My Phased Retirement Plan Strategy
What’s my sneaky phased retirement plan strategy? In a nutshell, it’s to stick it out in order to get more money so I can earn less money later on. Clear as mud?
Many moms I know went part-time or even some stopped working after they had their first child. I am planning to work full-time until my next maternity leave. Going to work every day from Monday to Friday is more bearable knowing that it is not forever and is hopefully less than one year, provided that Baby GYM #2 is on the way. I could have cut down to part-time or found another job returning back to work from my mini-retirement or mat leave with baby GYM, but I wanted to endure the grind because that means I would have more parental leave pay and I would have more parental leave top-up from my employer.
This extra money would help me reach my phased retirement plan faster, so why not?
It does mean coming home exhausted, having less time for ‘alone time’ to work on my creative pursuits, like this blog. It does mean having less time to cook, clean the home, spending time with baby GYM, work out, read, and manage the household finances.
The Phased Retirement Plan
Right now, my investment portfolio sits shy of $280,000 and churns out a dividend income of roughly $7000 annually. I plan to sell the condo we are living once we are ready to move into our house and use some of that realized home equity. Some of that equity will be used to pay for my portion of the house build and some of it will be used to add to my investment portfolio. As some of you may remember, we contribute a portion of our active (not passive) incomes to the joint pot and my husband and I have separate and joint finances.
At that time, I anticipate that I will be able to increase the investment portfolio to around $400,000-$500,000, which will give me a conservative dividend yield of around $13,000 to $16,250 (taking to account a 3.25% annual yield on investment), which is just shy of half of my passive income FI number.
Related: How Much Should I Have Saved Up by 40?
This is where the ‘phased retirement plan’ comes into play. After I add this to my investments, I will have at least $13,000-$16,000 in passive dividend income. My individual net worth will go down (because money will be moved into the joint assets which I don’t include in my net worth calculations– though I haven’t completely decided what to do about this yet), but my passive income will go up. My cash flow will increase because I will be generating dividend income for income-producingng assets.
Related: Net Worth Means Nothing if You Don’t Have Cash Flow
What’s my phased retirement plan?
What is phased retirement?
I think it’s a euphemism for working part-time.
I plan to work part-time but I’ll have to talk with my boss about this or even quit and find another job. I will be able to continue to save and invest while working part-time since I will no longer have a mortgage and maintenance fees I will be paying for, which took up a portion of my paycheque. Don’t get me wrong, I am very grateful to be able to have the choice to work part-time and feel very privileged to be in the situation I am in- thanks to my choice in life partner (who is also doing a phased-retirement).
Working part-time will allow me to be able to enjoy collecting birthday freebies on my husbands birthday and my birthday, one of my favourite things to do.
The Reasons for My Phased Retirement Plan
One reason for my phased retirement plan is that I want to see baby GYM reach his milestones. He’s young only once and the ages of 0-3 are crucial for development. Also, once he hits Kindergarten and school age, there will be tons of lessons, classes, games, events, to take him to and I have a feeling that it will get even busier at that time.
As mentioned in my sandwich generation post, this also means that my parents and in-law will be getting older too and they may need help.
Once baby GYM reaches school age and starts going to Kindergarten, I still plan to have a phased retirement and work part-time until I am somewhere between age 50 to 55. After that, my defined benefit pension should kick in (which will bring in four figures a month). I will continue adding to my investment portfolio since I like the idea of Fat FIRE.
The main reason for working part-time until age 50 or 55 is to continue receiving extended benefits since my husband does not have work benefits and I do. Braces, dentist appointments, medication coverage- all that stuff is covered under an extended health plan. Braces are expensive, last I checked they were thousands of dollars. My dentist tried to encourage me to get Invisalign to fix my lower teeth (I was lazy with my retainer so my lower teeth aren’t perfectly straight anymore) and the quote he gave me was shocking.
Another reason for working part-time while my child(ren) are growing up because studies show that having a working mom benefits kids later in life. Specifically, girls that have a working mom have more successful careers and boys that have a working mom are more apt to take care of their family members. My mom became a stay at home mom after my youngest sibling was born- sometimes I think she did too much for my siblings to their detriment.
Related: The Family Black Sheep and the Effect on my Finances
Finally, I think a perfect balance is work and home life and working part-time. When you are just doing one thing (staying at home) you might get bored or feel like you need to escape.
Sometimes I felt like this when I was on maternity leave- I felt at times like it was a non-stop routine of feeding, cleaning up the mess after feeding, playtime, nap, and then waking up to feed, cooking dinner, washing dishes, and the cycle repeats itself again the next day. I found myself not able to create intellectual conversation or even make proper sentences or adult conversation, ha! When you are doing two things in moderation, you get bored less easily and learn to appreciate the overall experience more.
