Early_retirement_failure
00:00:00.000 | Hello everybody, it's Sam from Financial Samurai and in this episode I want to talk about why I failed at early retirement and
00:00:06.580 | what I plan to do to get my early retirement card back and retire at the age of 45 by
00:00:12.760 | 2022
00:00:14.640 | So for those of you who don't know my background from 2009 to 2011 three years
00:00:20.480 | I was struggling to try to make sense of all the chaos in the markets
00:00:25.160 | Lost about 35% of my net worth in six months and I was pretty sad depressed scared about my future
00:00:31.240 | You know, I'd spent 10 plus years saving aggressively investing diversifying and it still really didn't work
00:00:37.780 | So that three-year time period was very difficult
00:00:41.440 | But very eventful and very rewarding in the end because I finally figured out how to leave work behind in 2012
00:00:49.280 | so I'm thinking over the next three years I can go through somewhat of a similar process and
00:00:56.160 | Figure out how I can get back to early retirement
00:00:59.320 | And I first want to talk about failure because I listen to the community
00:01:04.240 | I listen to what other people say and one of the consistent feedbacks given to me is that I'm an early retirement failure
00:01:11.320 | I simply could not anticipate all the costs and things that would happen in my life after I left work
00:01:18.920 | And I think that's really really fair and true and it gets better folks instead of being called a failure
00:01:25.200 | I'm also being called a loser and I know that's a little bit harsh. But guess what? I love criticism
00:01:31.600 | I just want as much criticism as possible because it is giving me the motivation to do better
00:01:38.200 | And that's all I really want to do is get better at things because stagnation is kind of doesn't feel really good
00:01:45.200 | Progress is my one word definition of happiness think about it progress in your career
00:01:50.640 | You're gonna be happy progress in your marriage
00:01:53.400 | You're gonna be happy progress and seeing your kids grow up and hit milestones. You're gonna be happy. So for me progress in
00:02:00.080 | Developing more and more retirement income so I can get back to retirement or stay retired
00:02:06.080 | That makes me happy and just progress in life and try to challenge myself every single day and not be afraid
00:02:12.960 | I've long gone past being afraid and I just want to I just want to try actually
00:02:18.720 | I'm afraid of not trying because of um, if I'm not trying that means there's something wrong with me
00:02:22.760 | So you may have read a pretty popular guest post
00:02:26.360 | I wrote for CNBC during the holidays and you may have read a pretty popular post that was featured in Forbes about my desire to
00:02:33.880 | Go back to work. Well, those were a bridge versions because of writing lengths and I didn't control those platforms
00:02:40.040 | But I do control the financial samurai platform and I wanted to share with you in more detail on why I think I failed at
00:02:46.920 | Early retirement. So the first point is that I underestimated my desire for social interaction
00:02:52.640 | I'm an extrovert ever since I can remember I remember when I was like five years old in Japan
00:02:58.160 | I was walking down the street and I was just randomly talking to everybody for some reason because I liked
00:03:02.560 | To talk to people and get to know their stories
00:03:05.320 | So I think it's much harder for extroverts to go into retirement and stay retired because we gain energy from other people
00:03:12.780 | Further I had one of the most stimulating jobs in the market
00:03:17.260 | I remember going to Asia every quarter to visit companies talk to entrepreneurs raise capital
00:03:23.520 | I would have to wine and dine clients with a corporate card go to events and you know travel across the country
00:03:29.800 | It was really fun and I talked to a lot of smart people and I learned a lot
00:03:33.040 | so if you go from 60 hours a week to just
00:03:35.520 | Nothing. I mean that's kind of jolting now if I had a
00:03:39.480 | Six hour a day job and then I went to nothing I could I could probably transition better, but I really miss the interaction
00:03:46.860 | I miss the Christmas parties the holiday parties, you know, I would go to like four or five
00:03:51.580 | it would be like wedding crashers or something and everybody was married because
00:03:55.440 | Well, there was alcohol and then there was free food and a lot of people were anticipating good bonuses. So what's not to like?
