The main reason why I’ve gotten more conservative with my investments is not because valuation for the S&P 500 is near an all-time high and earnings growth is decelerating.
Nor have I gotten more defensive because housing inventory has shot up across major parts of the country and prices are clearly declining.
No. The main reason why I’ve gotten more conservative with my investments is because I’m very close to retiring for a second time.
Let me recap my background and share some retirement preparation plans if you’re also planning on retiring soon.
The Return To Retirement Living
After first retiring in 2012, I spent about nine months living the early retirement lifestyle. I wrote a book about my experience negotiating a severance and my wife and I traveled around the world for about 12 weeks.
By the beginning of 2013, I no longer told anybody I was retired. People gave me funny looks whenever I mentioned I had left corporate America for good. I also felt stupid saying I was retired in my mid-30s.
I longed for more purpose and a more acceptable identity that didn’t require explaining my background each time. So I decided to pivot from early retiree to full-time writer and entrepreneur.
Almost immediately, I felt better about my new role in the world. Growing Financial Samurai all these years has been incredibly fun.
On average, I spend about three hours a day on the site, which is one of the main reasons why it’s been so enjoyable. If I was forced to work 10 hours a day on FS and commute, I’d have probably started hating it after a year.
Having something intellectual to do, especially after my son was born in early 2017, has been a blessing. Being cooped up in the house all day is no fun for this stay at home dad.
Another thing I’ve enjoyed doing in my second career is mastering everything that relates to online publishing. From writing, to marketing, to business development, I now have a strong grasp on all the things it takes to build and run an online media company from the ground up.
Although it’s been seven years since I left full-time work, it’s been almost 10 years since I started Financial Samurai in 2009.
Back then, I had told myself that if I could reach various stretch goals by the summer of 2019, I would give myself the luxury of taking it easy once again.
The main stretch goal was to regularly generate over one million organic pageviews a month.
As fate would have it, I have the option to let go this summer and fully retire once more.
The Origin Of Luck And Fear
What I realize now is that whether by coincidence or on purpose, I’m living my life in 10-year cycles.
I first got a job out of college in 1999. Getting a job at a major investment bank was mostly luck because graduates out of a non-target public school usually don’t get these front office jobs in NYC.
Although there was the dot com bust in 2000, the 10-year journey from 1999 to 2009 was an overall positive for my career.
After about two years at the first investment bank, I got my second lucky break when a recruiter placed me at a new firm in 2001 in San Francisco. If I had not changed jobs, I would have been kicked to the curb after my two years were up.
Then, of course, everything started crashing in 2008 – 2009. I was scared for my future given Lehman Brothers, Bear Sterns, Washington Mutual, and a bunch of other firms had collapsed. Friends were losing their jobs, their houses, and their savings.
Somehow, I managed to escape seven rounds of layoffs in a two year period at my firm. My immediate boss had left the firm to become a client the year prior. Thus, if the firm was to lay me off, it wouldn’t have had anybody to run the business. Another lucky break.
I was so worried about my future in 2009 that I decided to finally start Financial Samurai, an idea I had had since graduating from business school in 2006, but had been putting off.
If you look at the chart of when Financial Samurai was started, you’ll see that it was started at the exact bottom of the previous financial crisis in July 2009.
To start Financial Samurai at the bottom of the last financial crisis and then have a massive bull market help propel the site forward was also tremendously lucky.
Yes, I’ve spent many hours developing this site, but I fully admit that most of the growth is serendipitous. Living in San Francisco, the epicenter of technology and financial innovation has also helped me develop some key industry relationships.
If you started something in 2009, it would be relatively hard not to have successfully grown your business or your wealth.
The tailwind is like having a mentor who is actually the CEO of your company and also happens to be your dad who wants to give you the company. In such a scenario, how can you fail?
Since 1999 I’ve constantly wondered when my luck will run out. I’ve already talked about experiencing survivor’s guilt after my friend passed away when I was 15. All the good that has transpired since has only made me wonder more about the future.
Don’t Push Luck Too Far
Despite the good fortune, 2009 still burns deep in my psyche because of how badly my finances got crushed. Perhaps this is how survivors of the Great Depression felt for the rest of their lives.
I don’t want to ever again suffer through a 2009-like experience. I recently got a taste of temporarily losing lots of money in 2018, and that was enough.
I’m so thankful we’ve recovered and I no longer wish to push my luck.
2019 is the year where I plan to retire again after 10 years of running Financial Samurai. I’ll either sell the site, write less, or hire talented staff writers or guest writers to write using the Financial Samurai principles.
