Calculating “One More Year”

Many in the FIRE community will talk about “one more year” syndrome.  This is the idea that you work for just one more year and save a little more money before pulling the plug.  There are likely many reasons for this including fear of not having enough saved, actually liking your current work, or maybe just general fear of this massive life change.  Many of us are planning on leaving full time employment decades sooner than the average person so is one more year really all that bad?

At this point we have less than 2.5 years left to go until we hit FI based on my current estimates (this is our comfortable coasting FI number) but I have already started to think about how much one more year, or even one more month, could affect our finances.  Based on very rough numbers and of course greatly depending on market conditions every year we delay leaving our full time jobs would give us an estimated $2,000-$6,000 additional annual income for life.  Now I realize this is a huge range and that is very much because we have no idea what the market will do or even our exact savings every year.  But I will explain a little further so hang in there.

On the lean side of things let’s say the market stays pretty flat and any increase in our total investments is mostly due to our annual savings alone.  If our investments increase around $50,000 per year I figure this would amount to approximately $2,000 per year in additional income.  I get this number by multiplying $50,000 x 4% = $2,000.  That $50,000 would continue to grow throughout our retirement yet should allow us to withdraw approximately 4% or $2,000 per year.  (The trinity study is a commonly followed concept that states you can withdraw approximately 4% from your investments per year without running out of money.)  Many in the FI community use a number smaller than 4% but for this random post I am just sticking with 4% for now as this is all hypothetical numbers anyways.

Now let’s say that the market is doing only OK over the next few years, maybe with a 4-5% gain, plus we are still saving money.  It is possible that our total investments could increase by $100,000 per year.  In this scenario we would have an additional $4,000 per year to spend, for life.  $100,000 x 4% = $4,000.  We are starting to talk about real money now as this is another amazing ski vacation right there!

I am going to take it even a step further and say the market is doing well, maybe a 10% gain, plus the money we are socking away each month (based on the past year’s returns this is possible).  Our investments in this scenarios could increase by $150,000 per year giving us another $6,000 per year in income in retirement.  $150,000 x 4% = $6,000.  These numbers are starting to get big now!  I mean another $6,000 per year in income is a pretty sweet increase!  I can certainly see how hard it could be to walk away from numbers like these, especially if you are not miserable at work.

Let’s say another 12 months of work sounds daunting but maybe a couple more months doesn’t sound all that bad.  If I take this a step further now and break this down to a monthly amount, how much more will that give us?  I will use the $100,000 annual increase number in this example just to keep the math simple and also pretty conservative.  If we take the $100,000 of annual increase to our savings and divide this by 12 you get $8,333 per month increase to our investment account values.  $8,333 x 4% = $333.  So for every month that we continue to work at this point we could be adding another $333 per year in annual income.  For me that is about 3 months worth of gas for my car.  Obviously this is using straight line math which we all know is not accurate but this is just to illustrate a concept.

Since I am not planning on leaving my job on Dec 31st due to the timing of my commission checks and my annual bonus which I usually get in February I think I could easily fall into the trap of “just one more month”.  I mean when you are actively seeing your accounts increase every month it might be hard to walk away.  Although who knows as a lot could change in 2.5 years.

Now you might be thinking “how could your accounts be increasing that much per month?”  Well without giving you our exact figures we are definitely to the point where our accounts increase a noticeable amount every month, unless the market goes down.  I calculate our net worth monthly and over the past 12 months we have had 2 down months to our net worth but other than those our account values have increased by a significant amount each month.  Compound interest is really working for us now!  If you are just starting out on your own FIRE journey just keep in mind the beauty of compound interest and how it will eventually be amazing for you too!

There are several reasons that I think I could easily fall into the “one more month” syndrome.  One is that we do plan to work a little once we hit our number (coasting FI) so why not just keep my regular job making decent money and with benefits, assuming I am still moderately happy, rather than a minimum wage job.  At some point I might try to go down to 4 days a week and if this works I don’t see why working a little longer would be all that bad.

The second reason is I could hate part time work so it might make sense to stick is out with my current job and save a little more just in case I don’t want to work.  This would be leaning less towards our coasting FI number and more towards our total FI number.  I guess it comes down to the freedom of choice when it comes to work.

Another reason is just plain fear of not having enough money.  I mean the thought of actually withdrawing our money is kind of terrifying.  We need this money to last more than 40 years so I would hate to jump ship early and then come to find out 20 years down the road that we are screwed.

And the last reason that working just a little longer has been on my mind is I worry that I am going to have to help a family member with their retirement.  I don’t think I could watch family struggle making ends meet while my financial situation is pretty cushy.  This family member doesn’t know about our FIRE goal and I am not going to share the thought of helping them but this is in the back of my mind.

Based on my current estimates and goal we still have about 26 months until our FIRE date but I see this as a moving target.  Could a few more months not only help to pad our investments, give us more confidence that we can make this work, give us more freedom of choice when it comes to working part-time, as well as helping family?  The thoughts of adding another $6,000 per year to our annual income does sound pretty amazing.  Or will I be sick and tired of working and just want to get out?  I guess all plans are soft until we make the final decision.  For now, we will just continue to squirrel away more money and be thankful for the beauty of compound interest.

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