Why are ERE'rs so concerned with a side income when retired?

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1taskaday
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Why are ERE'rs so concerned with a side income when retired?

Post by 1taskaday » Fri Apr 25, 2014 2:49 pm

A question that I have been debating over and back in my mind about ERE is:

Why are early retirees or "would-be" early retirees always searching for a side income once retired?

I know the whole debate that Jacob puts forward about the people who debate whether he retired or not, and get this clearly.
This is not what I'm thinking about-I get that people may want to challenge themselves with a new different career and if they make an income from this, all the better.

The question I am really alluding to is, Why do people who have retired with their financial plan all set out, feel that they must try to bring in a side income?

Is it fear of the unknown, inflation or some catastrophic event that may happen to them eg. Health/disease problems.
Maybe it's because the majority on this forum are from the US and healthcare is so expensive there....

It's not exactly that I'm disappointed or disillusioned by this need to keep earning when "retired" but I really do not want to have to earn or work when I stop... but almost all on the ERE forum seem to always be on the "lookout” for extra income once they retire.

Why?

Surely the whole point of ERE is to reach a stage that earning money is not a concern any more?

I also understand the whole "Renaissance man" deal –i.e. the ability to survive and adapt as the need arises BUT this is not what I am alluding to either.

It’s just my observation but people on this forum seem to require that they earn after they "pull the trigger".

Have they retired too early with an inadequate financial plan?
Or is it a security/fear factor?
Is it to feed a need to feel "accomplishment” or a sense of achievement similar to the feeling after completing hard work or a task?

I am just wondering is it universal with all early retirees to be on the constant "look out" to earn when retired.

I suppose if that’s part of an ERE way of life, my question is, Why would I not just stay working where I am (on much reduced hours), as it is easy to earn bigger money than scrounging from a side income?A side income will take up a lot of time and energy to get started...the whole point of ERE is surely to be FREE?


Some may answer that it “stretches” or develops a person to earn from doing something new, but my answer to that would be, that I could stretch and develop myself by doing many other more interesting things than having to concern myself with money.

I will be interested in reading other ERE forum member’s opinions to this question, as this is not a criticism only an observation that I need to work out in my head.

jacob
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Re: Why are ERE'rs so concerned with a side income when reti

Post by jacob » Fri Apr 25, 2014 3:33 pm

It depends on how you see ERE. Is it a form of traditional retirement albeit much earlier, that is, the literal meaning? Is it the emergent renaissance ecology meaning?

Figuratively, if you think of your food supply as farming a field of wheat for X years to produce enough grain for the rest of your life, then planting an apple tree after you have enough grain doesn't make sense. Conversely, if you think modern farming is crazy but you happen to like gardening, then planting trees and growing vegetables makes a lot of sense. If this is your perspective, then ERE is not so much about building up a sufficiently large stash of grain to allow permanent beach-sitting as it is about finding a better way grow food and integrate this activity with the rest of your life. It's a nice side-effect that you can eat the garden produce too.

Here's another way of looking at it.

Modern career workers talk a lot about work-life balance. One is bad but necessary and the other one is pleasant and the balance is about maximizing utility.

Early retirement is about frontloading the work in order to get lots of life later on.

ERE, the way I see it, is to make it possible to eradicate the distinction between work and life. It goes somewhat beyond the naive "you just gotta find a career you're passionate about"-strategy. It's more of a "you gotta find a way to live=work you're passionate about"; and ERE is a suggestion for that way.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by SimpleLife » Fri Apr 25, 2014 4:02 pm

I don't think it's just an ERE thing. I have always felt the need/desire to have a side income. People describe me as a workaholic, even though I don't feel that way. But really for me it's just that I like making money, and I like making it from a few different sources so that if one dries up, I can survive from my multiple streams of income without touching my capital.

1taskaday
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Re: Why are ERE'rs so concerned with a side income when reti

Post by 1taskaday » Fri Apr 25, 2014 4:41 pm

Thank you,I think I understand it better now.

The example and the terms "to get lots of life" and "to make it possible to eradicate the distinction between work and life" really clarify the disjoin I was wrestling with.

Somehow this greater understanding I've now got, highlights more that I'm definitely not doing it correctly.

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chenda
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Re: Why are ERE'rs so concerned with a side income when reti

Post by chenda » Fri Apr 25, 2014 4:43 pm

I'm not sure I have observed ERE/early retiree's been particularly concerned with side income. It seems to me that when you are retired and are living, earning some extra money on the side almost becomes inevitable, but incidental.

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Dragline
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Re: Why are ERE'rs so concerned with a side income when reti

Post by Dragline » Fri Apr 25, 2014 4:56 pm

Yeah, I tend to reject that premise as well. Better directed to particular individuals, I think.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by Tyler9000 » Fri Apr 25, 2014 5:16 pm

I think sometimes about potential future side income, although I don't look forward to ERE just to do something else that's profitable. I just naturally think about risk mitigation as part of my normal planning process. Must be the engineering training.