00:04:02.720 | and I missed that - I
00:04:04.860 | Underestimated how low interest rates would go if you have been reading Financial Samurai since 2009
00:04:11.480 | I have been very bullish on real estate and I've been very bullish on bonds because I
00:04:17.400 | Believed and I still believe that interest rates will stay low for the rest of our working careers if not our lives
00:04:24.120 | We've got it folks since the 1980s interest rates have been coming down
00:04:28.960 | Just look at the chart and the reason why is because of efficiency technology
00:04:33.640 | Understanding cycles globalization and so forth. We've become better at managing
00:04:39.480 | Inflation as well as managing unemployment. Just look at the data
00:04:44.200 | But I did underestimate and did not expect the 10-year bond yield to drop to 1.5% in the fall of 2019
00:04:50.800 | I thought we'd stayed around two and a half percent, which is still low but going down to 1.5%
00:04:56.840 | While there's a bull market in stocks
00:04:59.360 | Hmm, that's kind of rare and that was amazing. It was like everything go up in
00:05:04.640 | 2019 market which is great because I had a pretty large portion of my public investments in bonds
00:05:12.160 | So instead of needing a million dollars in additional capital generate fifty thousand dollars at five percent
00:05:17.440 | One now has to accumulate 2.5 million in capital at 2% to generate fifty thousand
00:05:22.480 | So that is a massive shift in the goalpost
00:05:26.040 | Massive and if you are a true retiree who depends on income from your investments to survive. This is not so good because
00:05:33.680 | Basically your income is gonna go down now. Look granted you should have appreciation in capital and
00:05:42.320 | You could sell your capital and use your capital
00:05:46.080 | But I am pretty conservative where I believe the ideal withdrawal rate in retirement
00:05:51.080 | Touches no principle and the thing is I used to think two hundred fifty thousand a year was enough to live a middle-class lifestyle
00:05:57.280 | with a family in San Francisco, but due to the bull market
00:06:02.560 | We get hurt instead. The data now says you need three hundred nine thousand four hundred dollars in
00:06:09.480 | minimum household income a year to live in San Francisco and the scary thing is the figure was closer to
00:06:15.200 | 343,000 in the second quarter of 2019
00:06:19.280 | So this number this three hundred ten thousand dollar number is based off a 20% down payment on a 1.6
00:06:25.880 | million dollar median priced home and you got to come up with a three hundred twenty thousand dollar down payment, right?
00:06:31.180 | And you're supposed to spend no more than twenty eight percent of your gross
00:06:34.640 | monthly income on
00:06:37.400 | Housing expenses, which is probably pretty reasonable. So you're seeing income go down and you're seeing
00:06:45.480 | housing costs go up and therefore the required amount of income go up now I
00:06:50.520 | Comfortably live on less than two hundred fifty thousand dollars a year in investment income
00:06:55.640 | I comfortably live on less than two hundred thousand dollars a year investment income. We've been doing this for the past three years
00:07:01.200 | But hey if this is what?
