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How I Imagine Early Retirement

How do I imagine early retirement? Cruising in a Ferrari with millions in my pocket.

Maybe when I was in my teens.  For those of you who have been following this blog over the years, you’ll probably laugh out loud at the opening statement.

As my internet handle indicates, I’m a pretty frugal guy but with some splurges on things that I find valuable.   These days, this would be: exposing the kids to as many fun, physical and educational activities as possible; family travel; and food (I really like to eat).

I also place a high value on my time and having control in what I do on a daily basis.  This is probably the biggest reason why I find the concept of financial freedom so alluring.

The Money

In the most recent financial freedom update, I wrote about how we reached over $37k in passive dividend income.  With $40k right around the corner, the reality of financial independence is starting to sink in.

While $40k for our family of four isn’t quite enough to live our preferred lifestyle, it’s certainly enough to phase out of full-time work and perhaps focus on new pursuits.  However for now, since I just started a new career that is still in the learning phase, leaving the workforce hasn’t been on my mind.  In fact, this time around it feels a bit different.  It feels more like I’m “choosing” to work rather than something that I “have” to do.  What difference does that make?  To me, it’s more fun and less restrictive which makes a big difference to me.

Over the years, I’ve discovered and accepted that growth is what keeps me engaged.  Once growth stagnates, my eyes start to wander onto other opportunities and often thoughts of early retirement as one of the options.

When I first imagined early retirement many years ago, my thought was that every day would be like a Saturday afternoon that is full of leisure.   While I enjoy my Saturday afternoons, I’m pretty certain that it would get tiresome after a while.

Have you ever had a 2 or 3-week vacation and by the end, you feel the need to get back to doing something more productive?  That’s what can happen with permanent vacation (ie. early retirement), eventually, you’ll want to continue growing and providing value of some sort to society.

Maintaining Purpose

Many people assume that retirement is about getting to a financial “number” and leave it at that. While money is a huge factor in retirement, it’s not the only factor.  The other aspect of retirement that is just as important is the answer to the question – what’s next?  I’ve read too many stories of people entering retirement, suddenly stopping their daily work routine and losing meaning in their lives.

Retirement doesn’t mean you stop doing things, it means that now you get to pursue other ventures/hobbies on your own schedule.  So even if you have the financial means to enter “retirement”, no matter if you are 30 or 65, you need to plan for “what’s next”  just as much as you planned financially.

I prefer to term financial freedom over “early retirement” simply because most people will want to continue adding value or some sort during “retirement”, just perhaps with a less rigid schedule.

For me, financial independence isn’t so far away.  When I do decide to leave the regular 9-5 job, I plan to…  continue working.  Ironic isn’t it?  Actually, I can’t imagine not working.  I’ll likely move into consulting of some sort, continue working online in some capacity, but leave the schedule flexible for family events, travel, and exercise.  I also imagine myself starting another business of some sort. I’ll also continue building and watching my portfolio just because I find that stuff fun and maybe even dabble a little more in private equity.

To bring this back to the beginning of the article, rather than the Ferrari, here is the car that I’m more likely to be driving during retirement:

 

How do you picture your retirement?  How do you plan to stay engaged and maintain purpose?

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 20 comments… add one }
  • Leo Ly @ isaved5K.com April 23, 2018, 9:45 am

    I am not as close to FI as you are yet (about eight years away). What I wanted to do once I reached FI is to pursue a hobby that I can turn into a business. It’s not so much that I have to make an income, it’s just to challenge and keep myself occupied doing things that I have always wanted to do.

    I would definitely try to give back to my community by volunteering and maybe teaching a finance class at a community centre.

    • FT FT April 23, 2018, 2:28 pm

      Thanks for sharing Leo!

  • Ian April 23, 2018, 2:22 pm

    I will probably spend more time volunteering after retirement.

    BTW: A lot of your dividend income is coming from non-registered accounts. Do you find that the tax burden these dividends attract will descourage you from pursuing full-time employment? In other words, in NL, $40k in eligible dividends will be nearly tax free. However, if you add let’s say $60k of employment income on top of that, the government will take away nearly 1/4 of your dividends. Of course, it will get worse the more money you make through employment. Hence, I wonder if the tax alone ends up being a very strong incentive to retire early once the div income is high enough.

    • FT FT April 23, 2018, 2:30 pm

      Hi Ian,

      Thanks for the feedback. You are right about dividend taxation and income. Right now, our finances are structured so that very little dividends are taxable to me personally (only 50% of the SM account). The bulk of the dividends are in the corporate account (and tax-sheltered accounts), which won’t be withdrawn until my salary income is lower (ie. early retirement).

  • FT FT April 23, 2018, 2:27 pm

    Just received a tip via email:

    “For what its worth I have a very simple philosophy and that is – You have to retire TO something not FROM something.”

  • David Marsden April 23, 2018, 3:56 pm

    I am in my 13th year of ‘retirement’. I spent the first 2 years doing absolutely nothing but activities I considered fun (tennis, biking, hiking, exploring new places…). I discovered that you can only play so much tennis and ride and hike so many trails before you begin to feel it is not enough. To satisfy that itch, I spent the 3rd year developing my ideas for my own business. I found the process entirely satisfying and exciting. I woke up each morning enjoying the prospect of working on my business idea. I launched in the 4th year and have not looked back. I only need to put in 2-3 hours a day to keep the business alive and slowly growing. The rest of my day is enjoying whatever activity I fancy – only now I no longer feel something is missing.