Ian
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Re: Why are ERE'rs so concerned with a side income when reti

Post by Ian » Fri Apr 25, 2014 10:27 pm

I think for some people, flexibility and security are more important values than just early retirement. Having multiple sources of income aside from investments increases both, so its just one more tool to achieve their goals.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by saving-10-years » Sat Apr 26, 2014 12:34 am

@1taskaday, if I recall your own retirement plans correctly you have access to pensions which mean that your income is assured at an Early Retirement Moderate level already? So I can see why 'side income' will not be an issue for you. But having said that I don't think that most ERE people here have any attraction to income after retirement for the sake of income. They have an attraction to Interest (in the sense of an interesting life) after retirement.

Most will have a plan that they will be flexible in case they need to be but with far less need to work for income alone. There are occasional posts where someone has the carrot of money for working in their old job, or an undesirable job, dangled in front of them. The usual verdict is not to go for the income.

I think you also have to take into account that those who are planning retirement in their 20s and 30s can not know what is ahead in terms of marriage, children, catastrophic failing (or success) of investment strategy. So they also have a longer and less certain future and like to keep options open. ERE certainly opens options.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by IlliniDave » Sat Apr 26, 2014 7:14 am

Ian wrote:I think for some people, flexibility and security are more important values than just early retirement. Having multiple sources of income aside from investments increases both, so its just one more tool to achieve their goals.
I'd state it more like flexibility and financial wellness are equally important when compared to early retirement, but that's a strong point you make. They're actually quite intertwined, and so far from mutually exclusive.

One advantage I see to earned income is being able to funnel it into Roth IRAs (good to leave behind to the grandkids) and HCAs without getting a premature tax haircut on one's tax-advantaged retirement savings when they're primarily in a 401k or TIRA.

Another is the simple challenge of putting on a radically different hat, as it were, and proving one can still create/add value in some new capacity. I've often thought about signing up at a temp agency just as a way to get a somewhat random sampling of businesses and tasks. I think I'd get a lot of satisfaction out of proving to myself that I could find some modest degree of success in the world without relying solely on my past accomplishments.

Another is that life is full of vagaries and those of us who are little older are a bit closer to the point where age will preclude us from changing course and easily re-entering the workforce should a wrench fall in the works. So it makes sense to take advantage of any space where enjoyment/fulfillment and income intersect to add a little robustness to our position.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by sky » Sat Apr 26, 2014 10:01 am

Money is a surrogate for energy exchange. People who are smart and energetic and exchange those things with other people will generally receive income for it. Retirement does not mean "shut down", it means you can choose your energy direction.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by arebelspy » Sun Apr 27, 2014 5:40 pm

One other reason why a side income may be desirable (or at least the potential for one) is that it lets you FIRE way earlier - crucial for someone who doesn't care for their job.

Say you wanted to work until you were at an ultra safe 2% SWR. To do that means your stache has to be DOUBLE what it would at a 4% SWR (need 50x expenses in assets instead of 25x).

If instead you FIRE when you're at a 4% SWR, that may not be completely safe historically for 50+ years, but if you have the potential for side income, you don't have to worry about the small case of failure, as you can use the side gig to turn those into successes.

In other words, having a side gig or potential for one, you don't have to keep working and working until you hit an ultra-safe failproof level, which takes much longer. You can FIRE on a decent chance of it working, and have a plan if it doesn't, so you can be done way earlier.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by Scott 2 » Wed Apr 30, 2014 8:43 am

I've always felt like working more hours to get there faster is kind of missing the point.

I think about income when I'm FI. It's fear - of the unknown, of loss, etc. I definitely have an underlying perspective that I cannot have too much money. Walking away while at peak earning levels will be very difficult. A side income could make it easier, especially if the hourly rate is awesome.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by steveo73 » Wed Apr 30, 2014 5:22 pm

It sounds like a lot of ERE's are concerned with a side income. I personally am not concerned about creating a side income.

I think I'd rather work a little longer to create a larger stash or continue working if it was required for the extra buffer.

I don't though consider managing my stash a side job. I consider that an important part of my life.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by Scott 2 » Wed Apr 30, 2014 6:03 pm

One more year syndrome is a real risk with the ERE strategy, since it means a 25% increase in the long term budget. That's a big jump in financial security for 12 months work.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by workathome » Wed Apr 30, 2014 6:15 pm

I want to live off my mostly-passive side-income (think real estate) and not have to ever touc the best egg. Not that different from doing more with your investments than passive indexing.

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Re: Why are ERE'rs so concerned with a side income when reti

Post by jacob » Wed Apr 30, 2014 7:03 pm

+1 to arebelspy.

I'm in favor of letting this occur as a side-effect. I'm also risk-adverse enough not to count on it preferring to get to 3% and then die with too much money. I tried to the freelancing thing and while it's fun if you like to do it, it would not be much better than a job (for me) if I had to do it in order to make the money last.

However, I would prefer the side-income over staying longer in a full-time job I didn't like in order to increase safety from a mono-income. It's quite a bit of extra work to go from 4% to 3% and twice as much to go from 4% to 2%.

To reemphasize the point though. I prefer to live in a way and doing things that seems to generate sporadic bursts of income. 4% was the point where I did the transition (admittedly that happened when the market was undervalued and not overvalued like now, so I had probability in my favor). I'm now under 2%. Mileage varies.

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