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A Little Active Income Goes a Long Way in Early Retirement

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A Little Active Income Goes a Long Way in Early RetirementI have been retired for over 4 years and I love it. My low key lifestyle suits me perfectly. I don’t have to deal with a boss, coworkers, endless meetings, or rush hour traffic anymore. Life has been great and I don’t regret leaving my engineering career one bit. I haven’t quit working completely, though. I normally spend 20-30 hours per week on Retire by 40 and it generates a little income to help pay the bills. The key to early retirement is passive income, but it is extremely difficult cover your bills only with passive income. Early retirement can last more than 50 years so I think it is best to be safe and minimize withdrawal in the early years. That’s why a little active income goes a long way in early retirement.

Passive income is tough

Why is it so difficult to build your passive income streams for early retirement? Basically, the world is against you. Here are a few reasons why.

  1. Time is not on your side – Early retirement means less time in the workforce and more time in retirement. You would have fewer than 20 years to save and invest before you retire by 40. The earlier you retire, the more years you spend in retirement. Your passive income would need to keep pace with inflation and changing economic conditions for 40-50 years. That’s tough.
  2. Lifestyle inflation – It is inevitable to spend more money every year. The cost of goods increases every year and there are always new services and products. Most families are so caught up with lifestyle inflation that they can’t even save 10% percentage of their income. Saving 10% per year will be barely enough for retiring at 65 and most people can’t even consider retirement. Lifestyle inflation is why early retirement is out of reach for most people.
  3. Low rate of return – Another problem with passive income is the low ROI. I’m going to be conservative and say we can generate about 3% of passive income from our investments. Our annual expense is about $55,000 so we’d need around 2 million dollars to cover our cost of living. That’s not easy to do within 20 years.
  4. Accessibility – We have a little over $2 million in our investments, but they are not very accessible. The bulk of our investments are in our tax-advantaged accounts and we need to do some work to be able to access them without paying the 10% early withdrawal penalty. Our rentals are returning much less than 3% and they are not very liquid. They should improve over time, but they are not very efficient right now. This means we need to accumulate even more than 2 million dollars and keep working to improve our ROI.

See, passive income isn’t easy. That’s why I think working part-time is a more realistic way to go for early retirees. You can see how I’m doing at my Passive Income page.

Early retirement doesn’t have to mean a full retirement

Passive income is simply income from sources other than work. Active income is income that you have to actively spend time on i.e. a steady job at a workplace that hired you. Most families rely on active income to pay the bills, but we all have to retire eventually. At that point, you will have to rely on passive income to fund your lifestyle. However, it doesn’t have to be an abrupt switch from full-time work to full-time retirement. My brand of early retirement is the middle ground and it is much more accessible to anyone who puts their mind to it.

I quit working full-time and transitioned to part-time self employment. I’m doing something I enjoy and I’m making a little money to help pay the bills. Passive income is very helpful because it offsets the amount active income I’d have to make. In 2015, our passive income covered about 55% of our cost of living.  I call this the FI ratio. I’m working to increase our FI ratio and eventually passive income will cover 100% of our living expenses. I will then have the option to retire full-time. At this point, I like working part-time. It makes me feel productive and connected to the world. Part-time self employment is the ideal situation for me and my family. Things always change, though. It’s best to ramp up our FI ratio to 100% as soon as possible just in case.

Passive Income

I originally wrote this post at the end of 2012 and things have changed quite a bit since then. At that time, my goal was for our passive income to cover about 50% of our expenses. We thought Mrs. RB40 would continue to work for at least 15 years so my goal was a bit low. She liked her job and enjoyed being a productive part of society and I didn’t think she was ready to join me in early retirement. Fast forward to 2016 and Mrs. RB40 now wants to retire soon. She still likes work, but she wants more time to work on her other projects. Part-time work would be ideal, but she can’t do that at her current job. Consequently, our new goal is to cover 100% of our expenses with passive income plus my online income. Let’s see where we are in 2016.