00:07:04.520 | Financial pundits and housing analysts want to say I'll I'll accept it because who am I I'm just an unemployed
00:07:11.240 | stay-at-home dad
00:07:13.000 | So three I underestimated how much I could love a child and it's one of those things where you don't really know
00:07:20.040 | What one type of love is until you have a child, you know how to love your parents
00:07:24.880 | You know how to love your relatives, you know how to love your wife your husband your girlfriend your boyfriend
00:07:29.880 | But it's a different type of love when you have a child. It's like the most explosive
00:07:34.720 | Most magical most consuming feeling I have ever felt before there's a great saying
00:07:42.240 | Have kids and the money will come and the simple reason for that saying is that you just get so motivated to work harder
00:07:49.640 | Stay healthier and just do the right thing for your children that money will just inevitably come and I believe that I believe that
00:07:57.360 | Because my energy has gone up
00:08:00.040 | Maybe about 20 or 30 percent since having my boy and I just want to get going and do something and provide
00:08:07.640 | For taxes went down and estate exemption amounts went up
00:08:12.400 | so when I left my day job in 2012 a
00:08:15.800 | $250,000 income faced a demoralizing 33% federal marginal income tax rate and the estate tax exemption
00:08:23.480 | Was 5.1 2 million, which was not bad at the time
00:08:26.840 | but now a
00:08:28.840 | $250,000 base salary in 2020 faces only a 24% federal marginal income tax rate and the estate tax
00:08:35.960 | Exemption amount has doubled to 11.5 8 million per person
00:08:40.960 | so you can die with up to 11.5 8 million and
00:08:45.000 | Your heirs or the charities that you donate to don't have to pay any taxes
00:08:50.120 | Actually, I don't think don't you know, the charities have to pay any taxes
00:08:52.960 | Anyway, check out I think the Mormon Church. I think they save like billions in taxes
00:08:57.580 | So it seems like we have a limited window to earn as much as possible before tax rates go up and a state tax
00:09:05.240 | exemption amounts go down
00:09:07.240 | Five I never thought that being an early retiree felt right when I was 34 just it just just was weird
00:09:15.320 | I felt stupid and when people asked me what I did if I said I did nothing
00:09:19.720 | I just I just felt kind of shameful, you know living in San Francisco. It's it's it's kind of intense now
00:09:26.160 | It's like it's where the most motivated type-a people from the most overpriced private universities come to make their fortunes
00:09:33.920 | so it's like New York City and if I was in let's say a small town on Maui or
00:09:40.080 | Kauai or even in Oahu. I think I could get away with saying yeah, I just retired and I'm just I
00:09:46.720 | Don't know taking care of my kids and stuff like that, but I don't I'm stuck in San Francisco where everybody's go go go
00:09:53.920 | so I started telling folks about a year after I left my day job that I was a writer and
00:09:59.600 | Then more recently over the past three years
00:10:01.840 | I've been telling people who asked that I was a high school tennis coach and you know what it felt great
00:10:07.320 | It felt great to have this occupational
00:10:09.880 | Identity again. So this is something that I think if you retire early or if you just retire
00:10:15.780 | You're gonna have to struggle with this occupational identity for a while
00:10:20.380 | So make sure you retire to something so that you're always feeling like you're part of society and you're doing something to contribute to society
00:10:28.300 | Okay point number six is where I've gotten the most amount of pushback. I told you people have called me a failure
00:10:34.580 | They've called me a loser, but I forgot to tell you they also call me an idiot
00:10:38.380 | So this is the reason why everybody calls me an idiot as well because I overestimated my ability to move to a lower-cost area
00:10:45.960 | People are just like Sam
00:10:47.220 | Why don't you just leave San Francisco and go live in the boondocks and save tons of money and live like a king?
00:10:54.460 | Well, you know what?
00:10:55.860 | Sorry for someone who has lived in six countries by the time he was 14 and has traveled to over 60 countries so far
00:11:02.380 | I'm just terrible at relocating. I gotta admit and you know what? My wife doesn't relocate either. So hey, what am I gonna do?
00:11:09.540 | I've been seriously thinking about relocating since 2012 after I left my job, right?
00:11:14.580 | I was gonna sell my house live in a small place and then I don't know do what digital nomads did back then and go
00:11:20.560 | to Thailand or Vietnam
00:11:22.740 | And I don't know live like a king on $1,000 a month
00:11:26.000 | But guess what? I didn't do that. I decided to stay here because I felt that there was still
00:11:32.340 | Opportunity and then there were still friends and unfinished business. So look I wanted to go to Hawaii in
00:11:39.220 | 2014 and I was ready with my wife to go live a more simple lifestyle of $100,000 in
00:11:45.260 | Retirement income which would have provided a very handsome
00:11:48.340 | Living there. We didn't have kids then
00:11:51.980 | But you know what? I found a panoramic ocean view home in San Francisco
00:11:56.100 | I didn't even realize there were homes with views ocean views in San Francisco because I was so sheltered living on the east and north
00:12:02.100 | Side of the San Francisco. So when I found it, I was like, this is a no-brainer
00:12:05.260 | I'm gonna bring Hawaii to San Francisco and then it took two years to do all the remodeling
00:12:11.980 | So I wasn't about to leave I wanted to enjoy all our remodeling efforts and then in 2017
00:12:18.660 | My son was born and we were just totally totally thrilled. I was thinking well, I
00:12:24.460 | Can't leave because I got doctors here. I need some stability. We just finished our house
00:12:29.380 | So look I was hoping we would get rejected to preschool in 2020
00:12:34.100 | It's not not hugely hoping but I was like, we're only applying to three. There's a 10% or less acceptance, right?
