Hey everyone, it’s Finance Fridays again. I’ve talked about the Windfall Management Exercise recently and about Retiring Early before. Today let’s ponder “What if I retired today?”

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Is this another “Finance Exercise”?

Yes.

Kind of like the Windfall Management Exercise, this “What if I retired today?” is another exercise, just to kind of test your mindset. Here is the beginning of your retirement story:

It’s July 13, 2018, you’ve received word that you now have a windfall of money from some means. It could be an inheritance or the lottery, whatever you want – choose your own adventure. That amount is significantly more than “Your Number“. In fact, it is so much, that you (or you and your spouse) could both quit working today if you wanted to.

What would you do?

Here is my take on it:

The first part of this will be kind of boring because I’m kind of conservative. You won’t get the “classic” response of calling my boss and saying I’m quitting or “walking out” or whatever. Additionally, two weeks notice is not really a thing for doctors. For me, I have a sense of duty and responsibility to my position as a physician. As such, the first course of action would be for my wife and I to turn in our letters of resignation.

I’ve talked about “not burning bridges” before, but in this case it’s not a bridge burnt, it’s just a moral sense of responsibility and respect to your colleagues. Since it’s July, I think up to 6 months of notice is reasonable. If either of our jobs needed us to stay till the end of the year to help with a transition, I think that is reasonable. I would not want to us to burden our colleagues by leaving suddenly.

Makes sense…

In that sense, even if I “retired today”, I probably wouldn’t stop working until the end of this year. Remember how I talked about “transitioning to retirement“? That’s pretty much what I would do these next 6 months. I would probably be spending a lot of time with a fee-only financial advisor and my CPA to figure out the best way to manage this windfall. How it would be managed would probably vary depending on how much it was, but in general, it would be a mix of paying off the student loans, paying down the mortgage, investing portions into real estate, with a large amount sitting in a 3 fund portfolio and perhaps a smaller portion in dividend stocks.

Then we have to figure out a reasonable yearly budget with which to live on. This budget would be significantly smaller than our current budget since we wouldn’t be paying down student loans or making a mortgage payment anymore. Additionally, there should be plans to create a small monthly revenue stream through property rental. The first few years I would imagine we would be pretty cautious until we had a better understanding of how much money was being used.

This is boring…

Yea, I know. I’m a boring guy. “Retiring today” for me wouldn’t be telling my boss I’m quitting and then driving over to the Ferrari dealership no matter how much money I had.

There are a lot of other questions to consider. Would we stay in Hawaii or move to California to be closer to family? If we did decide to move, where would we live and what kind of house would we buy? These kinds of questions are difficult/impossible to answer because for me, it would very much depend on how old my kids are.

If they were happy here in Hawaii and both in school — I wouldn’t want to uproot them. However, if we truly did receive a windfall before Lucas started school, then it would be a reasonable consideration to move closer to family in California. This would be a very complex discussion which would occur during the “final 6 months of work” and would include input from the kids as well.

Let’s move on to “Being Retired”

It’s now January 1, 2019. My wife and I have said our goodbyes to our jobs. Our money is where we want it and our retirement plan is in place. Whether we were in Hawaii or in California…

What would a normal day look like for us?

I’d like to believe that we’d sleep in… but the likelihood is that our kids will come jump on our bed at 6 am. Like clockwork, we’ll get them up and ready for school (Kylie) and preschool (Lucas). We would get them ready for school and eat a little breakfest with them. Then we would drive them to school and drop them off.

After that, my wife would most likely force me to go to the gym with her. Since I would have no excuse to not go, I would go and do whatever was needed. I would assume some cardio and mild weight lifting or something. The likelihood is that my wife would get a license to teach Pilates or Yoga or something. Perhaps my wife and I would take up a sport to play together like tennis or something as well.

If we’re near a beach, we’d probably rotate a few mornings out to go to the beach instead of the gym maybe. At the beach my wife would just soak up the sun because that’s what she likes to do. As for me, I’d probably read a lot of books and then earmark or highlight pages paragraphs sentences I would like her to read — and force her to read at least those parts.

Then we would either come home for lunch or get lunch out a few times a week. We’d probably watch some stuff on Netflix that we’ve missed that last 5 years or so. Later on we would go get the kids from school and bring them home. We would then do homework together. After that we would cart them around to their extra curricular activities like piano, baseball, etc.

Nothing too exciting, just more time to do things we want to do instead of working.

That said, I think that eventually we would find other things to do. I would probably still work on this blog and perhaps put more time/effort into it since I’d have a lot more time to research/write. It would be nice to someday be able to write a book as well. I have a few other ideas that I’d like to work on as well. Maybe I could go take an intensive programming class to learn how to program. My wife says she’d be ok just laying on the beach all day — but I think she’d get bored eventually too. The likelihood is she’ll teach Pilates or Yoga or both. Also, since my daughter wants to have her own bakery one day, perhaps she’ll go get her MBA and learn how to own/run a bakery to help my daughter out.

In terms of vacations, I think we would do our best to plan at least a few vacations a year to various places. My wife is very against taking the kids out of school for vacations, whereas I am more lax about it. I think as long as its during a period of time that they can make the work up, it isn’t a huge deal. A few days off (or maybe even a week [once]) here and there isn’t a big deal. Just so we’re clear, this is coming from someone who never missed a day of school from K-12.

Overall, not really the sweeping lifestyle changes you would expect in retirement right?

What was the point of this exercise?

I think the point (for me) is that not that much would change if I had the money to retire today. The only thing that would change is that I would have more time to do what I want — when I wanted to. My lifestyle wouldn’t change much overall. However, I would get a lot more flexibility in choosing what I do with my time.

It’s really a question of “need” versus “want”. Needing to work versus wanting to work are very different things.

I think this exercise will help you to really focus on what you find important. You may find out that “retirement” isn’t that huge of a difference from you are right now.

It’s all a matter of perspective.

TL;DR

If I could retire today… I probably wouldn’t stop working until 2019 anyways.

My day to day activities wouldn’t change all that much — just the amount of time and flexibility I would have.

I would likely get bored and work on other things — because that’s how I am.

My wife would probably get bored and be a Pilates or Yoga instructor — or get an MBA to help my daughter’s future bakery.

I think this exercise will help you to really focus on what you find important. You may find out that “retirement” isn’t that huge of a difference from you are right now.

It’s all a matter of perspective.

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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