Dividend Stocks

Dividend stocks are a great source of passive income because they have the growth potential of stocks and a favorable tax rate. In 2015, we paid no taxes on our dividend income and it felt great. Don’t worry, the IRS isn’t going to throw us in jail. We were in the 15% tax bracket and it’s perfectly legal to pay no tax on our dividend income.

For 2016, we should receive about $11,500 in dividend income. That’s a nice increase from $7,500 in 2012. Our dividend should continue to grow every year because I invest in companies that have good track records of increasing their dividends. This niche is called dividend growth investing. We also add to our dividend portfolio whenever we have a little extra cash.

My tutorial on How to Start Investing in Dividend Stocks.

Rental Properties

Currently, we have a duplex and half share of a rental condo. For 2016, we should make about $3,000 in rental income. This is just the income after mortgage, property tax, maintenance, repair, utilities, and other expenses. I’m not counting depreciation, appreciation, or principal reduction. 2017 should be better because I’m planning to raise the rents to reflect the market rate at the end of the year. The rental market in Portland has been on fire over the last few years.

Our rental income has been lower than I expected because there have always been some big repairs to be done. The silver lining is the property price appreciation. Our properties have appreciated quite a bit over these past 4 years. Hopefully, the rentals will generate more cash at some point.

My tutorial on How to Start Investing in Rental Property.

Crowdfunding

Here is something new – I’m going give real estate crowdfunding a try this year. I just opened an account at Realty Shares. There is a 30 day cooling off period before you invest. The SEC recommends this to allow investors to become more familiar with the investment platform and the different types of investments available. During this period, investors can view the offerings available, but they can’t invest until the waiting period is over.

Fortunately, you can get this waiting period waived by filling out your investor profile and scheduling a follow-up call with Realty Shares. The follow-up call only took 5 minutes and they went over the different types of investments that are available. I got my cooling off period removed and I’m ready to invest! Currently, there are 11 open investments available. The minimum investment for each project is from $2,000 to $25,000. I’ll need go over the listing in detail and see if there is something I like. I invested $8,000 in a commercial property in Arizona and plan to go up to $10,000 by the end of 2017.

Blogging

Okay, this one is not quite passive. Blogging can be a lot of work, but it can lead to huge opportunities down the road. Many bloggers left their day job to pursue full-time self employment and they are doing very well. Some elite bloggers are making a lot more income than they ever made working for someone else.I encourage everyone to start a blog. The great thing about blogging is that you don’t need to know how to do all the technical stuff. You don’t even need to be a great writer. I was always better at STEM subjects when I was in school and I never thought I could write for a wide audience. My early articles weren’t great, but I improved a lot since then. Like anything, the more you practice, the better you get. Seriously, if I can write a blog, anyone can.

Here is my tutorial on How to Start a Blog and Why You Should. Eventually, it could become very passive. Some bloggers update their blog once per month and still generate a very respectable passive income. I hope to get there someday.

Retirement Accounts

The bulk of our investments are in our tax advantaged retirement accounts. Once Mrs. RB40 retires, then we can start building a Roth IRA ladder to access those accounts. For 2016, our tax-advantaged accounts should generate about $23,000 in passive income. These are all in passive index funds so the ROI is just around 2%. We could focus on more income by investing in dividend stocks when we do the rollover process.

FI ratio

Here is a simple way to track our progress toward financial independence.

FI ratio = passive income / expense

We should make about $38,000 in passive income in 2016. On the denominator side, our expense should be around $55,000 this year. So our FI ratio for 2016 should be around 70%. Actually, I would be very happy with 65%. We’ll see how the rest of the year goes.

Active Income

65% isn’t bad, but it isn’t 100%. We’re still short about $17,000. Luckily, my online income* makes up for the shortfall. That’s why I say a little active income goes a long way in early retirement. I only need to make $17,000 and our cost of living would be covered in 2016. Anyone can make $17,000 per year, right? In theory, Mrs. RB40 could retire this year if she really wanted to. However, she needs a little more sense of security so she will work a little longer. I think our FI ratio should be very close to 100% in 2020. She should be secure enough to retire early then. Another option is to relocate to an area with lower cost of living. We’ll keep that option in our back pocket for now.

