Why I Failed At Early Retirement: A Love Story

Happy 2020! May this new decade be better than the last.

One of the things I enjoy about the Financial Samurai community is that you guys keep it real. After announcing that I plan to be more entrepreneurial and less focused on retirement, you guys gave an outpouring of support and encouragement. This means a lot.

When I was trying to survive the investment banking meat grinder in my 20s and early 30s, I always saved in a special folder personal thank you e-mails I got from colleagues or clients. Their words of encouragement were more valuable than money.

On the flip side, one of the realities of keeping things real is that I’ve also got to face hard truths. And the latest hard truth from many regular readers and casual observers is that I’m an early retirement failure.

Facing The Truth Of Early Retirement Failure

Check out this comment from Dan on my post, Less Retirement, More Entrepreneurship:

“Thinking about it some more, isn’t your situation a case of early retirement failure? You thought you had enough money for early retirement. After having a child, you reassessed your situation and decided you needed more money. One of the criticisms of FIRE is “It all changes when you have kids” which seems to describe your situation.

Your whole brand is “be amazed by the guy who retired early to live in SF, have a family & coach high school tennis.” Now, you are going to monetize your blog & be more entrepreneurial which sounds a lot like going back to work. Not necessarily the corporate grind but your focus on hard dollar goals sounds like you don’t think you have enough money, which de facto means your initial early retirement planning was insufficient to cover the range of outcomes.“

Dan is absolutely right. After eight years of early retirement, I admit I can’t hack it anymore. I’m constantly looking 3-5 years ahead in the future. If our current financial situation stays static, I foresee problems ahead, especially if there is an economic downturn.

I am now forcing myself to alter how I spend my roughly 20 hours a week on Financial Samurai from 90% fun to 50% fun, 50% business. For the next six months of my new beginning, I’m also going to increase the time spent on Financial Samurai by ~10 hours a week to focus on business. Depending on how I do, I’ll then look for a job by mid-2020.

Some of you may have read a guest post I did on CNBC about this topic. That was the abridged version. Here I explain in more detail why I failed at early retirement.

Why I Failed At Early Retirement

1) I underestimated my desire for social interaction. I am an extrovert and early retirement is harder for extroverts because we gain energy from other people. Further, I had one of the most stimulating jobs on the market.

Every day I got to utilize my finance and economics background to analyze global stock markets. I’d meet amazing entrepreneurs from Asia to help them raise capital in America. About once a quarter, I would travel to Asia for a conference or take clients on trips to see investable companies. There was always something new happening every day. My job was exciting!

When you go from working ~60 hours a week for 13 consecutive years to having all the free time in the world, it is very jolting. It took me a couple years to get used to my newfound freedom because I had doubts about whether I had made the right decision.

In 2014, I found a partial solution to my missing social interaction by consulting for 10 – 20 hours a week at a couple financial technology startups. Living in San Francisco, I had always wanted to see what startup and tech life. But after a couple years of off and on again consulting, my interest waned, so I stopped.

Through tennis and softball, I was able to fulfill consistently my need for social interaction. However, the more I played, the more injured I became. Therefore, playing sports every other day was not the solution. For me to be happy, my body needs to be healthy.

Related: It’s Impossible To Stay Retired Once You Retire Early

2) I underestimated how low interest rates would go. Although I’ve been a firm believer of “low interest rates for life” ever since I started Financial Samurai in 2009, I did not expect the 10-year bond yield to drop to 1.5% in the Fall of 2019. I thought we’d stay around 2.5%.

The lower interest rates go, the harder it is for retirees to generate low-risk retirement income. Everything from municipal bond yields to stock dividend yields have come under pressure because, in finance, everything is intertwined.

For example, instead of only needing $1,000,000 in additional capital to generate $50,000 at 5%, one now has to accumulate $2,500,000 in capital at 2% to generate $50,000. Seeing such a massive shift in the goalpost when you don’t want to take more investment risk is disconcerting.

The more interest rates fall, the more retirees fall behind. By nature, retirees are more risk-averse. Therefore, retirees may be forced to alter their asset allocation to ensure they are not left too far behind due to inflation.

The only way retirees can really benefit from lower interest rates is if they have debt. My refinance is saving me roughly $13,000 a year in cash flow, but it doesn’t come close to offsetting the decline in investment income thanks to lower interest rates.

Not only have declining interest rates made it harder to generate retirement income, inflation has also thrown my retirement plans for a loop.

I used to think $250,000 a year was enough to live a middle-class lifestyle with a family in San Francisco. We’ve been living below $250,000 for the past three years. Instead, the data now says $309,400 is the minimum household income a year. The scary thing is, the income requirement figure was $343,000 in 2019.

