SemiFIRE: How to Semi-Retire Early

Now that we have FatFIRE, to go alongside LeanFIRE, I figured we just HAD to have “SemiFIRE” (semi-retire, early-style) to complete the collection. Why not? You can have all sorts of fun with SemiFIRE.

Yeah, the featured image is pretty cool. But you could also be describing a most painful anatomical-dynamic-meets-kidney-stone situation… At any rate, let’s dive into the mechanics of how you might successfully jump out of the proverbial “cubicle airplane”, before reaching your retirement “drop zone.”

I’m reminded of my friend Uncle Daryl as I compose this post. Daryl and I met over coffee last year, and he shared with me his career life-story. He’s definitely a pioneer in the SemiFIRE space. Tired of answering to unreasonable corporate management, Daryl set off to create his own consulting firm.

After pursuing this alternative way to escape the cube, Daryl became his own boss and thrived. Today, he enjoys winters in Arizona, and beautiful summers in Minnesota (where he spent most of his professional career.)

FIRE doesn’t have to be an “all or nothing” proposition

I know I write about this black and white, tug-of-war with my own journey to financial independence. You’d think my butt itches every time I sat in my office chair. Truthfully, I think almost anyone could tolerate an uninspiring day job, if they could cut their commitment to it IN-HALF.

I’ve been thinking about this lately. Come next July, I could pull my ripcord over the landing zone. But what if I don’t have my landing zone fully reconned by then? Unlike Daryl, I might not know what I’m jumping into yet. It’s not common where I work, but what could it hurt to ask for a part-time arrangement?

Alternatively, I could look for part-time work elsewhere, and who knows, maybe even wind up with healthcare benefits? Consulting on a part-time basis would be nice, assuming I could hone in a set of skills that someone else covets at part-time commitments.

A friend of mine who had been a stalwart corporate lackey for many decades recently made this transition himself. The only problem is he’s over-committed with THREE part-time consulting gigs, eating into his weekends and time with family. Does he need to take on that much? Not if he’s driving a sharp Audi A4 Quattro. I have to give this guy a lot of shit for his type-A slog through life.

Personally, I could see myself doing some sort of real estate investment consulting. Maybe fire up a “Coach Cubert” online course and give talks at conferences. I don’t know that that’s been done before with respect to real-estate investing, but I should look into it…

And if you’re desperate to be done with the corporate shenanigans, you could move

Here’s an intriguing idea: Say you get caught up in those HGTV House Hunters episodes where they focus on beachfront properties. You imagine being one of THOSE couples. You know, nitpicking your way through several “diamonds in the rough”, until you find one you don’t have to lift a finger on.

That show always got a titter out of me. I know it’s all staged, but shit. When these couples bitch about, “This one won’t work, Honey. There aren’t stainless steel appliances. Sigh…” or another favorite, “Oh my God, why did they paint the walls THAT color? Let’s get out of here!” … all you can think is what tragic, first-world problems our society is afflicted with.

But I digress. So if you think you want to be near a beach or live someplace warmer, you could certainly do your homework to assess where you might live for a lot less money. This is nothing new for traditional retirees, who have found wonderful low-tax states to retire in, like Nevada, Arizona, and Florida. We just have to figure out how to get more funding to schools in those states…

Another, increasingly popular option is to SemiFIRE in a foreign country. In this scenario, you work part-time and enjoy the tropical breezes with a super cheap mortgage and reliable medical care. Costa Rica, here we come! This is a bit of a tricky one though, if you have commitments like kids and aging parents. Course, you could move them all down there with you?

Retiring abroad is a growing trend, and SemiFIRE can be an option if you are willing to learn a new language and are open to different customs and norms. I don’t think we’d pursue this option ourselves, with all the real estate and business obligations to manage. But I could certainly see myself running up and down the beaches of Costa Rica, as snowbirds in our Medicare years.

SemiFIRE is not LeanFIRE

There’s another type of FIRE known as “LeanFIRE” that’s basically the Mr. Money Mustache approach to early retirement. Simply put, you save enough money early in your career, retire in your 30s or 40s, and live a very modest life on $40K or less.

Your stoicism and self-reliance are all you need to live a fulfilling life on $40K or less. (Though it doesn’t hurt to become a famous blogger, and then travel to exotic locations every year to hang with your cult followers. That sure doesn’t suck!)

SemiFIRE is different, because you’re not limiting yourself to a certain annual spending limit. If you want to live high on the hog, SemiFIRE is okay with that. Say you saved up $2 million and you’ve reached age 55. You’re ready to retire, BUT…

…You want to keep working part-time to pay for that oh-so-sweet yacht on Lake Michigan. The big boat you can sail all summer long, Midwest style, and then sail it on down to Key West in wintertime. There, you’ll work a few hours a day processing tax returns with a parrot on your shoulder, while listening to Jimmy Buffett’s Greatest Hits. That doesn’t suck either.

What’s the appeal of SemiFIRE? Are there downsides?

The obvious attraction to SemiFIRE is not having to wait until you’ve stored enough nuts for the early retirement winter. (Are we done with the silly metaphors yet, Cubert? Jesus Christ, man!) You can simply pull a Tom Cruise and get your Cocktail going on a sunny equatorial beach. Screw TGI Fridays! We don’t need that ultra-hip flare at our happy hours.

Even with an option to punch out early, there could be some downsides to this approach. First off, you’re making an income. If your calculus for health care plan premiums on the ObamaCare exchange were based on zero income, you better go back and run the numbers again. The difference in subsidies could be substantial. This wouldn’t apply of course, if you’re SemiFIREing to an offshore location…

Also, the job you take may come with some of the same pain-points as your full-time job. I’m not too old to remember some royally shitty bosses from part-time gigs I worked in high school and college. They’re out there still, I’m sure of it. The good thing is you only have to tolerate it for 20 hours or less per week, vs. 40-plus.

Depending on the type of part-time work, you could wind up planted in a cubicle again, or doing some highly repetitive task that comes with physical consequences. Be mindful of the risks, and offset these by good exercise and diet habits. Or, get a part-time job that requires a more physical set of tasks. Part of me thinks mail delivery would be nice, until some rabid dog comes along…

Regardless, your math could lead you to conclude that another few years of part-time work is all you need to finally reach your 25x annual expenses saved up. This approach to FIRE isn’t a permanent situation. No one who’s a reader here wants to be the Wal-Mart greeter at 90. I don’t think?

Do the math, and let me know what you decide

The simple math behind SemiFIRE is this: If you know how much savings you need for ongoing annual living expenses (let’s say it’s $50,000 per year), but your 4% safe withdrawal from those savings is only giving you $35,000, then you need a job that pays $15,000 per year, post-tax. That job is probably going to pay you $15 per hour, if it’s a typical part-time gig. Guess what? That’s roughly a 20 hour per week job.

Now, if you’re like Uncle Daryl, you might get crafty and fire up a consulting gig. In that case, you are your own boss. If your skills are in high demand, you can set your own hours. The pay is bound to be significantly higher than your typical part-time job.

The trick here, is to determine whether your skills are value-added enough to another firm, such that they’ll be compelled to hire you on. Finally, a consulting gig minimizes your taxes by allowing your earnings to flow to you as “pass-through income.” Thank you, LLC.

So whaddya think? Is SemiFIRE something you’d consider, to ditch the cubicle even earlier than you originally planned?