00:12:40.420 | So the chances are we're not getting in but guess what we got and we got into our local preschool. That's five six minutes away
00:12:47.860 | It's great. People are nice
00:12:49.860 | So I don't think I'm gonna uproot my entire family after spending like a year through the application and waiting process
00:12:55.900 | To go to Hawaii or anywhere where I don't know. I don't have any connections
00:13:01.360 | I have no guarantees for anything. So the path of least resistance was just to stay in San Francisco
00:13:08.140 | We had our friends our routines our doctors our network
00:13:12.580 | It just felt too forced to pull my son from preschool after just getting
00:13:17.620 | Acclimated and then going through the entire application process again
00:13:21.140 | Instead figuring out a way to make more money does and if you think about it, come on
00:13:25.260 | I have been working in finance since 1999
00:13:29.680 | Well for 13 years that is and then I've been writing about how to make money since 2009 on financial samurai
00:13:35.860 | So for me making money trying to make more money focusing on making more money is much easier than
00:13:42.340 | Uprooting my entire family to go to a relatively unknown place
00:13:47.260 | So if you want to call me an idiot for just trying to make more money
00:13:51.100 | Well be my guest but I think it's kind of idiotic to change your entire life just to save money again
00:13:57.980 | It's much better to build your wealth by making more money
00:14:02.420 | Than by saving money because you can only save so much right just like paying off debt
00:14:06.900 | You want to pay off your debt?
00:14:07.940 | But if you just focus on paying off debt
00:14:09.380 | All you're gonna get is no debt whereas we focus on making more money. All you get is total upside
00:14:14.940 | All right, moving on seventh point. I just have plenty more time
00:14:18.340 | Well, maybe not if you wait until the end
00:14:22.060 | But I have plenty more time to be more productive because if I'm not being productive after about a day I get antsy
00:14:27.740 | I think I start twitching my thumbs or something
00:14:30.340 | My boy is in preschool now and for six to eight to maybe nine hours a day
00:14:36.140 | I've got free time. So am I gonna just kick back and do nothing while he goes to preschool and I pay about
00:14:42.700 | $2,000 a month in tuition and donations or I'm gonna try to use some of that time to make some money to cover that extra cost
00:14:50.620 | Well, obviously I'm gonna be more productive and try to do some work to try to cover that cost because that's a lot of money
00:14:57.700 | Eight this might surprise you folks
00:15:01.660 | But maybe I just want to work because I've always wanted to be an entrepreneur when I was in Malaysia. This is middle school
00:15:08.540 | I remember
00:15:10.020 | getting into a Mercedes 280 SEL a
00:15:13.300 | Father's friend who was a businessman sent his chauffeur to pick me up and I felt like a baller
00:15:19.100 | I was 12 13 years old sitting in the back
00:15:22.100 | I remember they covered the seats with like some faux fur and you know
00:15:26.660 | Windows were tinted and then we drove up to the hills and there we were I arrived at the mansion for a party
00:15:33.220 | And I was just in all what are one of these folks do because this is not what my dad does and this is not
00:15:37.980 | the house that we live in and
00:15:39.820 | Our friends aren't like this and they were all entrepreneurs. They were in the food and beverage business. They were in the chicken business
00:15:46.500 | They're random businesses that made tons and tons of money. So for me, I thought you know, this is a normal path
00:15:52.580 | I would like to be rich. I'd like to live a nice life
00:15:56.460 | Let's get it. But unfortunately, unfortunately
00:15:59.020 | I was able to get a well-paying job right out of college, which I which at the time
00:16:04.280 | I thought I won the lottery
00:16:05.660 | So I wasn't gonna reject the lottery to go
00:16:07.940 | I don't know go to China and work in the factory in Shenzhen and try to be an entrepreneur there
00:16:12.500 | so the delay of
00:16:15.140 | entrepreneurship has been for a while and
00:16:18.420 | Because I feel like I've been handed such an easy life since I left work in 2012 with the markets keep on going up
00:16:25.740 | I feel a little bit like a loser in the sense, right?