It’s been a great run, and I want to leave on an up note. If you are thinking of retiring for a first or second time, here are some things you should consider.
Retirement Planning Checklist
1) Adjust your risk exposure down.
As with any classic retiree in their 60s or 70s, it’s important to take down risk exposure because you no longer have the ability or the desire to work any longer.
Measure your risk tolerance in terms of the Financial SEER ratio. In other words, how many months are you willing to work to make up for a potential loss in retirement.
Once you’ve retired, you don’t want to be forced to go back to work. Giving up precious time for money is one thing, but so is the embarrassment of having to go back to work because of poor financial planning.
Debt should be completely eliminated or reduced to a level that will never be able to sink your finances.
2) Calculate your various income streams.
If after taxes, your income streams can sustain your desired retirement lifestyle, you’re golden. If not, keep working or build more side hustle income. To be conservative, it’s best to have at least a 20% cushion above your living expenses.
Plan out a tax-efficient safe withdrawal strategy based on a combination of your pre-tax and post-tax retirement accounts.
Those who want to stay conservative should try to only live off their after-tax passive income and never touch principal. Only when Required Minimum Distributions are in effect should you start drawing down principal.
3) Make sure you’ve accomplished all your goals.
When you leave your profession, you want to leave with as few regrets as possible. The best way to leave with few regrets is by fulfilling your stretch goals.
One of the reasons why professional athletes retire after winning the Super Bowl, a Major, or the NBA Championship is because there is no greater glory. During the rare times when such a champ tries to make a comeback, it’s often a sad affair filled with struggle.
If you cannot reach the pinnacle of your profession, one thing you must ask yourself is whether you’ll be leaving the place better than when you first started. If the answer is no, then you must take measures to rectify or continue working.
Retiring when your fund or company burned to the ground will make you feel like an unsettled ghost, unable to rest in peace. You want to go out on your own terms, which is why negotiating a severance can be incredibly powerful to your mental well-being.
4) Ensure your legacy will be left in good hands.
The longer you’ve worked, often the harder it is to walk away. The transition is made easier if you have someone you’ve trained or trust to take over once you’re gone.
The last thing you want is to have all your good work get undone by someone with a completely different philosophy. If this happens, you will feel as if you wasted many years of your life. Find an excellent successor and don’t leave until you do.
5) Have a next purpose.
You don’t want to retire into nothingness. Going from working 12 hours a day to having all the free time in the world can be very disconcerting. After being so used to structure for so long, you might start wondering what else is there to life. Some of you might even get depressed if you don’t have purpose.
Instead, diligently map out your retirement goals months or even years before you retire. You want to retire to something, not from something.
Start talking to people in the fields that interest you when you still have a job. Once you retire, it may be tougher to build relationships because society tends to look down on those who no longer work.
Having a clear purpose in retirement will make your remaining days at work even more meaningful. You’ll also experience a much more joyful retirement life.
Retire As Many Times As You Can
There doesn’t need to be only one retirement in your life. Instead, I encourage you to retire multiple times because that means you’re challenging yourself with new endeavors.
Whether you decide to retire for six months or for six years is up to you. There’s nothing more professionally fulfilling than mastering a new skill and enjoying its accompanying rewards.
Skills are highly fungible today thanks to technology. So long as you’re able to work hard, communicate intelligently, get along with others, and produce more than you cost, you can do well at almost anything because the rest is learned on the job.
I truly hope we never see another 2008 – 2009, nor am I anticipating a correction of such magnitude. I’m just not willing to take unwarranted chances given I’m satisfied with what I have.
With now a wife and son to take care of and potentially zero active income if I sell Financial Samurai, I can no longer afford to take any excess risk. To go through another 40% loss as I did in 2009 at this stage in my life would be devastating.
Our passive income should keep us afloat, but I haven’t truly been able to means test it yet due to my severance that paid out from 2012 – 2017 and the active income I’ve been generating from Financial Samurai.
From July 2019 – July 2029, I plan to spend my 40s primarily focused on raising my boy and spending time with my parents. If we relocate to Hawaii, we’ll have more than enough activities to keep us busy in our second go around.
Let’s pray the next 10 years are as lucky as the past 10!
Readers, anybody on a 10-year cycle like me? How do you plan to ensure good fortune for the next 10 years of your life? Anybody retire a second or third time? How long did each retirement last and what did you do? What else should people do to prepare for retirement?