Passive income is a great way to pay for early retirement.  You don’t need to cover 100% of your bills if you’re willing to work a little bit. A little part-time work is actually good in retirement. It helps you pass the time and avoids driving your spouse nuts. I’m planning to keep working part-time for at least 10 more years. This will enable our investment to grow at a higher rate because we’ll be able to reinvest more. We may not be able to cover 100% or our income by 2020, but I’m confident that we will get there someday. Meanwhile, I will continue to work part-time on something I enjoy.

What about you? 

Would you consider working part-time after retirement?

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Image by Giorgio Montersino

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.

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{ 67 comments… add one }
  • Financial Samurai December 27, 2012, 12:19 am

    If you can generate active income that you LIKE during retirement, that’s what matters most.

    I agree, a little active income goes a long way to help subsidize your lifestyle along with passive income.

    It’s one big fun game to play. The FED is making it tough with interest rates so low. We’re on level “Difficult” but it is still fun!

    • Dividend Growth Investor December 27, 2012, 1:04 pm

      Active income is great. But also great is optimizing your current assets to deliver for you.

      I think that these $50K sitting in cash are producing nothing for you. If you bought dividend stocks instead, you could easily get $1750 – $2000 in extra dividend income. And you can always sell these stocks if you really needed the money. True, stock prices vary, but in reality, do you really think you will need the whole $50K in a lump sum?

      If I had $50K in a lump sum, I would probably invest $2K-$4K/month for 24 – 12 months… That way you will ease slowly into building the portfolio, and still have some cash left (since cash is so important to you).

      • retirebyforty December 27, 2012, 9:48 pm

        I’m planning to buy more dividend stocks eventually if things goes well. We probably don’t need $50k at once, but the Mrs. would loose a lot of sleep if we don’t have cash.
        For these next few years, I’d rather have cash than the extra dividend income. Once we are more settled in our new situation, I would invest these.

        • Chris December 28, 2012, 8:31 pm

          I’m wondering what kind of effect having a taxable brokerage account would have on your finances.
          Like Dividend Growth Investor said, that would provide you with a mechanism that would allow you to scrape off some or all of the dividends and thus allow you to offset a good amount.
          Or for that matter, perhaps a combination of the two (say 80/20 Brokerage/Savings accounts).
          Nice to have such a problem, and we’re working towards such potential problems as soon as we can, but may not see any fruition of it until I’m close to normal retirement age and the house is paid off.

    • Jane Savers December 30, 2012, 6:41 pm

      I love my job Financial Samurai and I will continue to rely on active income until my retirement. I am not handy enough to risk the purchase of anything involving tenants so I invest. I want to make a stock purchase during the first week of 2013 but I have to wait and see what the Americans are going to do about their ceiling and cliff issues.

      Low interest rates are great for me right now because I am trying to pay off debt.

  • Glen @ Monster Piggy Bank December 27, 2012, 1:46 am

    I have about 3 different irons in the fire in regards to passive income, although I only really started about half way through this year.

    So far I have made less than $1,000. So it is going pretty slowly so far.

    • retirebyforty December 27, 2012, 9:49 pm

      That’s the thing about passive income. They take a long time to build up. Good luck!

  • Sean @ One Smart Dollar December 27, 2012, 6:42 am

    I would definitely get a part time job to subsidize retirement. I live in Colorado and have always said it would be fun to work part time on a ski resort. Just like Sam said above, you have to enjoy the job or what’s the point.

    • retirebyforty December 27, 2012, 9:51 pm

      I liked snowboarding when I was younger, but now I’d rather be warm and cozy. 🙂

  • krantcents December 27, 2012, 8:47 am

    I like the concept of multiple income streams. I will have Social Security and a pension to cover my all my needs. My IRAs will supplement my income. I used the same concept when I achieved financial freedom. My income property covered all my necessities and my businesses provided income for the wants.

    • retirebyforty December 27, 2012, 9:51 pm

      You’ll have a very comfortable retirement. Enjoy!

