Hello everybody, it's Sam from Financial Samurai and in this episode I want to talk about why I failed at early retirement and what I plan to do to get my early retirement card back and retire at the age of 45 by 2022 So for those of you who don't know my background from 2009 to 2011 three years I was struggling to try to make sense of all the chaos in the markets Lost about 35% of my net worth in six months and I was pretty sad depressed scared about my future You know, I'd spent 10 plus years saving aggressively investing diversifying and it still really didn't work So that three-year time period was very difficult But very eventful and very rewarding in the end because I finally figured out how to leave work behind in 2012 so I'm thinking over the next three years I can go through somewhat of a similar process and Figure out how I can get back to early retirement And I first want to talk about failure because I listen to the community I listen to what other people say and one of the consistent feedbacks given to me is that I'm an early retirement failure I simply could not anticipate all the costs and things that would happen in my life after I left work And I think that's really really fair and true and it gets better folks instead of being called a failure I'm also being called a loser and I know that's a little bit harsh.

But guess what? I love criticism I just want as much criticism as possible because it is giving me the motivation to do better And that's all I really want to do is get better at things because stagnation is kind of doesn't feel really good Progress is my one word definition of happiness think about it progress in your career You're gonna be happy progress in your marriage 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 Developing more and more retirement income so I can get back to retirement or stay retired That makes me happy and just progress in life and try to challenge myself every single day and not be afraid I've long gone past being afraid and I just want to I just want to try actually I'm afraid of not trying because of um, if I'm not trying that means there's something wrong with me So you may have read a pretty popular guest post 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 Go back to work.

Well, those were a bridge versions because of writing lengths and I didn't control those platforms 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 Early retirement. So the first point is that I underestimated my desire for social interaction I'm an extrovert ever since I can remember I remember when I was like five years old in Japan I was walking down the street and I was just randomly talking to everybody for some reason because I liked To talk to people and get to know their stories So I think it's much harder for extroverts to go into retirement and stay retired because we gain energy from other people Further I had one of the most stimulating jobs in the market I remember going to Asia every quarter to visit companies talk to entrepreneurs raise capital I would have to wine and dine clients with a corporate card go to events and you know travel across the country It was really fun and I talked to a lot of smart people and I learned a lot so if you go from 60 hours a week to just Nothing.

I mean that's kind of jolting now if I had a Six hour a day job and then I went to nothing I could I could probably transition better, but I really miss the interaction I miss the Christmas parties the holiday parties, you know, I would go to like four or five it would be like wedding crashers or something and everybody was married because 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? and I missed that - I Underestimated how low interest rates would go if you have been reading Financial Samurai since 2009 I have been very bullish on real estate and I've been very bullish on bonds because I Believed and I still believe that interest rates will stay low for the rest of our working careers if not our lives We've got it folks since the 1980s interest rates have been coming down Just look at the chart and the reason why is because of efficiency technology Understanding cycles globalization and so forth.

We've become better at managing Inflation as well as managing unemployment. Just look at the data But I did underestimate and did not expect the 10-year bond yield to drop to 1.5% in the fall of 2019 I thought we'd stayed around two and a half percent, which is still low but going down to 1.5% While there's a bull market in stocks Hmm, that's kind of rare and that was amazing.

It was like everything go up in 2019 market which is great because I had a pretty large portion of my public investments in bonds So instead of needing a million dollars in additional capital generate fifty thousand dollars at five percent One now has to accumulate 2.5 million in capital at 2% to generate fifty thousand So that is a massive shift in the goalpost Massive and if you are a true retiree who depends on income from your investments to survive.

This is not so good because Basically your income is gonna go down now. Look granted you should have appreciation in capital and You could sell your capital and use your capital But I am pretty conservative where I believe the ideal withdrawal rate in retirement 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 with a family in San Francisco, but due to the bull market We get hurt instead.

The data now says you need three hundred nine thousand four hundred dollars in minimum household income a year to live in San Francisco and the scary thing is the figure was closer to 343,000 in the second quarter of 2019 So this number this three hundred ten thousand dollar number is based off a 20% down payment on a 1.6 million dollar median priced home and you got to come up with a three hundred twenty thousand dollar down payment, right?

And you're supposed to spend no more than twenty eight percent of your gross monthly income on Housing expenses, which is probably pretty reasonable. So you're seeing income go down and you're seeing housing costs go up and therefore the required amount of income go up now I Comfortably live on less than two hundred fifty thousand dollars a year in investment income I comfortably live on less than two hundred thousand dollars a year investment income.

We've been doing this for the past three years But hey if this is what? Financial pundits and housing analysts want to say I'll I'll accept it because who am I I'm just an unemployed stay-at-home dad So three I underestimated how much I could love a child and it's one of those things where you don't really know What one type of love is until you have a child, you know how to love your parents You know how to love your relatives, you know how to love your wife your husband your girlfriend your boyfriend But it's a different type of love when you have a child.

