Dumb thoughts on retirement
I’m going to open a bookstore, slash coffee shop, slash wine bar.
Have you ever been in a dire situation where you needed alcohol but it's 10 AM and all the bars are closed? Or, the even more dire situation where you need a book, but it’s 10 PM and all the bookstores are closed? Well, I’ve got a magical place that caters to both types of loiterers - both the inebriated and the well-read. Add in coffee drinkers (obviously I’m going to have free wifi) and I’ve captured the entire spectrum of loiterers in a single business.
Maybe it won’t be profitable, but it does sound like a fun idea. We all know that a lasting business is built on fun. Think trivia nights, ping pong tables, reading programs, board games, and cozy chairs. Dim the lights. Double the size you’re thinking of; if it doesn’t take up at least two stories or fill out an entire city block, you’re thinking too small. Drop in a bunch of wood tables. And move the entire establishment to the center of a lively downtown area.
I’m still in the planning stages where I haven’t run the logistics or thought through the details; so yes, it is a very realistic dream. I’m thinking of officially calling the business: “Bookstore / Coffee Shop / Wine Bar” to really drive home the objective. And, I’m going to start the business at 45 when I retire.
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One of my biggest strengths is that I’m a horrible multi-tasker. I’ve got the exact opposite ability. When something gets trapped in my mind, it’s the only thing I can think about. Some of the pros: I’m great at studying long hours, I can sit down and tackle tedious tasks, and I follow through when I say I’m going to do something. One of the cons: I don’t remember anything other than the one thing I was focusing on.
My girlfriend: “Are you ready to go to Diablo Lake?”
Me: “What? When did we talk about this?”
Her: “Three days ago. We had a thirty minute talk about it.”
Me: “Hmm. I can’t say I remember. What did I say?”
Her: “You said it was a great idea.”
Me: “Well, it is a great idea, I just wish I had more forewarning.”
Her: “You mean like a conversation yesterday talking about it.”
Me: “Oh, I guess I was distracted with other stuff.”
Her: “I'm glad you’re back now at least. I missed you.”
Recently the one thing that was dominantly on my mind was retirement. I’m thinking that I want to retire early. I’d like to work hard now so that I can not work hard later. Obviously I’d still be ambitious in retirement, my attention would just be focused on different hours of the clock. Less on nine to five and more on two to ten. The bookstore idea is more representative of other stuff I’d like to do. In retirement I’d try to become a full time writer and I’d open a small business, maybe a bookstore.
Retiring at 45 is definitely doable. I ran the numbers. When I say I ran the numbers, I mean that I built an excel model that projects out income, estimates expenses, includes major life events, and targets savings goals to make it all happen. The model includes an embarrassingly personal amount of detail, so I’m not going to share too much detail. As one example, in the more specific version of the model (later I had to generalize it, because it was getting too ridiculously specific) I had an input for the age I bought a future dog, the expected lifetime of that hypothetical dog, and the estimated end-of-life cost of said dog.
A major criticism of a 24 year old trying to model their future is that they don’t have a lot of perspective. How can I know what to expect from life if I’ve only experienced the easy parts, right?
Wrong! For every one of my variables I hooked them up to a range of possible values, and scenario-tested out the uncertainty. What if my expenses are a lot higher than expected? I can tell you. What if the market has a less than average return over my lifetime? I can tell you. What if I end up having four kids, the inflation rate on college tuition remains at 3.7%, and my college savings funds only return 4.0%? I’d pretend I didn’t know. (Again, embarrassing level of detail.)
I probably invested way too much time into the model. It sucked away three evenings and one weekend. I started worrying about expenses I didn’t have based on life events that hadn’t happened yet. What if the maintenance, repair cost on my future home is above 1.5% annually? How should I invest my money, growth or value funds? Why is college so expensive? I narrowed down 207,000 possible simulations and ran the numbers for 70,000 of them. I would have ran more, but my brain and computer were overheating. One night I literally stayed awake until 2 AM thinking about it all.
The next day, after the restless sleep, I decided to generalize the model. Instead of estimating how much I’d spend on gas when I was 35, I instead had an estimate for total expenses at 35. Based on the original model, I knew that retiring at 45 was possible, so in the new model, I tested out what I’d have to do to make that happen. It turns out, the major action item was rather intuitive: working hard.
The salary for my job is very formulaic. While there is a big salaried piece, a lot of my income is based on hours worked, promotions with detailed specifications, and timing of when I pass my actuarial exams. These are all items that I have control over with planning. And, I’m ambitious enough to make it happen, so I’m going to do it.
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The biggest variable in my model was my girlfriend. It’s hard for me to imagine my future without her, and I’m much more excited to spend my future with her than I am to be retiring at 45. The model was based around us and what type of hypothetical lifestyle we both hypothetically want. She audited all the hypothetical variables. Since she’s less interested in starting the bookstore / coffee shop / wine bar so early, she wants to retire at 53.
As a final disclaimer to this post, I believe that with planning, everyone can retire early. It’s not like either of us make a butt-load of money, we just both understand how a Roth IRA and compound interest work. The Seattle cost of living is tight. Rent in the city costs more than a mortgage in either Idaho or Colorado. We’re also pretty frugal with our money. I take the bus into work everyday and Maddie has never been on a shopping spree. For anyone looking to learn more about finance, I’d recommend Total Money Makeover by Dave Ramsey or I Will Teach You to be Rich by Ramit Sethi.