  • Justin December 27, 2012, 10:16 am

    Don’t forget about downsizing your lifestyle either. I am going to be forced into an early retirement from the fire dept due to an on the job injury which leaves me with a pension but not enough to live at our current level. We are going to move to Nicaragua for a few years (cost of living is 25% of the States), start a business, and go from there !

    • retirebyforty December 27, 2012, 9:53 pm

      Good luck! One of my buddy is from Nicaragua. It’s not easy to do business there.
      Once Mrs. RB40 retire, I would push for something like that too. The cost of living is so much more affordable in south America.

  • Kurt @ Money Counselor December 27, 2012, 10:50 am

    To me active income is a sort of insurance policy. Maybe it’s just me, but I’d feel better with even a little earned income coming in than with none, even if my passive income were enough to cover my living expenses. The unexpected always happens. And as we’ve witnessed the past few years, a big nest egg’s cash generating capacity can be slashed if, say, interest rates fall to near zero for several years!

    • retirebyforty December 27, 2012, 9:56 pm

      That’s a great way to look at it. I think working part time will also keep you active and give you something to do in retirement. When people are idle they tend to spend money. 🙂

  • Lance @ Money Life and More December 27, 2012, 3:27 pm

    I would like to consider early retirement at some point but I’m not there yet. We have other goals we have to take care of first. I wouldn’t mind working part time or having some source of active income at all. In fact, I think I’d prefer it as long as I could take time off when I want to.

    • retirebyforty December 27, 2012, 9:56 pm

      I haven’t thought much about taking time off. The blog is quite time consuming. Hopefully, I can find a better balance in the future.

  • Kraig @ Young Cheap Living December 27, 2012, 4:28 pm

    Agreed. Even as little as $300 per month in income is equivalent to having $90,000 invested and withdrawing at 4% per year. I don’t know about you, but it takes quite a while to amass $90,000.

    And $300 per month seems to be fairly straight forward and easy to earn.

    • retirebyforty December 27, 2012, 9:57 pm

      Exactly! Most of us should be able to generate $300/month doing something we enjoy.

  • SavvyFinancialLatina December 27, 2012, 8:48 pm

    How much do you have invested in order to generate $7500 in dividends?

    • retirebyforty December 27, 2012, 9:59 pm

      The value is a little over 200k, but it built up over time.

      • SavvyFinancialLatina December 28, 2012, 9:56 am

        Dang, so in order to make a decent income on dividend stocks you need almost a million $ in your taxable account.

        Good to know.

        • Chris December 28, 2012, 8:42 pm

          Well, obviously that depends upon the dividend stocks that you invest in.
          For instance, I’ve been successful in growing my portfolio by 24% for 2 years in a row by using good and sometimes lucky dividend stock purchases/sales. Not always getting the dividend but at least 2 times.
          So, if one was able to maintain that level and leave 5% of the increase in the account every year, they could feasibly generate $7,500 of “dividends” out of a brokerage account that only had about $40,000, if they could do exactly that.
          Of course I’m sure that you understand that the ROI is FAR from guaranteed to be 24%/yr forever, although there are stocks that do provide 10%-11% dividends (or more if you get lucky and buy them at a low price of course), which would change the amount needed up to $125,000

          • retirebyforty December 28, 2012, 9:15 pm

            Wow, 24% growth is world class. Of course the big challenge is to maintain the ROI when the whole market goes down like in 2007-2009.

  • Integrator December 28, 2012, 4:57 am

    The dividend income strategy is a great one for producing passive income. My portfolio throws off about $25k annually, but it has taken years (about 10!) to build up. If you are comfortable, consider diversifying to international dividend stocks and possibly smaller stocks that have higher dividend growth. Higher dividend growth is the key. Agree with the comment above that reducing your $50k cash balance and redeploying it toward dividend stocks will throw off additional income for you faster.

    • retirebyforty December 28, 2012, 3:09 pm

      I only have one international dividend stock and I should diversify more. $25k is great for dividend. It will probably take me 10 more years to get anywhere close to that from our taxable account. Our retirement accounts throw off dividend too, but I just reinvest those.

