in 1918 when the Spanish Flu broke out: specifically called the H1N1 virus. About one third of the global population was infected with approximately 675,000 deaths in the US. At that time the US population was 103 million making the US death rate 0.0066.

Extrapolating this out using today’s population numbers of 331 Million would mean we would have 2,185,000 deaths caused by this pandemic.

This is a big difference from the roughly 140,000 deaths today and back then during the Spanish Flu, no businesses or schools were closed.

More recently

We had the Hong Kong flu, H3N2, in 1968. Many of you were around, including us, through this period. As the name indicates this virus also originated in China and lasted into 1970. Continue Reading…

10 ideas for a Mini-Retirement lasting 6 months to 2 years

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Working a nine-to-five routine can be draining. The practice of taking time away from work for an extended period of time has become increasingly popular among employees. This “mini-retirement” can help professionals recharge and provide a much-needed break from a strenuous daily routine.

Although you may not be planning on taking a mini-retirement, brainstorming ideas of what you’d want to achieve during this period may help you align your purpose and goals within your professional career.

Below, we asked 10 thought leaders to share their ideas for things to enjoy during a mini-retirement.

Explore a new industry

Leave your normal career to explore investing or real estate. Choose something that you might not have the chance to focus on while working full time as a great way to spend a mini-retirement. Diving into topics that you are interested in and really taking the time to research and learn more about these topics could prove to make you money in the long run. – Rex Murphey, Montauk Services

Do something Book Worthy

My barometer for doing anything is considering whether the endeavor is worthy of a book. If I had six to 24 months to do anything, I’d first think about what the topic or title of the book would be. Then, I’d outline the table of contents. After the outline, I’d live out each chapter idea to the extent that I could fill the pages about the desired topic. That framework could be applied to any retirement idea from “The Ultimate Guide To Tapas in Spain” to “Everything To Know About Making a Documentary In a Third World Country.” But, as long as the mini-retirement idea is book-worthy, then I’m guaranteeing myself that the topic is deep enough to keep me continuously engaged and satisfied. — Brett Farmiloe, Markitors

Pursue knowledge

I love learning but due to my hectic work schedule, I usually don’t find time to study. So I’d want to learn and focus on self-development during my mini-retirement. I’d want to apply for a scholarship to fund my postgraduate program. Other than that, I’d want to learn new languages and travel. Maybe I’d go abroad for studies as it’ll give me a chance to travel as well. — William Taylor, VelvetJobs

Take an extended Holiday

Plan a holiday that you have been waiting for. This could be to a domestic location or an international destination. Make sure your finances are sorted and that the holiday fits into your current budget. Set aside enough money to last during this time, then take some time to focus on getting your career back up before the mini-retirement is over. — Joe Flanagan, GetSongbpm

Take a Road Trip in an RV

Retirement would lead to a few exciting travel options. The most exciting would be buying a Cruise America refurbished RV and traveling the United States.  Pack and unpack once for a journey of a lifetime and stay as long as you want in each location.  I think a one year trip around North America would be one of the most bucket list items one could experience and imagine all the amazing places you could visit and the memories that would be created. — Randall Smalley, Cruise America

Switch to freelance or part-time Work

A good way to do this is to either freelance or work as a consultant on a part-time basis. The main benefit of doing this is that, in most fields of work, you’re able to do this online. This means you’ll be able to work from wherever you wish to enjoy life for some time. Whether it be a beach in southeast Asia or in an RV around Europe, working in this way gives you the flexibility to enjoy your time off from full-time work. It also lets you choose just which assignments to accept during this period, allowing you to work as much or as little as you want. Is your budget running a bit low? Maybe it’s time to ramp up your hours. Alternatively, are you about to go off the grid for some time? Close your laptop and off you go. — Anna Barker, LogicalDollar

Revisit your childhood interests

I would dust off my childhood fantasies about what I liked to do. One recurring theme on the Rock Your Retirement podcast is that many of us are not prepared mentally for retirement. We need to have a purpose in life. Continue Reading…

Buying a home in Retirement? You’ll need these Resources

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Photo Credit: Rawpixel

By Sharon Wagner

Special to the Financial Independence Hub

Buying a home and preparing for retirement can be stressful enough on their own, so when the two intersect it can be easy to feel like you’re in over your head. With some careful planning, you can avoid a lot of the headaches that often go with buying a new home. These resources can assist with making informed choices when it comes to budgeting for your new home and your move.

Planning & paying for your new home

Money can be tight in retirement, so it’s important for you to think carefully about all of the potential expenses that can come with purchasing a new home.

Address retirement finance concerns before diving in; you can access reliable information through Financial Independence Hub.

Preparing for the costs of Aging in Place

Aging in place features are important for seniors, so make sure you know which features to look for and what costs to expect.

Decluttering & downsizing your current home

Cut stress and expense by decluttering and budgeting for help.
Continue Reading…

College will look a whole lot different after the Coronavirus pandemic

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By Mike Brown

Special to the Financial Independence Hub

The devastating coronavirus pandemic has flipped every aspect of life on its head and caused great uncertainty, especially when it comes to higher education in North America. 

In Canada, for example, higher education institutions can’t appear to get on the same page, as some colleges will be fully online, some will be a mix between in-person and virtual classes, and some just aren’t sure what they are going to do yet. 

Then there are some colleges, like Brock University, that are implementing mandatory mask policies, while others like St. Francis Xavier University are requiring all students to sign a liability waiver by August 1 to protect the school against any loss or injury related to COVID-19. 

In the United States, the situation is no different, and many students and parents have no idea what colleges are going to do come the Fall. Some institutions, like Yale and the California State University system, are gearing up for another virtual semester, while others like Rice plan to reopen with social distancing regulations in place.

Harvard released a confusing plan that will bring back 40% of students next semester, while the rest will take online classes, and all will somehow pay the exact same price. 

LendEDU, a personal finance website, recently published a survey that highlighted how this uncertainty surrounding higher education in North America could change the college landscape for good. 

Many students considering Online College or a Gap Year during Pandemic

LendEDU’s report surveyed 1,000 respondents that were either current college students from the graduating class of 2021 or later or graduated high school seniors from the class of 2020. 

The results showed that many college students are considering nontraditional alternatives to college in light of the coronavirus pandemic.

For example, 41% of undecided high school seniors are considering enrolling in online college for the Fall semester, while another 28% are not sure if they would do that yet, and 31% will not. 

 

Another 43% of undecided high school seniors are thinking about just taking a gap year next year, while 28% are not sure either way, and 29% are not considering that. Continue Reading…