00:16:29.580 | Maybe the critics are right a little loser metaphorically still living in his mom's basement
00:16:33.420 | Not paying rent and eating free meatloaf all day. I might not even have to wash my Superman underwear because
00:16:39.620 | He or she doesn't I don't think my dad would wash anything for me. So it would probably be my mom
00:16:45.540 | She's so so nice. So by not facing so much hardship after early retirement
00:16:50.740 | I squandered away my potential to become a successful entrepreneur
00:16:54.500 | I don't plan to let that opportunity pass me up anymore in 2020
00:17:00.140 | All right. Let me share just several more reasons why I failed that early retirement
00:17:04.220 | This other one is interesting because I feel bad taking advantage of subsidized health care
00:17:10.660 | One of the best strategies some early retirees exercise
00:17:13.960 | Maybe all or most early retirees exercise is receiving health care subsidies through the Affordable Care Act
00:17:21.180 | Also known as Obamacare now despite having a million or more dollars and assets
00:17:26.460 | These early retirees feel no shame in receiving subsidized health care
00:17:30.140 | But the thing is I do I feel like I don't think that's what the ACA is for
00:17:36.060 | subsidizing
00:17:38.140 | Millionaire or well-to-do early retirees
00:17:40.940 | I think the ACA was set up to help those deep in the grind who are struggling to make ends meet or do and have
00:17:46.780 | full-time jobs or
00:17:49.020 | Whatnot, so if I'm going to start getting subsidies, that means I'm taking away subsidies and since 1999
00:17:55.700 | I've been paying my taxes out the wazoo and
00:17:59.260 | Donating money and time to charities to help my fellow brothers and sisters in America
00:18:05.500 | And I think that's just how it's been for more than 20 years
00:18:09.380 | So to then be on the receiving end of subsidies after I felt like this country has given me so much
00:18:15.220 | It just felt wrong. So I just can't get over that
00:18:19.260 | Next reason why I failed early retirement
00:18:22.060 | I think this is real and this is
00:18:24.060 | Something that I've I've known about since I was a kid and that is I lack sufficient intellect
00:18:30.060 | 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
00:18:37.340 | to account for all the important variables
00:18:40.180 | No matter how hard I tried when I was a kid. I could never get straight A's
00:18:44.580 | I remember specifically saying dad mom. I'm gonna get straight A's this quarter. So I studied like crazy
00:18:49.780 | Nope, couldn't get straight A's. I remember getting a very mediocre SAT score
00:18:54.860 | It was like 1120 and that was after reading all the Princeton Review guides
00:18:59.140 | I never took any courses, but you know, I did the guides and I thought I was focused
00:19:03.540 | But I just couldn't get over the 1200 hump
00:19:05.940 | After graduating from state you which is a state you that I really like the College of William & Mary admittedly
00:19:13.300 | You know, I got a job but I was then condemned to the chopping block after just two years mainly due to poor performance
00:19:18.500 | And then office is silly the dot-com bust
00:19:21.500 | But in contrast my Canadian classmate ended up becoming a managing director at age 32
00:19:26.020 | And I think she's still there crushing it in 2012 before and after I left my day job
00:19:32.260 | I applied to over a hundred startup and tech jobs online in order to make sure there were no undiscovered opportunities
00:19:38.260 | I knew at the time that Airbnb was gonna do great things
00:19:42.140 | So I applied to three different positions and I was either ignored or rejected from all of them now
00:19:48.620 | So if you're thinking about applying for jobs online, I don't know. I would say pass
00:19:52.860 | I would say go use a referral go the good old-fashioned route
00:19:56.180 | Which is networking and in-person referrals because this online job application stuff. I don't think works
00:20:02.780 | What else?