3) I underestimated how much I could love a child. Before becoming a parent, I only had a two-dimensional idea of what love was. I loved my parents and sister in one way and I loved my wife in another way. Then when my son was born, a new type of unconditional love was created that made me want to do everything to take care of him.

I understand now why couples who are financially struggling decide to have multiple children. I understand now why parents pay an exorbitant amount of money for private school when everything can be learned for free online or at public school. I also understand why already wealthy parents feel the need to bribe their kid’s way into university.

It is in our DNA to provide for our children. Otherwise, our species would not survive. Once you have kids, you will want to work a little bit harder and try to live a healthier lifestyle.

4) Taxes went down and the estate exemption amounts went up. When I left the workforce in 2012, it felt great because a $250,000 base salary faced a demoralizing 33% federal marginal income tax rate and the estate tax exemption was $5,120,000 per person. I was tired and no longer wanted to give a third of my salary to the federal government and another 8% to the state of California.

In 2020, a $250,000 base salary now only faces a 24% federal marginal income tax rate while the estate tax exemption amount has doubled to $11,580,000 per person.

It feels like we have a limited window to earn as much as possible before tax rates go up and estate tax exemption amounts go down.

5) Being an early retiree doesn’t feel right. After the first year of early retirement, I no longer told anybody I was an early retiree because I felt stupid saying so. It was embarrassing to be only 34 years old and not have a full-time job in one of the most dynamic cities in the world.

If I had moved to a small beach town in Kauai, I think I’d have been more comfortable telling anybody who asked that I was retired. But not here in San Francisco. San Francisco is a place where the most motivated, type-A people from the most overpriced private universities come to make their fortunes. The city has become very much like New York City, full of hustle and bustle.

When all your friends are killing themselves at work trying to make more money to afford a bigger house, tuition for multiple kids in private school, and the next promotion to proudly update on their LinkedIn profile, it feels extremely out of place to say you don’t have a job.

Therefore, I started telling folks who asked that I was a writer, a high school tennis coach, a consultant, or an entrepreneur. And you know what? It felt great having an occupational identity again.

6) I underestimated my ability to move to a lower-cost area. For someone who lived in six countries by the time he was 14 and has traveled to over 60 countries so far, I’ve been terrible at relocating. My wife enjoys stability too.

I’ve been seriously thinking about moving since 2012 when I first left my job. That year, I even tried to sell my primary residence. Thank goodness nobody wanted to buy it then.

In 2014, I thought I was ready to move to Hawaii with my wife. We created a detailed retirement income/budget spreadsheet where we’d live a comfortable life off of roughly $100,000 gross a year. Instead of making the move since we both didn’t have jobs, we decided to make Hawaii come to us.

I found a fixer-upper with panoramic ocean views in an unknown neighborhood. The house was such a no brainer deal that I had to buy it. All other properties in major cities with ocean views trade at hefty premiums, not at a discount like they were and still are in San Francisco.

It took about two years to completely remodel the house to our liking. There was no way we were going to then leave after all that effort spent. We needed to enjoy the fruits of our labor gosh darn it!

Then in 2017, our son was born. It was as if he waited until the house was ready before coming into the world. We did not feel comfortable relocating to a new ecosystem as new first-time parents since we had grown accustomed to our doctors.

What I did shoot for was relocating to Hawaii by 2020 if we got rejected to preschool. As we only applied to three for the 2019 year, I was secretly hoping we’d get rejected by all. This way I would have no more excuses left to stay. Alas, we got accepted to our neighborhood preschool five minutes away.

Staying in expensive San Francisco was the path of least resistance. We had our friends, our routines, and our network. Pulling my son from preschool after just getting acclimated and then going through the entire application process again in a new city with no guarantees didn’t feel like a wise use of time. Instead, figuring out a way to make more money does.

Related: The Proper Geoarbitrage Strategy: First Your City, Then Your Country, Then The World

7) I have plenty more time. I like to be productive. If I’m not doing something productive after a day I get antsy. For 32 months, I was a stay-at-home dad and writer. The days often went from 5 am – 11 pm. It was a tough slog, but I now feel like I can tackle anything in the world.

Now that my boy is in preschool, I suddenly have ~8 hours a day of free time because he takes a nap at school from 1 pm – 3 pm as well. The first month of preschool felt like I was on vacation again. But after a couple months of living the early retirement lifestyle again, I decided I had better start utilizing my time more productively.