  • My Multiple Incomes December 28, 2012, 8:54 am

    It’ s really good to have an active income to augment your passive ones especially if you have chosen to go on an early retirement which I plan to do in the future. I hope that when my retirement date comes my passive ones will be more than enough to sustain us, but if not then I see no problem in getting an active one to supplement my income.

    • retirebyforty December 28, 2012, 3:10 pm

      Good luck! Active income is so much higher than passive income, but it’s more work. 🙂

  • Steve December 28, 2012, 4:47 pm

    Is the $13,000 all from this blog? How many hours a week do you estimate you spend on this blog (writing, admin, maintenance, responding to comments, etc)? Thanks.

    • retirebyforty December 28, 2012, 9:12 pm

      The income is not all from this blog. I have a couple more sites and I did some freelancing as well.
      I probably spend around 30 hours per week on all my sites together. Blogging is not passive at all.

  • Darwin's Money January 3, 2013, 6:41 pm

    Nice work having $50K liquid. But have you considered some “somewhat safe” alternatives that yield a bit more than the crappy bank savings yields? Perhaps CDs and just eat the withdrawal penalty if necessary or greater part of it in dividend stocks or something?

    • retirebyforty January 4, 2013, 10:04 am

      CD rate is just .1% higher than what I’m getting now so it’s not worth it to me. Next year we’ll invest the money if we didn’t need it this year. I’ll probably go with I bonds and dividend stocks.

  • Mr. 1500 January 5, 2013, 3:34 pm

    I’ve been on Prosper for over 2 years and Lending Club for almost that long. You didn’t mention if you’ve tried Lending Club, but if not, I suggest you have a look. For me, its been a bit safer than Prosper (0 defaults verses 2 very early defaults on Prosper). Also, Lending Club is in much better shape financially with an IPO planned in the next 2 years. Finally, check out lendacademy.com if you’ve haven’t already. Peter Renton has a ton of great information there. In particular, I really liked this recent post: http://www.lendacademy.com/simple-investment-strategy-for-lending-club-and-prosper/

    Thanks for all your great information. We share a common dream!

    • retirebyforty January 6, 2013, 1:34 pm

      Thanks for your input. This year I will invest with Lending Club to see if it’s better than Prosper. Prosper seems to be having technical problems lately and that’s not good for either the lenders or borrowers.

  • My Money Design January 7, 2013, 6:36 pm

    I’d consider a little active income to mix in with my passive income if it meant staying afloat until I could touch my retirement accounts. Unfortunately, I just found out that P2P isn’t offered in my State.

  • Financial Samurai January 12, 2014, 7:10 pm

    Just landed a part time gig which pays a robust salary. Start tomorrow! I’ll write about it the future. Very excited bc the gig is so congruent with everything in doing online.

    • retirebyforty January 13, 2014, 9:31 am

      Looking forward to reading more about it. A part time gig is a great fit for early retirees.

    • Physician on FIRE August 15, 2016, 12:48 pm

      That’s exciting, Sam!

      I think most of us who have the drive to create a situation for ourselves that allows us to retire early are going to continue to have that drive. As I continue to contemplate my early retirement, I am unable to imagine a life without doing something “productive.” I know productive and money-producing aren’t necessarily the same thing, but that’s how my mind tends to think.

      Best,
      -PoF

  • theFIREstarter February 2, 2014, 4:17 pm

    All over this stategy!

    There is no way I can save up enough in 5 years to retire only with passive income, and to be honest, I have no real interest in doing that anyway (unless I went travelling, but I am getting a bit too old for all that I think and have done a lot already). So my plan is to try to build some active or semi passive online income, start a few offline side hustles that are interesting and fun to me, get the wife on board and off we sail into the early retirement sunset. If only it were that easy eh 🙂 but we’ll give it our best shot.

    • retirebyforty February 3, 2014, 9:51 am

      Good luck! Traveling is a lot of fun, but you can’t do it all the time. I think we’ll like 2 months out of the year max.

