Early Retirement Litmus Test – Willing to report to your colleagues?

From time to time, I come across or correspond with people who are wondering if maybe they are ready for early retirement.

Here's one test in case you are wondering too.
Think back to some of your work peers, colleagues that you were forced to compete with during performance appraisals. Now ask yourself this: If you had to, would you be willing to report to (work under) them? And, would you be willing to work for and report to someone who used to report to you?


If you don't feel comfortable with the idea, then, before you quit your corporate job, you should be really sure that your accumulated savings are more than adequate, or that you know clearly why you are leaving.

However, if you answered yes to the test question, then you may be one step closer to early retirement. Your response implies that you don't have any organizational ambition left. And your ego won't come in the way, should your finances go south in a bad way while you are in early retirement, and you need to find another job.

That said, over time, I have come to believe that the traditional way of thinking about retirement as two distinct 0-1 binary states – that one is either retired or not retired – isn’t really valid anymore. There are many states in between.

Now more than ever, there are many opportunities to progressively scale down from full time employment. One can find ways to earn sporadically, depending on individual needs, while also buying oneself autonomy and time, which is what early retirement means to most people.

Related Posts:
Are you ready for early retirement?
EE Day - Your earliest exit day

Competence Trap – Addendum

Here's a quick addendum to competence trap, with one more of its implications.

Let's say that a couple decides that one of them will go to work and earn, and the other will stay back and manage the home front. Additionally, they decide that once every two years, they will alternate roles, switching who stays at home and who goes to work. They feel that this would be very fair.

However, such seemingly equitable arrangements won't make economic sense for the couple. The reason for this is the power of the competence trap. Even if the couple is able to get their respective offices to go along with their proposed arrangement, they will end up with sub-par promotion opportunities being presented to either of them. In the long run, they will end up with below average salaries.

Instead, if one of them had continued to work, that person would have become more and more competent at what they do, and would likely have enjoyed better financial compensation.

Related post: Competence Trap

Inferior vs Normal Goods

In my assorted reading, I come across several new (to me) concepts and ideas. Quite often, these concepts seem to apply to my situation at the time I encounter them.

Recently, in an economics book, I read about what economists refer to as inferior goods as contrasted against normal goods. This seemed to have implications for those interested in early retirement.

First the definitions: An inferior good is something that people want less of as they get richer.

Examples of inferior goods include eating street food (as opposed to eating in white-tablecloth restaurants); buying new items (versus settling for used ones or getting old items repaired); and taking bus rides (compared to driving one's own car).

A normal good is something that people buy more of as their incomes rise (better clothing, getting a bigger house, fancier entertainment etc.)

In my own case, the goal was to get time off. Now, I am very aware of how important luck is in our lives and I won't deny that my wife and I are extremely fortunate. But we also planned for and made numerous adjustments in working towards this goal of getting time off (which in our case means no steady income). In retrospect, I see that starting from years earlier, we consciously opted for the so-called inferior goods.

To me, this choice seems to be another necessary condition. It strikes me that those who are serious about taking time off (by giving up their regular salary) have to opt for at least some "inferior goods."

You make all the adjustments you can, and then you hope for luck.

The Need for an Affiliation

Here's a practical tip for those who are seriously considering quitting their jobs and trying other things for a while.

Not long ago, I was telling my friend SR about the difficulty I was having in responding when people asked me what I did. "So what do you do?" they'd ask and I would stumble and dance around in trying to give a clear answer. I also began to notice that my "Profession" gets asked in practically every form I filled out.

Often, saying "I don't have a job" or "I'm on a sabbatical" or "I'm just taking it easy for a while" is not appropriate. It also invariably leads to more questions that I might not be in a mood to entertain.

When my friend heard this, he said, "Man, what you really need is an affiliation. I fully get what you are trying to do, but an affiliation is very important in this society."

With each passing week, I saw that he was absolutely right. When responding to the what-I-do question I began to notice that I was always associating myself with some group or profession. I would tell some people that I was a freelancer or a part-time consultant or a volunteer. All of these were true but I was implying a greater affiliation than there actually was. Not because I wanted to lie or mislead, but mostly to stave off questions.

So here's my tip: Before you quit, and if at all possible, make sure that you still keep some professional affiliation going. Offering to volunteer (where you see ways you can add value) is the best way I know of to gain affiliations. It doesn’t have to pay, or be full time, but it will certainly make your transition a little smoother.

Movable Feasts – A Behind the Scenes look

Managing the kitchen has been an interesting experience when moving from city to city every couple of months. A few people have asked me how we manage the cooking part. We do eat out frequently, but we mostly cook our meals. We can't eat out 3 meals a day, every day.

Back in our apartment in Chicago, we had lots of utensils and kitchen appliances. Since we are now restricted by luggage that we can carry by ourselves, we move around with a very limited amount of utensils. Our kitchen stuff fills about half of one suitcase.

