Retirement Diary #3: Time will Tell?

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If you want to understand how time affects people, you either ask a wise person or an elder.

A wise person analyzes with their mind and gives you an answer. An elder shares their experience, felt through their body.

The farewell party enters its third week. The guests in this week are my classmates from the same generation.

Twenty years ago, we lived and studied together at school. Twenty years later, we’ve all established ourselves in well-known companies.

As we wrapped up our food and drinks, I reminded them:

20 years ago, Didn’t we say that we would work in tech for a decade or so and then retire?

By that logic, our seniors who graduated two or three years ahead of us should have already ridden the wave and passed the baton to the next generation…

Right?

My artsy former roommate, seated across from me, glanced up, rolled his eyes, put down his chopsticks, clenched his fists, and then, like a flower blooming suddenly, opened his hands wide.

“Bull — Shirt!!”

The whole table burst into laughter.

Actually, it turns out that only very few of us have actually “retired.” I was shocked by the results — shocked that I might have been too optimistic? or perhaps my risk assessment was off?

By age 40, salaries should have grown to a level that new graduates envy. On Labor Day, our group chat was filled with complaints about the upcoming tax season. Given the tax rate, the amount paid usually exceeds the liquid cash in our bank accounts. Unlike utility bills or tuition fees, paying taxes in one go can be quite painful.

So aside from the groaning, people either ask how to get cashback from paying taxes or inquire about which credit card offers the best installment plans — more installments, the better. A 12-month installment plan would sync perfectly with next year’s tax season!

If our income calculations are similar, why is it that I consider myself financially secure, while others, earning even more, continue to work tirelessly?

This question fueled the second half of our dinner conversation.

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There’s a saying that true asset accumulation happens when your income exceeds your expenses.

While incomes have increased, so have expenses. After offsetting each other, this slows the pace of asset accumulation.

However, I believe that if your income is at 150%, even with expenses at 150%, asset still accumulates at 150%. Moreover, some essential living costs don’t increase in proportion to income. So, once your income exceeds a certain level, your savings grow rapidly.

Here’s a simple example:

• A household with a yearly income of $30,000 and expenses of $10,000 accumulates $20,000 annually.
• A household with an income of $90,000 and expenses of $30,000 saves $60,000

It is a 3x faster accumulation rate.

So why people (of my classmates) don’t retire? The real cause may lie with how people interpret them — their perspectives. I’ve noticed a few common sticking points:

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1. Stuck with mortgages or housing costs.

In times of low interest rates, it’s smart not to pay off your mortgage early but to invest the funds elsewhere. During inflation, investing in property to “hedge against inflation” is also a frequently heard strategy.

From a total asset perspective, investing in real estate seems wise. It’s common to hear: “Hurry and buy a house if you don’t have one yet, or invest in another if you do.” I’ve even heard people say, “Once I sell these properties, I’ll have financially freedom (or called financial independent).”

But when asked, “So, when will you sell your properties and have financially freedom?” the response is often followed by reasons like, “depends on the time my properties has the highest price”, “depends on the profit I can earn from selling the properties”, or “Maybe I won’t sell — I’ll leave it to my kids instead.”

These reasons often render the properties truly “immovable.” To maintain cash flow and pay off mortgages, they have no choice but to keep working.

2. Stuck with lifestyle inflation (Hard to scale back after luxury).

As long as the cash flow remains abundant, it’s natural to spend more for convenience or comfort — paying a little extra for time or enjoyment. The extra spending only slows down wealth accumulation slightly, and with rising company stock prices and salaries, there’s still enough money left over.

Imagine if you spent an extra $1,000 a month, amounting to an extra $12,000 a year. Though your expenses grow, the amount you save each year is only slightly less than before — maybe $10,000 or $15,000 less. When you consider the time saved, the mental effort spared from price comparisons, and your child’s smile, those extra expenses feel justified.

And that strategy isn’t wrong for the life you have active income.

However, if you want to apply the F.I.R.E., you may want to calculate your assets needed for retirement. In this case, let us use the simple and intuitive method : 4% rule. When applying the 4% rule, you realize that the extra $12,000 in annual expenses will cost an $300,000 for your assets needed for retirement. This will turns into a hefty target for asset accumulation. (by 4% rule, it’s 12,000 x 25 = 300,000).

To reach that target, continuing to work seems necessary.

Not to mention, what if the extra spending isn’t just $12,000?

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3. Stuck without a plan (Not knowing what to do after).

After retirement, what would you do with all your free time? Had spent over a decade doing a job, whether you’re still passionate about it or not, you’ve mastered it and enjoyed the benefits of that mastery (both in terms of ease and income). If there isn’t something else you’re dying to do, drifting along the same course feels like an option.

Previously, I’d imagine life after retirement as growing flowers, sitting in front of the TV, or “traveling around the world.” Are these traditionally “unproductive” activities really what you want to do?

If not, then what kind of life do you want?

If the answer isn’t clear yet, is it better to stay the course while figuring it out?

4. Stuck by family and societal expectations.

If you’re working for one of the industry-leading companies, the badge hanging around your neck becomes even more attractive.

During family gatherings, “Where’s your child working now?” or “Did you hear? So-and-so’s kid joined TSMC last year…” Not only in Elders’ chat, hese scenarios also pop up in conversations between your kids.

When filling out a simple questionnaire, the “occupation” section — whether it’s the “industry” or “company name” field — makes you pause.

What will you write in the future? Will there even be a corresponding option?

Even if you know the bigger the company, the smaller the role you play, it still takes courage to remove that badge.

And then, after you’ve taken it off, what will you put under “occupation”? Freelance? (Doesn’t feel right). Or check “Other” and write “unemployed”? (Trust me, confused glances will follow).

Once you’re stuck by any of the reason, it feels like maintaining the status quo is the “local optimum” in the problem-solving process. But if you step back and observe from a higher dimension, maybe beyond this hill lies an even better solution.

However, we don’t have a god’s eye view. Do we really know if there’s a better solution beyond the hill?

I’m not a wise person. I don’t know.

But I’ll keep thinking, getting closer, preparing the plan, and then…

My Dad says,

“You young people can’t live without your smartphones these days.”

My classmate says,

“I have to take off my glasses to read the menu now.”

I say,

“Everything’s fine, sure — but I still want to know what else Time can reveal to me.”

I’m not a wise person, but I have the chance. I also have a Plan B. So, I’ve decided to embark on this journey. I’ll take a year or two to experience it, and then share what I’ve learned.

If success, I am retired. If not, let’s call it a gap year in my mid-life.

This post was originally written on May 6, 2024 in Traditional Chinese.