  • Apathy Ends August 15, 2016, 4:39 am

    I would work on my own terms, but wouldn’t want to necessarily work part time for low pay, would rather tough it out working full time than doing that for another year or two

    • retirebyforty August 15, 2016, 11:59 am

      You never know how it’s going to turn out. If I have to, then I’d do what I have to do. Hopefully, I can continue to be self employed and making a little money in the future.

  • Mike Drak August 15, 2016, 10:00 am

    Keeping a source of active income intact after taking early retirement reduces long term risk but make sure it is something that you like to do and that it provides the flexibility that you require. Why would you ever quit something that you like doing?
    When I calculate my FI ratio it’s Passive income/non-discretionary expenses. Discretionary expenses going out to dinner, vacation etc are covered from my fun money (active income).

    • retirebyforty August 15, 2016, 12:03 pm

      Good point about fixed expenses. We don’t have a lot of discretionary expenses so I don’t think it would make a huge difference. I guess we could reduce vacation, but I don’t want to do that unless our fund runs low. Things are pretty good at the moment.

  • Girish August 15, 2016, 11:14 am

    Assume 3 (or max 4%) as withdrawal rate. Anything more and you are taking huge risk of running out of money sooner. Also do various simulations (what Ifs) on your portfolio. Try various returns, recession every 4 year then rally for next 2-4 years etc to see how robust your plans are. You will surprised to find that what you think as adequate is not at all when subjected to objective real life tests. That is why I said anything more than 3% is not very sustainable in the long run. If the funds are inadequate then it makes sense to generate some income to avoid early withdrawals so money grows unhindered in the initial years. In any case you will need to think like a businessman and plan the strategies and cash flows both. You are on your own. This calls for great deal of financial savvy and discipline. May not be for every one due to mental aspects. I am talking about early retirement before the age of 60.

    • retirebyforty August 15, 2016, 12:06 pm

      I think 3% is just about right for early retirees. Once you get to 65, I think 4% is okay. It depends on how the investments are doing, of course. I plan to reduce withdrawal in bad years. You’re right – early retirement isn’t for everyone. You need a lot of discipline.

      • Girish August 15, 2016, 10:19 pm

        Another aspect I would like to bring forth is the timing. The markets are on one way trip since 2009. Due to QE and money printing there is too much liquidity chasing assets. We see asset bubbles every where. The stock markets in most countries are stretched. All that QE and printing is going to cause massive inflation down the line and going to impact market valuations. Has happened in the past and will happen again. My point is people who are now comfortable due too high stock market valuation may need to stay alert and not lose all those gains made. Any severe recession and market correction can be debilitating for retirees. I see many people assume that their unrealized market gains will remain stable. But that is a fallacy. We have seen in 2000 and 2008 corrections how they wiped out people close to retirement or actual retirees banking on stock market gains.
        Not only retirees need to preserve their gains but they also should be in position to take advantage of any market correction. That means they need to keep dry powder ready to take advantage of any serious market correction. And they should ensure that the rest of their portfolio is in stocks that will survive any serious recession. This calls for great deal of financial savvy. Not at all easy for regular folks.
        It is getting tougher to manage the retirement, no doubt.

  • Mike Drak August 16, 2016, 5:48 am

    I’ve spent a good part of my life pre FI worrying about money and I made a promise to myself not to worry about money anymore. Life is way too short. That is why as long as my health holds out I intend to generate active income from work that I enjoy and feel free to spend that extra income on anything I choose. I would lose my mind and waste a lot of energy if I had to worry about the markets each day. The trade off is worth it to me and working in retirement has a number of other positive aspects attached to it.

  • James August 16, 2016, 10:59 am

    Do you feel any unease being a stay at home dad while your wife goes to work when your family still needs the money? Unless someone’s wife or girlfriend is independently wealthy, for many men, this sort of non traditional role would make them very uncomfortable in reality eventually even though they may claim otherwise.

    • retirebyforty August 16, 2016, 11:28 am

      No, I don’t feel any unease now. Mainly because our net worth is 40x our annual expense. This is financial independence to me.
      Also, my wife plans to retire in a few years so it’s just a matter of time. We’ll both be retired soon.
      It’s not traditional, but it’s working out well for our family.
      If we’re not FI, then I might feel bad about it.