It's like the most explosive Most magical most consuming feeling I have ever felt before there's a great saying Have kids and the money will come and the simple reason for that saying is that you just get so motivated to work harder Stay healthier and just do the right thing for your children that money will just inevitably come and I believe that I believe that Because my energy has gone up Maybe about 20 or 30 percent since having my boy and I just want to get going and do something and provide For taxes went down and estate exemption amounts went up so when I left my day job in 2012 a $250,000 income faced a demoralizing 33% federal marginal income tax rate and the estate tax exemption Was 5.1 2 million, which was not bad at the time but now a $250,000 base salary in 2020 faces only a 24% federal marginal income tax rate and the estate tax Exemption amount has doubled to 11.5 8 million per person so you can die with up to 11.5 8 million and Your heirs or the charities that you donate to don't have to pay any taxes Actually, I don't think don't you know, the charities have to pay any taxes Anyway, check out I think the Mormon Church.

I think they save like billions in taxes So it seems like we have a limited window to earn as much as possible before tax rates go up and a state tax exemption amounts go down Five I never thought that being an early retiree felt right when I was 34 just it just just was weird I felt stupid and when people asked me what I did if I said I did nothing I just I just felt kind of shameful, you know living in San Francisco.

It's it's it's kind of intense now It's like it's where the most motivated type-a people from the most overpriced private universities come to make their fortunes so it's like New York City and if I was in let's say a small town on Maui or Kauai or even in Oahu.

I think I could get away with saying yeah, I just retired and I'm just I 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 so I started telling folks about a year after I left my day job that I was a writer and Then more recently over the past three years I've been telling people who asked that I was a high school tennis coach and you know what it felt great It felt great to have this occupational Identity again.

So this is something that I think if you retire early or if you just retire You're gonna have to struggle with this occupational identity for a while 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 Okay point number six is where I've gotten the most amount of pushback.

I told you people have called me a failure They've called me a loser, but I forgot to tell you they also call me an idiot 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 People are just like Sam Why don't you just leave San Francisco and go live in the boondocks and save tons of money and live like a king?

Well, you know what? Sorry for someone who has lived in six countries by the time he was 14 and has traveled to over 60 countries so far 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?

I've been seriously thinking about relocating since 2012 after I left my job, right? 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 to Thailand or Vietnam And I don't know live like a king on $1,000 a month But guess what?

I didn't do that. I decided to stay here because I felt that there was still Opportunity and then there were still friends and unfinished business. So look I wanted to go to Hawaii in 2014 and I was ready with my wife to go live a more simple lifestyle of $100,000 in Retirement income which would have provided a very handsome Living there.

We didn't have kids then But you know what? I found a panoramic ocean view home in San Francisco 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 Side of the San Francisco. So when I found it, I was like, this is a no-brainer I'm gonna bring Hawaii to San Francisco and then it took two years to do all the remodeling So I wasn't about to leave I wanted to enjoy all our remodeling efforts and then in 2017 My son was born and we were just totally totally thrilled.

I was thinking well, I Can't leave because I got doctors here. I need some stability. We just finished our house So look I was hoping we would get rejected to preschool in 2020 It's not not hugely hoping but I was like, we're only applying to three. There's a 10% or less acceptance, right?

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 It's great. People are nice So I don't think I'm gonna uproot my entire family after spending like a year through the application and waiting process To go to Hawaii or anywhere where I don't know.

I don't have any connections I have no guarantees for anything. So the path of least resistance was just to stay in San Francisco We had our friends our routines our doctors our network It just felt too forced to pull my son from preschool after just getting Acclimated and then going through the entire application process again Instead figuring out a way to make more money does and if you think about it, come on I have been working in finance since 1999 Well for 13 years that is and then I've been writing about how to make money since 2009 on financial samurai So for me making money trying to make more money focusing on making more money is much easier than Uprooting my entire family to go to a relatively unknown place So if you want to call me an idiot for just trying to make more money Well be my guest but I think it's kind of idiotic to change your entire life just to save money again It's much better to build your wealth by making more money Than by saving money because you can only save so much right just like paying off debt You want to pay off your debt?

But if you just focus on paying off debt All you're gonna get is no debt whereas we focus on making more money. All you get is total upside All right, moving on seventh point. I just have plenty more time Well, maybe not if you wait until the end But I have plenty more time to be more productive because if I'm not being productive after about a day I get antsy I think I start twitching my thumbs or something My boy is in preschool now and for six to eight to maybe nine hours a day I've got free time.

So am I gonna just kick back and do nothing while he goes to preschool and I pay about $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 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 Eight this might surprise you folks 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 I remember getting into a Mercedes 280 SEL a Father's friend who was a businessman sent his chauffeur to pick me up and I felt like a baller I was 12 13 years old sitting in the back I remember they covered the seats with like some faux fur and you know Windows were tinted and then we drove up to the hills and there we were I arrived at the mansion for a party 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 the house that we live in and 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 They're random businesses that made tons and tons of money. So for me, I thought you know, this is a normal path I would like to be rich. I'd like to live a nice life Let's get it.

But unfortunately, unfortunately I was able to get a well-paying job right out of college, which I which at the time I thought I won the lottery So I wasn't gonna reject the lottery to go I don't know go to China and work in the factory in Shenzhen and try to be an entrepreneur there so the delay of entrepreneurship has been for a while and 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 I feel a little bit like a loser in the sense, right?

