Free at 40

As long term readers on this blog know I started planning my retirement to be ‘Free at 45’, yet the reality has been that target has been slowly dropping for a number of years.  The last official calculation I did back in 2012 (see the series on the side bar under Popular Posts) came out with me being able to leave work at 42 with cash to spare.

So I’ve had this idea in the back of my head, could I be ‘Free at 40’ instead?  After all things have been going really well and I wondered how different would that look like if I decided to go for it.  So I did look into it and I’ve decided I really like the idea, even if it means some significant changes to the original plan.

The major shift that occurs if I do Free at 40, is the fact I go that early I’m much more in the realm of semi-retirement rather than closer to full retirement as with the original Free at 45 plan.  I’ve always had some work for me in these plans the question as always been to what degree do I feel comfortable depending on future work income.  The Free at 45 plan only used work income to cover vacation spending or other purely fun items.  The money wasn’t needed to pay any day to day expenses.

Yet as I grown I’ve come to realize I don’t really mind doing some work, as long as it isn’t too much.  So I am willing to trade some future work at part time to cover off some expense if it means I can get out of full time work sooner.  So for the longest time I had trouble finding where I could be comfortable on depending on some work income.

In the end, I approached the solution backwards, I picked the age of being done work at 40, or just under four more years.  If I do that I estimate I can save approximately $600,000 by that time, which is about $100,000 less than my original $700,000 in the Free at 45 calculations.  Which on a yearly basis, means I’m short about $4000 a year than my original budget (so all the other costs like food, property tax and all the house bills would be still fully covered from investment income).  In practical terms, the amount is the money I would be saving on an annual basis to eventually replacement my car and future house repairs.

So a solution to provide some buffer on those amounts is to save a slush fund for approximately five years or $20,000.  Thus giving me the ability to cover any immediate expenses the may come up.  I’m still also attached to my backup plan of having a few years of living expenses in a second slush fund to allow me to avoid taking money out of my investments in a few really bad years.  This would require another $50,000 to be saved.

These slush fund may very well be in place when I turn 40 since I typically do better on my savings and investment returns than I predict.  If not, I estimate I could save those in just over six months, which would turn free at 40 into free at 40.5…I think I can handle six months if required.

So you might be wondering why bother with Free at 40, when Free at 41 would likely be damn close to the original plan?  Because in short, I’m sick of making excuses to keep working full time.  I’m ready now to move on and do different things with my life and the only reason I’m sticking around at the moment is to save money.

I noticed in life it is easy to make small amounts of money doing things so some dependence on income doesn’t scare me. I’m tired of finding reasons to stay working full time when more often than not I’m noticing how things can turn out just fine anyway.  Humans are extremely good at adapting to our circumstances so I don’t fear doing this at all.  I will still have a good life.

So what do you think of ‘Free at 40’?  Brilliant, insane…somewhere in between?  I welcome all feedback on this idea.

11 thoughts on “Free at 40”

  1. I think you should go for it. You said you’re sticking around to save money so it sounds like you’re not being fulfilled at your current job. You should retire as soon as you can and move on to something you enjoy. Early retirement doesn’t have to mean you’re not working. To me, early retirement means you have sufficient cash flow (from investments, rentals, pensions, etc.) to cover the bulk of the living expenses and the rest can be made up by doing a job/hobby that you love but also makes a little money. Good luck!

  2. I don’t know if this suits your situation, but if you’re sick of your job, maybe you can start looking for a new job right away – something you’d actually enjoy doing, maybe something part-time that can be your new line of work as your transition into semi-retirement?

  3. I may have a more strict definition or ER than you do, but that’s just me. I worked FT until I was 38, then I worked PT for 7 more years (semi-retirement, I called it) before I fully retired in 2008 at 45. I did not want to fully retire until I knew I could cover all my expenses with a cushion or surplus from my regular investment income. So, was a “Free at 38” or “Free at 45?”