With preschool costing $1,950 a month plus donations and our family healthcare premiums going up to $1,940 a month in 2020, the logical thing to do with my free time is to earn more money to cover these expenses.

Finding a job that provides subsidized healthcare and a healthy paycheck is the simplest solution. Figuring out a way to generate an additional revenue on Financial Samurai is another solution. Why not do both.

8) I’ve always wanted to be an entrepreneur. Even before coming to San Francisco in 2001, I’ve wanted to be an entrepreneur. The dream started in middle school in Kuala Lumpur where I was in awe of businessmen who lived in mansions and had chauffeurs drive their Mercedes 280 SELs.

I didn’t pursue my entrepreneurial dream because I landed a good job out of college. It was hard to say no to a healthy salary. When I finally did in 2012, I didn’t optimize Financial Samurai for revenue because I thought I had enough passive income and a severance package to live a comfortable life. All I really wanted to do was have fun and write freely.

The problem with being too comfortable is that it demotivates you to hustle. When your investments are going up every year, why bother trying so hard?

I was just handed an easy life living in America and getting completely lucky by retiring at the bottom of the market in 2009. I’m the 42-year-old loser, metaphorically still living in his mom’s basement, not paying rent and eating free meatloaf all day.

By not facing much hardship after early retirement, I’ve squandered away my potential to become a successful entrepreneur. I don’t plan to let opportunity pass me by anymore in 2020+.

Related: Spoiled And Clueless? Try Working A Minimum Wage Job As An Adult

9) Complaining is a waste of time. I believe everything is rational. If we want something we’re going to do things to make that something happen.

Instead of complaining about my career stalling out in 2011, I immediately devised a way to escape in 2012. The best way to see if you deserve what you think you deserve is to go out on your own. This way, you’ve got nobody to blame or credit but yourself.

Instead of complaining why I still haven’t gotten bumped down from 5.0 to 4.5 in my early 40s, I’ve continued to suck it up and battle against 25-year-old ex-Division I tennis players. As a result, over the past four years, I’ve compiled a terrible losing record that would make anybody want to quit tennis. But I fight on because half the battle is just showing up.

Instead of complaining that the retirement income goalpost has moved $60,000 – $100,000 farther away to live a middle-class life in San Francisco, I’ve decided to face the reality that my retirement income simply won’t be enough in the near future. I will now work hard and find new ways to reach this new retirement income goal instead of making excuses.

10) I want to be able to continue giving my time and money. If I was struggling for money, I probably would have quit Financial Samurai long ago because writing can take forever and everything I write is free. During this time, I’ve had the privilege and satisfaction of seeing so many readers fortify their finances and live better lives.

I’ve heard from college students who have bought homes and are now starting families because they have their finances in order.

I’ve heard from folks in their 50s who got the courage to negotiate an exit package and live life on their own terms.

Having financial independence also makes it much easier to give money because you’re not always conflicted about whether to give or save for retirement. You’re also able to more easily give your time because you’re not always wondering whether you should use the time to hustle.

Finally, I want to have the financial means to take care of my parents and my in-laws, who are all in their 70s. I’ve seen them clearly slow down over the past 10 years. Long-term care can easily cost $250,000 per parent over two or three years.

11) I feel bad taking advantage of subsidized healthcare. One of the strategies some early retirees exercise is receiving healthcare subsidies through the Affordable Care Act. Despite having a million or more in assets, these early retirees feel no shame in receiving subsidized healthcare.

Call me stubborn, but I just can’t get myself to rejigger my retirement portfolio to lower our income and game the system. I don’t think the ACA was set up to subsidize early retirees with a healthy amount of assets. The ACA was set up to help those deep in the grind, struggling to one day be free.

You can get healthcare subsidies if you make up to 400% of FPL

12) I lack sufficient intellect and pedigree. The fact that after trying so hard for so many years that I can’t stay retired shows that I’m not smart enough or wise enough to account for all the important variables.

But I’ve known about my intellectual deficiency since I was a boy.

No matter how hard I tried, I could never get straight As, not even for just one quarter. I also got a very mediocre SAT score despite spending hours pouring through SAT study guides. I remember always being one of the last students to finish an exam.

After graduating from State U and getting a job, I was condemned to the chopping block after just two years due to poor performance. In contrast, my Canadian classmate ended up becoming an MD at 32. It was only through luck that I was able to escape New York City and come to San Francisco with a new job.

In 2007, I foolishly bought a vacation property in Lake Tahoe because I thought I was getting a good deal at 12% off the seller’s purchase price a year prior. The real estate market proceeded to implode and I lost another ~40%. At least I never shirked on my debt.

