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The Best Retirement Plans Include Flexibility

The Best Retirement PlansFor most of us, when the time to retire comes, hopefully it’s a decision that has been in the works for a long while before it actually happens. The best retirement plans are made well in advance.

You work for many years, you make money, and you contribute into your retirement accounts. You watch your assets grow over time. And eventually, you pull the trigger and retire.

But just because you create a retirement plan doesn’t mean that everything outside of your control will fall into place according to the plan. Even with the best retirement plans, sometimes we’re forced to act before we’re ready.

We ran into this scenario last summer after I was unexpectedly laid off.

Even the Best Retirement Plans Sometimes Get Off Track

Ms. Financial Slacker and I started saving for retirement shortly after we began working. Before long, we had saved a little money, but when we began investing into more than just our 401(k) plans, we felt that we needed more guidance. So we hired an advisor and started a formal retirement plan.

Our advisor came in the form of a family member who was also a certified financial planner. While she was a big proponent of investing in low-cost index funds, she was also a believer in the value of being frugal. We read the Millionaire Next Door, and even though we didn’t follow all the advice in the book, we made decent incomes and did a good job of saving. And thanks to this advice and the value of compounding, we accumulated a nice investment portfolio over the next twenty years.

But everything doesn’t always go according to plan. When we started this process many years ago, we created the best retirement plans we could and we were well on our way to executing those plans when I suddenly found myself unemployed last summer after getting laid off.

Getting laid off created a timing problem. Our retirement plans didn’t contemplate dropping out of the workforce at that time. Not only did we still have expenses to pay including private school and college, also our portfolio was structured for capital gains not investment income.

But sometimes even the best retirement plans need to be adjusted. As such, we reassessed and began moving in a new direction.


How I Made Money for the Past 20 Years

I spent the last 20 years working for others. Running other people’s businesses. Buying companies for other people. Raising money for others. I have done everything possible to make those companies as successful and profitable as possible. And if I can brag about myself for a minute, I was pretty good at it.

Unfortunately, because I was good at making money for other people, I put all my effort into that and ignored other areas. While I was busy making other people money, I wasn’t focused on my own finances. I was saving money and I was investing that money. But I wasn’t figuring out how to make that money work for me.

It wasn’t until I got laid off that I changed my mindset.

The good news is that we didn’t have an immediate income need. Ms. Financial Slacker’s income coupled with my consulting income still exceeded our expenses even after the layoff. Also, because we had started saving early, we were well-ahead of where we needed to be.

But even though we were in a good place, once I no longer had a regular salary coming in the door, I realized that I needed to do something – find another job, monetize my portfolio, or go into business for myself.


How I Will Make Money for the Next 20 Years

I looked at three options for making money.

Find another job

Despite what the federal government would like you to believe, the job market is not that strong in the US. Also, because I live in a smaller market, the job prospects are even more limited. And I spent much of my 20 years in a niche industry which is in the midst of a massive overhaul driven by declining volume and industry consolidation.

So finding another job on terms that I am willing to accept might be a challenge.

Monetize my portfolio

As I said, my portfolio was set up for capital gains. For 20 years, I had multiple stable income sources and didn’t need investment income. From the time we started working, both Ms. Financial Slacker and I put money into our 401(k)s. We invested primarily in a diversified portfolio of index funds. While over the years, there were periods where we couldn’t invest and there were periods where we got off track for one reason or another, overall we consistently invested during most of that time.

And because we had started investing at a young age, our pre-tax retirement accounts are fully funded. This means that once we reach retirement age, those accounts will generate enough investment income to live off without any further contributions.

But while our pretax accounts are on track, our FIRE accounts are not set up to fund our current living expenses. Our retirement plan anticipated continuing to generate an income while the kids are in school. And even though our expenses are paid and we’re still saving, I am less comfortable with our current income model lasting through the next twenty years without making some changes.

So rather than living off our portfolio today, I have started looking at the viability of the third option.

Go into business for myself

Technically, I am in business for myself. I own this site and it generates a small income stream. But it’s still a relatively new site.

I also provide consulting services. I wrote about a mortgage refinancing project I recently worked on.

So between the website, consulting projects, and a few other ideas in the works, I have the start of what could become a full-time self-employment venture.

But I need to continue growing this business. And that’s where I am focusing my efforts.


The Best Retirement Plans are Always Evolving

Now that I am self-employed, we are working on a new retirement plan. The best retirement plans aren’t static. They allow for changes in circumstances. One size does not fit all when it comes to retirement planning.

Our new plan focuses on getting our self-employment income to a consistent level allowing for greater flexibility in other areas of our life. With investment income and self-employment income approaching the level needed to pay for our current living expenses, we can explore different alternatives that wouldn’t be available otherwise.

And because our pretax accounts are fully funded, we can focus our efforts shorter term on the next twenty years. I am excited about how things have worked out and I’m looking forward to this new phase of our life.


Readers, have you experienced any significant events that forced you to reassess your best retirement plans made long ago?  How did you react?  Did you find that the changes actually helped you reach an even better place than before?


Permanent link to this article: http://financialslacker.com/best-retirement-plans-include-flexibility/


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  1. Vicki@MakeSmarterDecisions

    I “early retired” in May and I’m back to work full-time now, so we definitely have adjusted. This is a temporary job and because I still have one in high school (senior) we can’t travel yet. I took this job because I enjoy the work and we will pay down a rental property to increase cash flow. Win-win for the moment!

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    1. Financial Slacker

      That’s a pretty short retirement. But it sounds like it worked in your favor. I keep hearing these stories of people leaving the workforce only to get pulled back in. But on their terms.


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  2. Dividends Down Under

    FS, good on your for having so many different income sources that you can take a huge setback like that in your stride. It sounds like you know what you’re going to do, so you can get right ahead and do it without hesitation.

    We are still at the start of our FIRE journey, so there’s a long way to go. Our biggest setback so far is that we’ll have to do IVF to have children. This is a huge set back for our investing plans and how we can get our money compounding for us (it’s not doing much sitting in our bank account). But luckily, we have it, and we’ve started investing early so it should be okay in the end.


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    1. Financial Slacker

      Thanks, DDU.

      It’s taken me a while to get to where I can take things like getting laid off in stride.

      Good luck on the IVR.

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  3. ambertreeleaves

    Good that you share this story. It shows that flexibility is the key to a plan. Noone knows what happens tomorrow.

    Our own plan is only one year old and void already due to a job change. As I prefer the startup experience – I am employee be 1 – over the corporate life I had. It comes with an impact on our plan. Add to that our intentional choice to travel more…. Let’s see what comes along to keep us on track.

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    1. Financial Slacker

      Congratulations on the entrepreneurial leap, ATL. Can’t wait to hear and read more about it over time.

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  4. Finance Solver

    Hearing stories of full timers who’ve lost their jobs which lead to them losing their livelihood made me absolutely scared to be dependent on one employer for income. I may sacrifice a bit of social life but I think it’s worth it when I gain security in return. I would not want to live a life of fear!

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    1. Financial Slacker

      Having multiple income sources is critical. Depending on a single employer for your livelihood is beyond scary. It’s like owning a company with one client. You’re at the whim of your employer.

      But it sounds like you’ve already figured that out.

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