Related: How to Fight Back Against the Motherhood Penalty
Reaching My FI Number
I should still be able to add $30,000 to my investments annually and on top of an estimated (or optimistic??!!) 7% compound annual growth rate, this adds another $35,000 potentially. Doing the calculations I will be likely shy of a $1,000,000 investment portfolio at the age of 40, but at least I will be very close to that number (maybe with a bit more than $100,000 left to go).
My FI number is a $1,000,000 investment portfolio and if I were to work full-time I would be able to achieve my goal of hitting this FI number at the age of 40. However, since I’m planning to work part-time, I don’t know if this is achievable…
Although my average salary over time working part-time will not be very high, I should have a high savings rate nonetheless.
And…I’ve come to be okay with that. It took a bit of time to accept it (because I like to achieve the goals I set out for myself) but I’m feeling more confident about this decision than ever before– but it was a difficult decision to make.
When I see my toddler’s smile and his fascination with flowers and bicycles, it makes me appreciate the simple things in life so much more. Simple things like time spent with loved ones.
The journey to FI is not a race. Life is not a race.
In closing, I am reminded of the quote:
Life is a journey, not a destination. Learn to enjoy the ride.
— Unknown
Have you had to make difficult decisions in the pursuit of more time with loved ones rather than the accumulation of more money?Â
For those that have reached FIRE, what was your journey like?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.
Hi GYM, Although our circumstances are very different, I had a similar thought process as you. Grind it out early with a vision that a different more enjoyable life style lie ahead with part time work as part of the strategy. Tom
@Tom- It would be interesting to check the happiness/ life satisfaction scores of people who work part time vs full time, haha! I had a crazy week this week and am dreaming of part-time pastures.
So cool that you’re able to figure out that you have this option of a phased retirement in order to spend more time with toddler GYM and Baby GYM #2?(wait is this a hint? lol!!) And really cool that your husband is planning the a phased retirement as well. Hopefully the both of you will reach that FI number of $1 million in your portfolio within the time you will turn 40.
Braces cost a lot. I had them when I was in high school and my mom told me that I could worn it in grade school but it was expensive for them at the time. I also had a retainer after I was done with the braces but I stop wearing it after a year. And now my front teeth have a small gap in-between because of that.
@Kris- My husband is already pretty much part-time 🙂 He’s been taking care of toddler GYM most days that I am working so I have been feeling the ‘mom guilt’. They say a ‘smile is forever’ so I guess that’s why people spend so much money on braces. Have you tried wearing your retainer again to see if it still fits?
Yeah I tried wearing them about a couple of years after I stopped using it. I put it on before I went to bed see what would happened. Bad choice!! It felt so uncomfortable that it woke me in the middle of the night and had to take them off. I guess I can go back to the orthodontist and correctly straighten my teeth again with another retainer. But at this point I’m satisfied with how my teeth looks and most likely won’t go through that again!
@Kris- I hate wearing my retainer, but I’ve been trying to wear them again more often since my teeth are migrating. Yeah, that’s a good option, retainers definitely don’t cost as much as new braces, but fantastic that you don’t feel the need to change your teeth 🙂
This is a neat plan – funnily enough it’s sort of in line with what I’ve contemplated for our future years maybe, if I can make any of the numbers work out. It’s definitely hard for me to choose to give up the full time salary when I worked so hard to bring it up to this level in the first place though, so for us it’s merely an exercise in considering options. I’m much closer to 40 than you so I don’t think I’ve got a hope of hitting the $1M mark in the next four years alone but we’ll figure it out.
I’ve also been pondering Invisalign for a year now and our insurance will cover enough of the cost for it to be merely painful and not shocking but it’s still enough, along with the ACTUAL pain, that I’m not eager to do it.
@Revanche- Oh I totally know how you feel. I was so close to actually hitting 6 figures in a year and then I am giving it up. Kind of stings, but I’ve accepted my choice. Oh I didn’t know Invisalign was painful, it looks so glamorous to me. It doesn’t look painful, it looks like wearing a retainer. If you take the plunge, let me know how it goes!
Hi GYM, you put a lot of thoughts into it, and that sounds like a plan. I’m sure your kids would be very happy about it. When my kid was young, I wished I could spend more time with him. That’s kind of regret.
Working part time is attractive, and I might consider it once back home.
@Helen- I think my mother in law worked full time and my husband and sister in law have turned out great! It seemed like they had a lot of quality time even though both parents worked. Someone I know just retired and going to work very casual/ part time at the post office, delivering mail! $20/hr not bad for a relatively stress free job that allows you to get some fresh air.