    • FT FT April 24, 2018, 8:34 am

      Thanks for the feedback David, good to hear from retirees and real-life experiences.

  • Chris April 23, 2018, 4:18 pm

    Why are people in such a hurry to retire? Why not find a job you enjoy now instead of starting to enjoy life once you retire? I found a job I love, challenges me, and gives me plenty of time off if I want. It took me a few years to find it, but do not regret making the switch from an office/desk job.

    • FT FT April 24, 2018, 10:35 am

      That’s a great point Chris and something that I should have added to the article. I think what holds people back from changing careers is fear and complacency. It’s sometimes difficult to imagine trying something new and exciting when your current job isn’t so bad and pay is acceptable.

  • Steveark April 23, 2018, 7:32 pm

    I did it three years ago and stay engaged by having five for profit side gigs and several non-profit ones. Add in the running, tennis, hiking, fishing and skiing my wife and I do and there usually just aren’t enough hours in the day. But my vehicle’s are decidedly internal combustion. Yours(my city dwelling bro has one just like yours) wouldn’t be a safe bet to make it the closest airport from here.

    • FT FT April 24, 2018, 8:36 am

      Thanks for also sharing your experiences Steve. Right now, I view electric cars as more of a toy (like the leaf – Tesla’s are too pricey right now), but with longer ranges and new battery technology as time passes, only a matter of time before they become an alternative to a cheap gasoline car.

  • GYM April 24, 2018, 3:45 am

    Great thoughts FT! I was just thinking about this as I was washing dishes for the 3rd time today– early retirement doesn’t necessarily mean not having to cook, clean, or wash dishes (which would be amazing if it were, but then retiring early would be much more expensive!). It’s not all that glamorous. Well, I’m not early retired yet but I am on parental leave so it kind of feels like I don’t have to work.

    • FT FT April 24, 2018, 8:38 am

      Being home on mat leave is the furthest thing from retirement – it’s a ton of work! Have you thought about early retirement as well?

  • nobleea April 24, 2018, 1:05 pm

    I would like to think that I will be cruising around in a ferrari, or similar, during my early retirement. I plan on leaving my career much earlier than my wife, so while she does have flexibility during the summer, our kids will still be in school, so we’re kind of home bound. Very few of my friends will be retired by that point, so I might be able to log a few more days skiing with some of them, but that’s about it. I will absolutely be running my own business. Maybe it’s a part time thing that brings in spending cash, maybe one or more of them blossom in to full time careers. I do want to cook more – take the kids to sports and help out with their teams. Garden more, maybe set up a greenhouse. Write a movie/book or three, consult in my current field. I have no doubts that I’ll be able to make money doing something I really enjoy.

    But definitely, a fun car is part of the plan as well.

    • FT FT April 26, 2018, 1:43 pm

      Thanks for sharing Nobleea, it’s a fun exercise to think about filling the schedule with things you really want to do. Are you a car guy Nobleea?

      • nobleea April 27, 2018, 8:09 pm

        Not to the extent of watching the TV shows and subscribing to the various magazines, but I do enjoy them. The M5 has been what I’ve wanted for at least 20 years. Doesn’t really work for 2 or more car seats, so might have to hold off for a bit! I follow the trends and updates in the high end sports segment, but also the new tech and electrics.

  • Tim April 27, 2018, 12:28 pm

    “When I first imagined early retirement many years ago, my thought was that every day would be like a Saturday afternoon that is full of leisure. While I enjoy my Saturday afternoons, I’m pretty certain that it would get tiresome after a while.”

    You have no idea how funny I find that statement after I just wrote a post about my early retirement after six months and concluded it is like Saturday. ;)

    Yet I will say I’m not even remotely bored at being off this long. I think perhaps why it is working for me is I had a firm idea on what I wanted to work on in early retirement (writing fiction) even if I haven’t done a tonne of work on it yet (I’ve drafted one novel and started editing a second one). I think the biggest change was getting a new definition of what ‘productive’ means to me and that bar is a LOT lower than it was when I was working. The freedom to do what you want when you want is totally worth it.

    Best of luck on what ever you end up doing.

    • FT FT May 23, 2018, 2:33 pm

      Thanks for stopping by Tim, good to hear from you. Funny that we have come to the same conclusion about it being Saturday! Have you consulted or worked on other means of generating income since leaving corporate life?

  • dino April 29, 2018, 3:34 am

    I have a question with regards to your corporate account for dividends. Do you run the business as an investment business (for example this website) and invest accordingly? All trading is done and kept within the business account therefore sheltering your earnings? I am curious about the corporation that runs based on pure stock purchasing and dividend returns.
    I run my portfolio and my wife’s portfolio for long term blue chip dividend stocks similar to yours with a few etfs and one growth stock (Netflix). I recently switched from bank run mutual funds to self-directed funds because I was tired of paying the high MERs. Right now we will average around 4 k of passive income in our first year now with hope for 20 k + some day. We already both have DBP pensions with the government so all the rest is extra income for retirement so I put off maxing out our TFSA/RRSP until recently.
    Thanks

    • FT FT April 29, 2018, 2:47 pm

      Hi Dino!

      Yes, we keep all of our investments within the same corp. In the ideal situation, we would separate out the investments from the operating business to maximize the cap gains exemption if we decide to sell in the future. If you have a DBP, having a corporation will be great as you can control the flow of money into your personal hands (maximize your income but stay under the old age security thresholds).

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