00:20:05.140 | Since 2009 I've written three articles a week without fail and you'd think with so much practice my grammar would improve
00:20:11.900 | Yet my writing mastery score is a dismal 26 percent out of a hundred percent
00:20:16.380 | according to my Ukrainian friends at grammarly I
00:20:19.580 | Applied to the night fellowship program because I thought it would be an amazing opportunity to learn network and contribute to online media
00:20:26.820 | It's basically a fellowship for
00:20:29.100 | Journalists and people in online media. I had a non-traditional background working finance while owning a growing personal finance site
00:20:36.100 | I thought it would you know provide interesting perspective
00:20:39.740 | Nope, didn't even get called in for an interview
00:20:42.020 | I applied to a couple incubator programs to see if I could leverage financial samurai to create a fintech company
00:20:47.620 | After all the platform was built it was growing it was profitable
00:20:52.100 | Nope got rejected from both and then today I fail to realize how angry I've made some people during the chronicling of my
00:21:00.980 | financial independence journey
00:21:03.100 | Although I believe my reality is just as real as someone else's reality
00:21:07.340 | Because the cost of living is so high in the two cities. I spent my entire post college life
00:21:12.380 | It turns a lot of people off and I was just too stubborn. I was like, you know what?
00:21:16.900 | Forget it. If you don't like what you read don't read it. This is my journey
00:21:21.340 | But now I realize well to be smarter. I
00:21:25.900 | Need to be more broad. I need to be able to relate to more people. Otherwise
00:21:32.620 | You know, the growth is limited. So thankfully I do have the wisdom and to recognize my intellectual deficiency and as a result
00:21:39.380 | I'm gonna make some changes going forward. All right at last the final reason why I failed at early retirement. Are you ready?
00:21:46.980 | We had a baby one fine morning in December at 7 40 a.m
00:21:52.380 | My wife and I were blessed with a healthy baby girl. We checked into the hospital at 11 30 p.m
00:21:58.500 | The night before and we couldn't have had a smoother delivery. My wife's OBGYN started her shift at 11 p.m
00:22:05.780 | And finished her shift with us. And for those of you who have never had a baby
00:22:09.900 | this is really rare because first of all, you just
00:22:12.540 | can't time whether you're gonna see your doctor at the hospital or
00:22:16.540 | You know you might she might be off or he might be off or you might go into labor
00:22:21.380 | At a time where he or she gets off work
00:22:24.460 | So with new life comes new responsibility. There is a tremendous amount of pressure being the sole income provider
00:22:30.580 | I need to make sure we have a comfortable enough home a safe enough car
00:22:36.000 | Enough child care and household help to maintain our sanity and enough funds to pay for her education
00:22:42.420 | and our son's education if you were to ask me in 2015 whether we'd have two children by
00:22:48.980 | 2020 and before my wife turned 40 I would say probably not
00:22:53.660 | because the first took more than two years to successfully conceive with one false start and
00:22:58.700 | So we feel very very blessed and I won't fail my family. I can't fail my family
00:23:05.320 | So this is why I feel that staying retired with two children is just not
00:23:11.340 | The right thing to do. It's much better to shore up our finances to anticipate
00:23:18.420 | Inflation of some of life's most expensive things such as housing
00:23:22.860 | Tuition and health care and try to get ahead of the curve
00:23:26.180 | Life is really unpredictable folks
00:23:29.020 | Early retirement was a nice eight-year run, but all good things must come to an end
00:23:33.780 | There's just simply too much to do and too much at stake not to go out there and make a living again
00:23:39.500 | So there you have it folks
00:23:41.140 | I hope I've sufficiently explained my early retirement failure
00:23:45.500 | And I hope this gives you an idea if you're planning on retiring early what you may face as well in our next episode
00:23:52.980 | I'm gonna talk about my game plan my early retirement master plan to get back to early retirement by
00:23:58.540 | 2022 with two kids and I've written about it in a post already if you want to take a look but in my episode
00:24:04.960 | I'm gonna share a little bit of nuance a little bit of things that I don't write about so stay tuned
00:24:10.000 | Thanks so much everyone. Have a great new year