We are forced to be very strict with what we can cart around: 2 dinner plates, 4 bowls, 2 cups and a few spoons. (It is sort of like what they hand you at the start of a week-long Zen retreat, or like going camping, but for a really extended period of time.) We have one small pressure cooker, 1 frying pan, a few stainless vessels, a knife and one flat griddle for dosas, and a few more microwavable plastic takeaway containers for heating and storing.

There's pretty much a checklist for the items in our first grocery shopping in each new place – rice, sugar, salt, cooking oil, instant coffee and a few ready mixes to start things off. We carry a small bag of spices which we refill as needed. Fresh vegetables are plentiful in India. We started out managing with long-life UHT milk cartons, but there's enough competition among milk vendors so now we get milk packets delivered to our door each morning.

What we now have is surely much less than 20% of what we once had in our kitchen. And what has been a revelation to me is that we are managing quite fine. I don’t feel the lack of those other things except on rare occasions. If we desire something fancy, we have to eat out. We have even hosted dinners for others (with some borrowed vessels and cutlery).

We are very Spartan about adding to our kitchen acquisitions now, which implies that we must have been inefficient before, buying lots of redundant stuff.

And the big lesson (to me) is that cutting back and adjusting to a having a simplified kitchen has not been as difficult as it once seemed from the outside. You just have to be mentally prepared.

Reference Anxiety

“Reference Anxiety” is basically the compulsion to keep up with the Joneses.

I came across this term a few years ago, in Lee Eisenberg’s book The Number. Lee mentions this as one big obstacle that keep people from attaining their “Number” – which is the estimated dollar amount in their nest egg so that they can retire comfortably.

Though I wasn’t aware of the term for it, I had experienced reference anxiety numerous times. I think most of us have.

I used to be a little proud of the fact that I drove a relatively old car to work. But that only lasted until my wife pointed out that Larry Summers, the director of Obama's National Economic Council still drives a 1995 Protege. Now there’s a man who is completely free of reference anxiety.

What struck me (and the reason I am posting this at all) is a side comment that Lee Eisenberg makes in his book. He mentions research that shows that it is not the Joneses who are raising the bar. Instead, he says, “we feel a great deal of pressure to keep up with ourselves.”

This, I find to be particularly insightful. There is no dearth of better things to acquire and enjoy. I know from first hand experience. I have many friends who are very successful in their chosen fields and not surprisingly, they live the good life. None of these friends would suggest that I go and buy or subscribe to the same things that they do. And yet it takes a lot of energy (if not courage) to consciously stay away from trying to keep up.

When it comes to reference anxiety perhaps I can fight it better if I realize that I am my own enemy.

5 Myths about not having a job

It’s been one year since I succumbed to the idea of not having a job at all. Like everyone, I had hopes and preconceived notions of what it would be like to not go to work at all. Here are 5 things I have learned in the ensuing year are not really true.

Myth #1: You will have vast stretches of unlimited free time
This is the primary reason to give up a regular job, but it is surprising how little extra time one really gets. Not having to set out for office daily is when you realize how many of our day to day activities have to get done anyway. If you manage your time well, you can get a few extra hours every day, but it not even close to whole days.

Myth #2: With no routine to adhere to, you can do whatever you want, whenever you feel like it
It has been a shock to me how quickly new routines get formed. Yes, it is possible to be rebellious and try to shun routines. But for me, not having a routine worked out to be really counter-productive. I have made peace with the fact that routines to a certain degree are inevitable, and that the structure is actually helpful for me to function better.

Myth #3: You can forget about Work and earning Money
Your ex-colleagues and friends will come up with suggestions for what else you could be doing with your time, even if you don’t want to work 9 to 5. From time to time, I myself come up with schemes which I feel are ways to earn extra money. That kind of thinking lasts until I realize that it simply doesn’t make any sense to venture out on dubious propositions that have a remote chance of succeeding. And that I would be earning one tenth of my annual salary even if they did pan out. But it takes conscious effort to stay clear of work and money-related thinking.

Myth #4: You can’t live without a regular paycheck
Actually, employees get a lot more than just their paycheck, if you also consider the perks and benefits that go with being employed. So there is a big fear in letting go of what feels like life support. In my case, after a few necessary adaptations, it didn’t at all feel that bad. I don’t want to make it seem easy. Just that with enough planning, careful saving and living within set budgets it is possible to attain freedom from our dependence on regular paychecks.

Myth #5: You will get terribly bored
This is perhaps the biggest myth of them all. Those who say this really don’t know what they are talking about. When was the last time you got bored of a 4-day weekend, or your 2-week vacation? With all the events, movies, books and so much of the Web to discover, if anyone gets bored it is really their own fault. I am just as pressed for time as I was when I was working, and haven’t yet gotten bored.

In all, I am happy with my decision to leave the workforce. (Otherwise I’d be out looking for a job right now.) Just that things don’t always turn out as you think they will. If you know of friends or colleagues who mention their urge to shove their job, you might consider forwarding these myths to them.