In 2012, before and after I left my day job, I applied to over 100 startup and tech jobs online in order to make sure there were no undiscovered opportunities. I was either rejected or didn’t hear back from all of them.

One of three Airbnb rejection e-mails in 2012. I’ve kept them as a reminder to never surrender

Since 2009, I’ve written three articles a week without fail. You’d think with so much practice, my grammar would improve. Yet, my writing Mastery score is a dismal 26% according to my Ukranian friends at Grammarly.

In 2013, I applied to the Knight Fellowship program because I thought it would be an amazing opportunity to learn, network, and contribute to online media. Having a non-traditional background working in finance while owning a growing personal finance site would have added unique perspective to the classroom. Nope, I got rejected.

In 2015, I applied to a couple incubator programs to see if I could leverage Financial Samurai to create a fintech company. After all, the platform was built, growing, and profitable. Both programs were within driving distance from my home as well. I got rejected by both as well.

Today, I fail to realize how angry I’ve made some people during the chronicling of my financial independence journey. Although I believe my reality is just as real as someone else’s reality, because the cost of living is so high in the two cities I’ve spent my entire post-college life, it turns off a lot of people.

Thankfully, I have the wisdom to recognize my intellectual deficiency. As a result, I’m going to make changes going forward. I must keep going because I have no safety net.

Related: Perpetual Failure: The Reason Why I Continue To Save So Much

13) I love a challenge. Progress is my one-word definition of happiness. As soon as I stop making progress in any type of activity, my enthusiasm wanes.

Since 2012, I’ve had the most fun trying to grow my then ~$80,000 in gross passive income. My initial goal was to grow the figure to $100,000 within a couple years. Once that goal was achieved, I started raising my gross passive income goal by $50,000 every two years to keep challenging myself.

Therefore, going from $250,000 to $300,000+ is just a natural progression I’ve been giving myself for years. It’s just like inflation, the stock market, the real estate market, or anything else that tends to go up over time. But I can understand how first-time FS readers would see this goal as a shock.

I know we can comfortably live off $250,000 a year in gross passive income because my family of three has been comfortably living off less than $180,000 a year in gross passive income for the past three years.

But only a fool would expect expenses to stay the same given life is so unpredictable. Although I’m intellectually deficient, I ain’t no fool! To be happy, you must constantly forecast your misery.

This leads me to my final point.

14) We had baby! One fine morning in December 2019 at 7:40 am, my wife and I were blessed with a healthy baby girl. We checked into the hospital at 11:30 pm the night before and we couldn’t have had a smoother delivery. My wife’s OBGYN started her shift at 11 pm and finished her shift with us.

With new life comes new responsibility. As the sole income provider, the pressure in on like Donkey Kong. I need to make sure we have a comfortable enough home, a safe enough car, enough childcare and household help to maintain our sanity, and enough funds to pay for her education.

Further, I’m probably a mediocre stay at home dad. Goodness knows I’ve tried my best since April 2017 to be a full-time caretaker. I’ve read all the books and have spent endless hours trying to nurture my son. But sometimes, it’s important to recognize when your best is simply not good enough.

So many working fathers have told me that it is the quality of time, not the amount of time that makes them great fathers. If what they say is true, I shouldn’t feel bad spending 20 – 50 hours less a week with my children, or 1,000 – 2,600 less hours a year.

I’ve also spoken to over a hundred full-time mothers since early 2017 and I don’t recall a single one wishing their husbands or partners stayed at home more to help out with the kids. I saw mothers juggling two and sometimes three kids with relative ease. It was more like they were happy their partners were out there making some money!

As a result of my conversations, I’m likely overestimating my value as a stay at home dad. When your beliefs are incongruent with reality, things must change.

All the same, I feel blessed. If you would have asked me five years ago whether we’d have a boy and a girl before the year 2020, I would have said no way. For our first, we tried for years before finally conceiving.

My family is why this article is a love story. I will not fail my family.

Related: The Cost Of Fourth Trimester Childcare: $40,000 And Up

Life Is Unpredictable

So there you have it folks. It was a nice 8-year run, but all good things must come to an end. There’s simply too much to do and too much at stake not to go out there and make a living again.

In an upcoming post, I’ll explain how I plan to accumulate enough capital to get back my early retirement membership card by 2022. Let the challenge begin!

Related post:

If I Could Retire All Over Again, These Are The Things I’d Do Differently

Readers, any other early retirement failures out there who would like to commiserate? What went wrong? What were some of the things you underestimated or didn’t expect after retiring from the grind?

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