  • Kevin @ LifeInFIRE August 17, 2016, 9:28 am

    Even if you are 100% FI, it is still very nice to work a little and get a small “playcheck” for fun spending (RothIRA contributions). It helps you enjoy your FIRE time by being even more active, yet doesn’t touch your FI passive income stream.
    Yes, working may let some of us feels more active, but I’d bet many people who can FIRE are so driven that their schetchle is already quite full.
    The other side benefit of working a little is that you can tell people “Oh, I’m a XXXXXX” when asked what you do. Almost NOBODY seems to comprehend the ability to be FIREd. To many people, FIRE is bragging, so just tell them about your (little) “job.”

    • retirebyforty August 17, 2016, 10:52 am

      You’re 100% correct about FIRE. People always look at me strangely when I tell them I’m retired. Now I say I’m a stay at home dad. 🙂

    • Mr. All Things Money August 17, 2016, 1:53 pm

      Regarding: “The other side benefit of working a little is that you can tell people “Oh, I’m a XXXXXX” when asked what you do.”

      Being a new early retiree, I am still trying to get used to of answering that question when asked. I get weird looks when I tell people I have retired early. It’s like nobody believes that you can actually retire young if you are smart with your money and learn to invest.

  • Kevin August 17, 2016, 5:52 pm

    Timely article. I have 9 years left to figure out how to make active income once I retire at 40 years old. I’m thinking teaching some classes at a community college since I enjoy teaching. Not much money I know but as Financial Samurai said, you got to find something you enjoy.

  • Sherrie St. Cyr August 17, 2016, 6:29 pm

    I totally missed the “retire early” window, but I’m in the enviable position that I love my job and it pays well. I think transitioning to part-time work for a while is an ideal situation.

    • retirebyforty August 18, 2016, 10:52 am

      Congratulation! I would love to have a job I like that pays well. I think that’s better than retirement, but you still need to save. You never know how things are going to change.

  • Michael August 18, 2016, 8:33 am

    Hi Joe,

    This is my first visit to your blog. Very nice post! Passive income is great, however, it does require work too as you have pointed out.

    I read somewhere – “it becomes work when you would rather be doing something else”.

    As long as you enjoy what you do for a living, you could plan / save / invest for retirement, and when the day comes, it is truly your choice.

    If you don’t like what you do for a living, you probably need to find something that you truly enjoy doing and try to make a living out of it.

    Right now, I enjoy my work, and I could do what I do for a pretty long time.

    –Michael

  • EL August 19, 2016, 2:17 pm

    Good job on the passive income. It goes to show that if you stay focus you can do anything. I think a safety buffer is smart, and will help the passive income increase over time. Obviously reducing expenses helps, and moving money around towards higher yielding vehicles like REITS will help. Look for opportunities that have above average dividend growth, and its a good chance that growth will continue.

  • Doug arnold August 22, 2016, 3:42 pm

    I’m semi retired from the military have done some odd jobs but going to look for a part time job over the next couple of weeks

  • Great Indian Retiree August 26, 2016, 8:30 pm

    I completely echo the sentiment that its getting tougher and tougher to retire on passive income alone – rates in developed countries are low and emerging economies are also seeing reducing interest rates. If you are making 4-5% ROI on your assets, you should consider yourself successful.

  • noor July 6, 2017, 8:55 am

    I think a safety buffer is smart, and will help the passive income increase over time. Obviously reducing expenses helps, and moving money around towards higher yielding vehicles like REITS will help. Look for opportunities that have above average dividend growth, and its a good chance that growth will continue.

  • Constructing A Future July 17, 2017, 8:03 am

    This is an excellent point. We make most of our income in real estate (land lording, flipping, etc…) but it doesn’t feel like work. I can’t wait until the day I can quick my 9 to 5 to solely focus as much or as little of my time towards it as I want. Retirement in the sense of golf every day and getting old fast doesn’t interest me a bit. Retirement for me is freedom from an employer!

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