Work Optional

1. Define Your Work-Optional Life Vision

What would you like to accomplish in your life?

Dream big. Envision your ideal work-optional life, whether it's full early retirement, semiretirement, or career intermissions. Consider your happiness, hobbies, travel aspirations, and legacy. Reflect on your childhood dreams and bucket list items. This vision will serve as your motivation throughout your journey.

Play to your strengths. Identify your priorities and values. What brings you joy and fulfillment? What would you regret not doing? Be honest about what you're willing to change or give up to achieve your goals. Your work-optional life should align with your authentic self and deepest desires.

2. Create a Money Mission Statement

Every dollar you can avoid spending per week is at least $300 you don't have to save for retirement.

Reframe your relationship with money. View it as a tool to buy back your future time, not just as a reward for work. Identify your spending triggers and emotional responses to money. Create a spending philosophy that aligns with your priorities and life vision.

Mindful spending. Develop a money mission statement that outlines:

• What you spend on mindfully and without guilt
• What you spend on only as necessary
• What you do not spend money on

This statement will guide your financial decisions and help you avoid lifestyle inflation and mindless spending.

3. Invest Wisely for Long-Term Growth

Good investing is boring.

Keep it simple. Focus on low-cost index funds that track the overall market. Avoid trying to beat the market or picking individual stocks. Remember:

• Time in the market is more important than timing the market
• Inflation may be a bigger threat than market risk
• Fees can significantly erode your returns over time

Diversify your magic money sources. Consider a mix of:

• Index funds (stocks and bonds)
• Employer-sponsored retirement accounts (401(k), 403(b), etc.)
• Individual Retirement Accounts (Traditional and Roth)
• Real Estate Investment Trusts (REITs)
• Rental properties (if you're willing to be a landlord)

Aim for a balance between growth potential and risk management.

4. Plan for Housing and Healthcare

Medicare will cover about 60% of their medical costs, leaving them on the hook for the rest.

Housing flexibility. Consider your ideal living situation and how it might change over time. Options include:

• Owning a home (potential for downsizing later)
• Renting (more flexibility, less maintenance)
• RV living or full-time travel
• Geographic arbitrage (moving to a lower cost-of-living area)

Healthcare planning. Understand your options and budget accordingly:

• Employer-sponsored plans (while working)
• COBRA (temporary coverage after leaving a job)
• ACA exchange plans (individual marketplace)
• Health Savings Accounts (HSAs) for high-deductible plans
• Medicare (age 65+)

Factor in potential increases in healthcare costs and consider strategies to optimize your income for lower premiums.

5. Calculate Your Magic Number

Base amount (annual expenses × multiplier) ($): 100x/SWR

Determine your savings target. Calculate how much you need to save based on your desired work-optional lifestyle:

• Full early retirement: 25-35x annual expenses
• Semiretirement: Traditional retirement savings + additional funds for early years
• Career intermission: Traditional retirement savings on track + funds for the break

Consider your risk tolerance. Choose a safe withdrawal rate (SWR) between 3-4% based on your comfort level and early retirement timeline. The earlier you retire, the more conservative you may want to be.

Use the formula: Magic number = annual spending (minus any pension payments) × inverse of safe withdrawal rate + additional expected expenses

6. Accelerate Your Progress

Everything compounds.

Boost your income. Explore options like:

• Side hustles
• Retraining for a higher-paying career
• Negotiating for raises or promotions
• Starting your own business

Reduce major expenses. Focus on the two biggest costs:

1. Housing: Consider downsizing, house hacking, or moving to a lower cost area
2. Transportation: Reduce car ownership costs, use public transit, or bike when possible

Optimize your savings rate. Bank your raises and bonuses, increasing your savings rate to match increased earnings. Automate your savings and investments to remove temptation and decision fatigue.

7. Make Your Plan Bulletproof

There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.

Diversify and allocate wisely. Balance your portfolio between stocks and bonds based on your age and risk tolerance. Consider the formula: 120 - your age = percentage to allocate to stocks.

Create backup plans. Build in contingencies such as:

• Multiple sources of income/assets
• Cash buffer (2-3 years of expenses)
• Home equity line of credit
• Ability to cut expenses if needed
• Marketable skills for part-time work

Maintain proper insurance. Keep comprehensive health insurance, property insurance, and consider umbrella liability coverage.

8. Navigate the Transition to Work-Optional Living

The biggest gain is the freedom from work stress and work obligations and newfound freedom in how to spend time.

Plan your exit. Consider timing around bonuses, 401(k) matches, or personal milestones. Give appropriate notice and leave on good terms. Take care of logistics like health insurance, tech needs, and financial transfers.

Emotional adjustment. Allow time for a "detox" period to release work stress and establish new routines. Expect a range of emotions, including excitement, sadness, and potential identity loss. Communicate openly with your partner about the transition.

Create structure if needed. Some people thrive with unstructured time, while others need more discipline. Experiment to find what works for you, whether it's scheduling activities or creating personal projects.

9. Prioritize Your Well-Being in Early Retirement

Early retirement itself will not magically make healthy choices for you, reverse your bad habits, or get you off the couch.

Focus on physical health. Now that you have more time, prioritize exercise and healthy eating:

• Aim for 10,000 steps per day
• Mix cardio and strength training
• Cook more meals from scratch
• Try new healthy recipes and activities

Nurture mental and emotional well-being. Explore activities that bring meaning and fulfillment:

• Volunteer or engage in community service
• Learn new skills or languages
• Practice mindfulness or meditation
• Cultivate hobbies and creative pursuits

Stay socially connected. Maintain relationships and build new ones:

• Join clubs or groups aligned with your interests
• Attend community events
• Schedule regular social activities
• Consider part-time work or volunteering for social interaction

By prioritizing your overall well-being, you'll be better equipped to enjoy and make the most of your work-optional life.

Last updated: October 9, 2024