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My brother, Brother Groovy, is a very curious fellow, and lately he’s been on a self-sufficiency kick. He wants to buy land in the country so he can build a little house, grow some food, and raise some chickens. He’s also exploring the feasibility of powering his little country house with solar.
Since the idea of self-sufficiency appeals to me as well, I often pick Brother Groovy’s brain about the topic. And during our last conversation about “prepping,” he shared a very profound observation. Disasters in the United States aren’t cataclysmic. Yes we have our Katrinas and our recessions, but we’re pretty much immune to the real scourges of mankind—famine, pestilence, and civil war. So Brother Groovy isn’t striving for societal-implosion self-sufficiency. That degree of prepping would be clearly excessive. No, his prepping goals are more modest, something along the lines of no-electricity-and-water-for-a-week self-sufficiency or oh-crap-I-just-got-downsized self-sufficiency.
Is the Mustachean Threshold too Lofty?
Now, don’t ask me why, but I began to think of the Mustachean Threshold (25 times your annual expenses in savings) in terms of Brother Groovy’s quest for self-sufficiency. He’s going for partial self-sufficiency because full self-sufficiency doesn’t make sense. Could the same type of analysis be applied to the Mustachean Threshold? In other words, what if the Mustachean Threshold doesn’t make sense for you? What if shooting for half the Mustachean Threshold is more pragmatic?
Consider someone who didn’t get her financial act together until her early 40s. She’s finally debt free, but has no savings. She can do better with her annual expenses, but they come in at a reasonable $35k. And she makes a good salary ($75k). Her company provides a 401(k) with a nice match (4 percent), which she just signed up for.
For her to reach the Mustachean Threshold, she would have to save $875k. Is this doable? Maybe. But she might not hit the Mustachean Threshold until she’s 70. Yikes!
What if, on the other hand, she didn’t shoot for the Mustachean Threshold? What if she shot for the Peach-Fuzz Threshold—twelve and half times her annual expenses. Under this scenario, she would never be financially independent. But once she saved $438k, she could shift to part-time employment.
What would you do if given these choices? Would you work full-time until you were 70-years-old? Or would you prefer to work 20 hours a week starting at age 60?
I know what I would choose. For a good chunk of my adult life, I’ve worked two jobs. In my current job, I work 45-50 hours a week. Working 20 hours a week wouldn’t even feel like work. So in a heartbeat I would take part-time work starting at 60 over full-time work ending at 70.
For a lot of Americans, the Mustachean Threshold isn’t practical. By the time they have the mind-set and the ability to save, the years required to get the job done aren’t there. It’s too late in the game. But for some of these Americans, the Peach-Fuzz Threshold is a good compromise.
So listen up Peach-Fuzzians. All is not lost. If you can switch to part-time work at age 60 that ain’t so bad. In fact, it’s freakin’ groovy.
I’m digging this concept, because the magic of compound interest is only awesome if you’re young enough to realize it. It’s downright depressing if you realize it when it’s too late. Working part time is a great lifestyle. You’re away from work enough to feel free, and you’re at work just enough to feel like your still able to accomplish something. Since all of our lives and needs are totally unique, the path to FI is really about finding the individual path that works for each of us. It’s not about finding someone else’s path. It’s about finding your path that provides you with the most meaning, purpose, and success. If you can find that path, you’really winning no matter how much money you have in the bank.
Thank you, Bill. I really appreciate your kind words. My goal with this post was to show the late-starters that all is not lost. With just a little thought and a little sacrifice, you can still wrangle together a half-way decent retirement. As you so aptly put it, FI is “about finding your path.” And if you can find a path that brings you “meaning, purpose, and success,” you’ve won–regardless of “how much money you have in the bank.” Beautiful sentiments, my friend.
Interesting trade-offs here. It’s something I think about a lot: would I rather work a LOT now, in my 20’s, and work substantially less or not at all later? OR, would I rather “spread” work out over my lifetime? I suppose many people do this with savings/spending as well: the choice to save now rewards a future self, at the expense of today’s self.
Hey, Frank. Yes, that’s a conundrum many face. Work and save like a maniac in your 20s so you can coast in your 40s or 50s. Or enjoy life in your 20s and work until you’re 65 or older. I’m 55 now and I wish I would have enjoyed life a little less in my 20s. It would have been great to retire at 45. But when I was a young man (18-25), I thought life was over at 30. Oh if I only had drank more wisdom than cheap beer in college!
I am constantly considering this possibility… I think if I saved myself about half way to complete independence, I could easily quit full time employment, and make up the other half of my income needs with freelance work and side hustles.