    I wholly agree with your idea of a slush fund. I consider mst of my second-tier emergency fund (About $40k in an intermediate-term muni bond fund) a slush fund along with another similar blob in another bond fund my slush fundS available to pay for large expenses such as a new car at some point along the way. (My current car is 7 years old but has only 25k miles on it. I expect it to last at least 7 more years.)

    It looks to me you need to at least reduce your weekly hours worked like I did back in 2001 when I was 38. Whether you consider yourself “free” or not is up to you. I was partly free because I had regained my personal life when I switched to PT hours but was still burdened with some of the awful commute for 7 more years.

  4. After just spending 2 weeks of parental leave, early retirement is becoming more and more intriguing to me. Having said that I do enjoy my work so I really don’t see it as a drag. I think if you enjoy your work you can definitely looking continuing with it and just work less hour. Maybe start by reducing the weekly working hour from 40 to 30 and see how that works out for you?

  5. I think you should consider the “barriers to re-entry”. If low, then go for it! But, if you think it would be difficult to obtain similar work after retirement then hedge on the cautious side and work a little more.

  6. I could probably have gone “part-time” at 35… but I truly wanted the ability to never work again. So another 7 years of saving and investing (and not spending much) has brought my investable assets to 1.3M at 42, With no kids, and the ablilty to live a kickass life on less than 25k, I think I’m probably good.

    Perhaps if something “perfect” came along, I’d consider working again, but I’d really rather not.

    When I tendered my resignation about a month ago, it was with the intent of cutting the work cord COMPLETELY.

    Tim, your “free at 40” isn’t freedom…. if it were me, I’d work longer.

  7. It’s always easiest to work longer. It’s a known entity that feels quite comfortable, which isn’t the same as enjoyable. Can you see the excuses for working longer and recognize them for what they are? You’re a numbers guy, I trust the numbers work out for your family.

    Free at 40 is the way to go. You only have one life. Your kids are only young once. Aim high and realize your dream.

  8. I like the more flexible way of planning. I’d guess that if we see poor returns in the stock market, it’s highly likely to be some time in the next four years. Which is great timing for you to be putting fresh money in.
    I’ve had no regrets on working only part of the year for the last 4-5 years. The one summer I did work in that time period totally sucked. Especially as your kids get to be about 12 or so, there is a bit of sense of urgency to spend time with them before they hit their teens and have a life of their own that you can only have with long periods off or a schedule of your own making. Maybe other people can do that while working full time for someone else, I never could.

  9. I think for many of us the more we plan for ER the more excited we are to put those plans into action. Without the safety net of our current job, we want to know if all our numbers crunching will really hold water and while 45 looks great well 40 is so MUCH SOONER!! I’m currently considering resigning all together and and the weeks draw closer to giving my notice, I struggle with deciding on an end date. Sure, I’ve done this job for the last 7 years but somehow these next three months seem an eternity when you are ready to leave.
    I think if you’re ready, then go. If you go and realize its not what you thought? Who cares. So long as you don’t flip anyone the bird on your way out I doubt anyone is going to care, besides you, if you decide to go back to work. That’s the beauty of it- you can change your mind, adapt, make adjustments and move on. You are not held to anyone’s script but your own. THAT, is freedom.

  10. I say set a goal, but let the goal be flexible. This (in my world) means showing you can meet the goal, but not locking yourself in as new information comes up. If you decide to switch preferences and spend more (or even less) or work even less (or a lot more), then just calmly consider the options here and there and be fine with changing the plan.

    Just make sure to avoid getting sloppy with the commitments, though =P

  11. I don’t see how one can say they’ve ‘retired’ but are still working.

    I think one can say they are working as an option, not a requirement to survive though.

    I can’t retire at 45, more like 50 – and even then I’ll probably keep working so I won’t really retire from working until my 60s (when I think I might go back to university, cheap tuition and all that).

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