Maybe the critics are right a little loser metaphorically still living in his mom's basement Not paying rent and eating free meatloaf all day. I might not even have to wash my Superman underwear because He or she doesn't I don't think my dad would wash anything for me. So it would probably be my mom She's so so nice.

So by not facing so much hardship after early retirement I squandered away my potential to become a successful entrepreneur I don't plan to let that opportunity pass me up anymore in 2020 All right. Let me share just several more reasons why I failed that early retirement This other one is interesting because I feel bad taking advantage of subsidized health care One of the best strategies some early retirees exercise Maybe all or most early retirees exercise is receiving health care subsidies through the Affordable Care Act Also known as Obamacare now despite having a million or more dollars and assets These early retirees feel no shame in receiving subsidized health care But the thing is I do I feel like I don't think that's what the ACA is for subsidizing Millionaire or well-to-do early retirees 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 full-time jobs or Whatnot, so if I'm going to start getting subsidies, that means I'm taking away subsidies and since 1999 I've been paying my taxes out the wazoo and Donating money and time to charities to help my fellow brothers and sisters in America And I think that's just how it's been for more than 20 years So to then be on the receiving end of subsidies after I felt like this country has given me so much It just felt wrong.

So I just can't get over that Next reason why I failed early retirement I think this is real and this is Something that I've I've known about since I was a kid and that is I lack sufficient intellect 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 No matter how hard I tried when I was a kid.

I could never get straight A's I remember specifically saying dad mom. I'm gonna get straight A's this quarter. So I studied like crazy Nope, couldn't get straight A's. I remember getting a very mediocre SAT score It was like 1120 and that was after reading all the Princeton Review guides I never took any courses, but you know, I did the guides and I thought I was focused But I just couldn't get over the 1200 hump After graduating from state you which is a state you that I really like the College of William & Mary admittedly You know, I got a job but I was then condemned to the chopping block after just two years mainly due to poor performance And then office is silly the dot-com bust But in contrast my Canadian classmate ended up becoming a managing director at age 32 And I think she's still there crushing it in 2012 before and after I left my day job I applied to over a hundred startup and tech jobs online in order to make sure there were no undiscovered opportunities I knew at the time that Airbnb was gonna do great things So I applied to three different positions and I was either ignored or rejected from all of them now So if you're thinking about applying for jobs online, I don't know.

I would say pass I would say go use a referral go the good old-fashioned route Which is networking and in-person referrals because this online job application stuff. I don't think works What else? Since 2009 I've written three articles a week without fail and you'd think with so much practice my grammar would improve Yet my writing mastery score is a dismal 26 percent out of a hundred percent according to my Ukrainian friends at grammarly I Applied to the night fellowship program because I thought it would be an amazing opportunity to learn network and contribute to online media It's basically a fellowship for Journalists and people in online media.

I had a non-traditional background working finance while owning a growing personal finance site I thought it would you know provide interesting perspective Nope, didn't even get called in for an interview 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 it was growing it was profitable Nope got rejected from both and then 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 spent my entire post college life It turns a lot of people off and I was just too stubborn. I was like, you know what? Forget it. If you don't like what you read don't read it. This is my journey But now I realize well to be smarter. I Need to be more broad.

I need to be able to relate to more people. Otherwise You know, the growth is limited. So thankfully I do have the wisdom and to recognize my intellectual deficiency and as a result I'm gonna make some changes going forward. All right at last the final reason why I failed at early retirement.

Are you ready? We had a baby one fine morning in December at 7 40 a.m My wife and I were blessed with a healthy baby girl. We checked into the hospital at 11 30 p.m The night before and we couldn't have had a smoother delivery. My wife's OBGYN started her shift at 11 p.m And finished her shift with us.

And for those of you who have never had a baby this is really rare because first of all, you just can't time whether you're gonna see your doctor at the hospital or You know you might she might be off or he might be off or you might go into labor At a time where he or she gets off work So with new life comes new responsibility.

There is a tremendous amount of pressure being the sole income provider I need to make sure we have a comfortable enough home a safe enough car Enough child care and household help to maintain our sanity and enough funds to pay for her education and our son's education if you were to ask me in 2015 whether we'd have two children by 2020 and before my wife turned 40 I would say probably not because the first took more than two years to successfully conceive with one false start and So we feel very very blessed and I won't fail my family.

I can't fail my family So this is why I feel that staying retired with two children is just not The right thing to do. It's much better to shore up our finances to anticipate Inflation of some of life's most expensive things such as housing Tuition and health care and try to get ahead of the curve Life is really unpredictable folks Early retirement was a nice eight-year run, but all good things must come to an end There's just simply too much to do and too much at stake not to go out there and make a living again So there you have it folks I hope I've sufficiently explained my early retirement failure 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 I'm gonna talk about my game plan my early retirement master plan to get back to early retirement by 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 I'm gonna share a little bit of nuance a little bit of things that I don't write about so stay tuned Thanks so much everyone.

Have a great new year