Wanting to belong, wanting no attachments

Sometimes I want to belong, to be part of vibrant communities. At other times, I want to have no attachments whatsoever, to be free to keep moving. I am often conflicted about harboring these seemingly mutually incompatible desires simultaneously. Which is why I find the following passage by Anne Lindbergh reassuring:

"Perhaps a first step, is in simplification of life, in cutting out some of the distractions. But how? Total retirement is not possible, I cannot shed my responsibilities. I cannot permanently inhabit a desert island. I cannot be a nun in the midst of family life. I would not want to be. The solution for me, surely, is neither in total renunciation of the world, nor in total acceptance of it. I must find a balance somewhere, or an alternating rhythm between these two extremes; a swinging of the pendulum between solitude and communion, between retreat and return. In my periods of retreat, perhaps I can learn something to carry back into my worldly life."

Anne Morrow Lindbergh, Gift from the Sea

Tell me your XYZ coordinates

In many places around the world, but especially in India, people will typically try to ascertain three things about you and mentally assign you a certain rank and position. This rank is often deemed to be a measure of how successful you are, and whether you have “made it.” How they interact with you from then on depends on the rank or score that they assign you.

The three things are: your job (company, profession and title), your house (location and size) and your car (make, model and year). Here in India, I’ve had numerous people ask me directly or obliquely in an attempt to assign me a status-rank.

When these people find out that I have none of the three they are at a bit of a loss, unable to slot me into their coordinate system.

This takes them out of the scripted conversation that they are used to, because they’ve done this dozens of times before with others. But it sure makes for interesting conversations.

Hedonic Adaptation in Retirement

“Ram, are you thinking of coming back to work?” “Are you doing the things you wanted to do?” These are the questions that I regularly get asked via email or phone calls with friends and ex-colleagues.

What they are really asking is this: So now that you left work, are you really, really happy? Since most of us dream of not having to go to work, I know that my answer could be a valuable data point for them.

I really am very happy, but the reason I can’t be gaga ecstatic in my response is because I am aware of hedonic adaptation.

At its simplest, hedonic adaptation is the theory that humans rapidly adapt to their current situation, becoming habituated to the good or the bad. As a mnemonic for this phrase I think of hedonism – the pursuit of pleasure – and then link ‘adapting to it.’

(For the sake of completeness I should also mention that there are many who make nuanced arguments and try to refute or caveat the theory of hedonic adaptation.)

I first came across this term a few years ago in Daniel Gilbert’s excellent book “Stumbling on Happiness.” (I am a happiness literature junkie.)

Lottery winners are almost always mentioned as the textbook example of hedonic adaptation. Every study of lottery winners shows that after around 18 months or so, they are no happier than they were before winning the lottery.

I have seen a variation of it in my own case. Whether I am working or not working, I seem to feel equally busy. When I was working, it was fairly common for my list of to-do’s to have 15-20 items or more. I would knock off as many as I could, and roll over the remaining tasks for the next day. These days, I have much fewer items, but it still feels like I am just as busy. (Witness hedonic adaptation.)

Hedonic adaptation can be a very good thing when things go bad for us. We learn to adapt to it, to return quickly to our ‘set point.’ The flip side is that even when very good things happen to us, we get used to them very quickly too. (Can you remember the very first search you did on Google? It seemed like a great thing had happened to us -- the Web coupled with Google seemed to open up possibilities like never before. But today, we have so thoroughly adapted to the existence of Google in our lives that we just are not as thrilled about it as we once were.)

Knowing that hedonic adaptation exists, I have to constantly remind myself of how fortunate I really am, of how much I value my free time and that I should be using that time for things I think are worth doing, for things that make me happy.

These psychologists (who seem to have a metaphor for everything) are now dubbing this as being on the hedonic treadmill – no matter what speed, you end up in the same place.

Retirement -- Do you get on each other’s nerves?

Just the other day, my friend Srini posed a question that his wife had wanted to ask. Now that my wife and I are spending all our time at home, she wanted to know if we get on each other’s nerves?

I was concerned about exactly this aspect as I was leaving my job last year. In many ways, I feel that this is an even more pertinent retirement question than the questions about finance, which is what most people first think of.

In our case, for the most part, we are handling all this extra time together fine, though this is really more than a yes-or-no question. The fact that both of us left our jobs at around the same time has worked in our favor. In several retirement books, I have read that the second spouse (one who retires later) ends up disrupting the rhythm and the free time that the first spouse has gotten used to. This causes some resentment and leads to arguments.

Over the first few weeks of being home-bound, we re-divvied up the chores in ways that seem fair. We’ve fallen into a pattern of activities that we end up doing together (movies, TV, library visits and even grocery shopping) and there are times when we just do our own things.

From time to time, I will relocate to a different room just to get some space. I zealously carve out time to read books alone. I meet friends for coffee and have occasionally headed off alone to events, bookstores or to a coffee-shop to be by myself.

Lesson: Before you retire, have a discussion with your spouse on what you expect to be doing together and agree on having some time alone for each of you alone (if that’s important to you.) The biggest trick (I think) is to be able to catch the trigger points that lead to repeated arguments.

So to answer the original question, overall we’ve worked to reach an equilibrium without getting on each other's nerves. And I have actually been surprised that it has turned out better than I expected it to.