Without the encumbrance of a full time job, I am positive I could earn at least half a living by getting creative! That would allow for much more flexibility in my schedule, and I’d likely be happier in general.
You are so right about flexibility. The potential to do great things is out there for so many people. But too many of us are trapped in a full-time rat-race job to realize it. Mrs. Groovy and I are very fortunate. We are full Mustachean and will be retiring this October. But we are also relatively old (mid 50s). I often wonder how my life would have unfolded if I knew about financial independence and was half Mustachean in my early 30s. I definitely would have been in a position to take more risks. Congratulations on figuring this stuff out way before I did. And thanks for stopping by, Kudy. I look forward to reading about your future adventures.
Working after retirement age, even part-time, may not be possible for some. I retired and stopped working at age 62 when my health conditions made it too difficult to continue. Even if you’re healthy, finding good employment at that age may be problematic. Those who are behind on their retirement savings may need to adjust their expenses so that they can save more, or plan on adjusting their expenses during retirement. You can plan to work during your later years, but it’s always good to have a back-up plan.
That’s a very valid point, Gary, and Mrs. Groovy has been saying that all along. I know a few people in poor health who will be forced to work, or go on the dole. They’re not going to change their ways until it’s too late.
It all comes down to what you want your retirement to be. 25x is based on the 4% rule stating that your savings should last if you withdraw 4% a year.
If 25x your spending seems like too huge of a number, you may need to lower your expectations for spending in retirement or take a part-time job as you pointed out above. It all comes down to choices. I guess there is a reason is it called personal finance – its different for each person!
Hey, Thias. Excellent point. It does all come down to choices. If someone decides he values freedom over things, he chooses a more spartan life and leaves the rat race as soon as he can. If someone else values things over freedom, he chooses a more comfortable life and works until he’s eligible for Social Security. One lifestyle isn’t better than the other. As long as people understand their values, and tailor their decisions to maximize those values, nobody loses.
It remains 25 times your expenses no matter how you look at it. I myself plan to work part-time once I reach my number, but it also means I won’t be “Financially Independent”. So, yes, my egg nest will be actually 16 times my expenses (matching the “half mustachian” target you describe), but I won’t really be financially independent.
I love it, Stockbeard. The Mustachean Threshold is the ideal. But it’s not written in stone, and those who can’t reach it shouldn’t hang their heads in shame. Most of my family and friends would love to go to part-time work in their mid to late 50s. That would be living the dream for them. But they’ll all be working 40-plus hours a week until the they’re eligible for full Social Security benefits. Managing to accumulate 16 times your annual expenses is pretty damn impressive in my book. And while that number may not give you complete independence, it will give you options and benefits that most Americans (and most of the world’s population) couldn’t begin to imagine or hope to experience. Kudos.
I say save just a little more and move somewhere where she can live on $18,000-$20,000 because working part time is just like lifestyle inflation. At first it feels like nothing but pretty soon you grow into it and still feels like you have a job.
But that’s just me 😄
Hey, MissGF. Excellent point! Perhaps the biggest factor in helping Mrs. Groovy and me achieve financial independence has been geoarbitrage. If we didn’t move from high-cost New York to low-cost North Carolina, we’d be working until at least 65. Moving literally shaved off more than $800,000 from our Mustachean Threshold. So, yes, if you live in a high-cost area and can obtain the Peach-Fuzz Threshold, you can then move to a low-cost area and avoid part-time work altogether.
P.S. Mrs. Groovy vehemently agrees with you. In fact, she says that once she retires, that’s it. She’s never working again. And if things get bad, and we totally mismanage our portfolio, she’ll have us move to Ecuador to keep our cost-of-living below our means.
In that scenario, I would go for the peach fuzz. Focus on finding part time work that you enjoy and then live life the way you want. I guess it really depends on how much you despise your current work.
Agreed. The Mustachean Threshold is definitely preferable. But if circumstances make that an unrealistic goal, you’re better off going for the Peach-Fuzz. My biggest concern is that late-starters will give up all hope. They see what twenty-five times their annual expenses is and are so disheartened by that number they say “fuhgettaboutit.” My Peach-Fuzz Threshold is an attempt to keep them in the game; to show them that the teachings of the financial independence community are still relevant to their lives.
I applaud you and your brother but, I would last a month without the conveniences of life.
I have done without before and I can not handle the lights out for more than 4 hours or no internet.
I would if I had to but, I hope that day never comes. 🙂
I hear ya, Michael. When I was going to school in Buffalo, we lost a couple of housemates (they graduated early) and we couldn’t pay our gas bill. The utility company came and shut off the gas in mid-March. It was brutal. I can’t believe the pipes didn’t freeze. Two months of electric space heaters and cold showers weren’t fun.