By Del Chatterson
Special to the Financial Independence Hub
My unplanned retirement at 52 seems to have been successful, if I look back over the last 15 years, but I could have done it better and suggest that you can too, if you have a plan.
Here is my story and the lessons I have learned. I am sharing them on the assumption it’s never too late for you or me to do it better. At age 52, I quit my day job and headed into the unknown. At that time I certainly did not call it “retirement.” It was more “seeking new opportunities,” time for a change of career plans” and other appropriate clichés.
How did I get to that point? Well, I was just another engineer/MBA with a career in corporate positions and management consulting, followed by twelve years in my own business. My computer products distribution enterprise grew quickly and did very well during the booming PC revolution of the ‘80s. Then in the ‘90s the PC market rapidly changed and smaller players were squeezed out by the few surviving big manufacturers, distributors, and retailers. So the business become less fun and less rewarding as I went through the challenges of a merger, wind-up, re-start and finally an exit. My decision to leave was based simply on the lack of personal satisfaction. The stimulating challenges and my motivation had evaporated. It was time to move on.
Inspired by The Wealthy Barber
During most of the 25 years after my MBA, I had earned good compensation and was apparently smart enough to manage a sound savings and investment plan (encouraged by the wise and practical advice of Jonathan Chevreau, the Wealthy Barber and many others.) The biggest bump in compensation and savings happened, of course, during the good years in my own business when sales and profits were booming. But when I quit working and starting searching for new opportunities there were two things missing: I did not know what I really wanted and I didn’t have a plan.
Financially, I was able to carry on without income and live off my investments. My savings and investment plans, starting in my early 30s, were based on reasonable risk and return assumptions in a well diversified portfolio. I started with a brokerage account and a commission-based broker. But after some poor advice and a couple of big losses, I switched to another broker for a few years, then finally decided to go 100% self-directed. I learned my choices were as good as those of the big brokerage research advisors and I now had the luxury of boasting about the winners and keeping quiet about my mistakes.
I remained cautious on 85% of the portfolio, although it was 95% in equities, as I could never justify the low returns of fixed income and was willing to be patient through the downturns. I often explain (usually to aggressive wealth management sales people) that my decision to continue to manage my own investments is not for the better returns, but for the education and entertainment value. Admittedly, sometimes an expensive education and sometimes more horror story than action-adventure.
Over the years, however, I had achieved acceptable average returns and at age 52 I could quit working and earning income. I could “retire.”
The Rule of 15
How did I know that? Being an engineer and MBA, I did have spreadsheets to run through various scenarios that showed I could live well and still leave an inheritance behind whenever I checked out. I even developed a simple “Rule of 15” that saves you all the trouble of preparing those spreadsheets. If you have fifteen times your annual spending invested, then you are good to retire. That’s it: if you need $50,000 a year to live on, you can retire on $750,000. That amount will take thirty years to decline to zero if you can earn at least 5% a year return on it.
The experts of course, will tell you it’s more complicated than that and you need to consider inflation and volatility of returns, housing, health and family issues. However, they are not predictable anyway and you have some room for error and the ability to manage within the 5% return and the 30-year time frame assumptions. Don’t make it complicated and suffer paralysis by analysis. The Rule of 15 is a simple reality check on your retirement plans.
But financial independence — findependence as Jonathan Chevreau calls it — is not enough. You may know how you are going to spend your money during your retirement, but how are you going to spend your time? That turns out to be even more important to your long-term health and well being.
In my case, I meandered aimlessly into my unplanned retirement and tried to keep it interesting by dabbling in everything from Internet start-ups to building a consulting business; from running marathons to running for MP, playing golf to playing guitar. I dealt with some family issues, separated and divorced and did some voluntourism by helping entrepreneurs in developing economies and aboriginal communities.
After fifteen years of wandering between consulting, semi-retirement and self-unemployment, I recognized this approach was not giving me much satisfaction. I needed more passion and purpose in my life.
Since my own process clearly was not working, I started soliciting input and advice from professional resources to help figure out what I really needed for personal fulfillment. It began with a personal assessment of who I was and what I wanted. Better knowledge of myself helped me focus on what I should be spending my time on to achieve the goals of personal fulfillment. Clarity helps.
Here are the most important lessons that I learned in my unplanned retirement:
Do not make decisions by neglecting them until events decide for you.
Have a plan that recognizes your personal needs, goals, resources, limitations and timetable.
Assess who you are and where you are now; decide where you want to be and when; then start acting according to your plan. Hope for a little luck along the way, but don’t count on it.
About the Author:
DEL CHATTERSON is your Uncle Ralph.
He is dedicated to helping entrepreneurs to be better and do better.
Del is an experienced and successful entrepreneur, executive and consultant. As an entrepreneur, he grew his computer products distribution business from zero to $20 million per year in just eight years. His consulting company, DirectTech Solutions, provides strategic advice to business owners at all stages: from start-up through the challenges of managing growth and profitability to the exit strategies for management transition and business succession.
Del is an Engineer and MBA and has lectured on entrepreneurship and business management at both Concordia and McGill Universities in Montreal. He continues to share his experience and offers ideas, information and inspiration for entrepreneurs worldwide under the persona of “Uncle Ralph.’
He has recently published two books for entrepreneurs:“Don’t Do It the Hard Way” and “The Complete Do-It-Yourself Guide to Business Plans.”
Learn more here.