Living an Amazing Life via the Reverse Retirement Plan

One of my cousins and her husband live a life that many people find to be a bit unusual. They have what I would describe as a “life cycle.”

For two or three years, the two of them will work at a job in or near the town where they live. They both have college degrees and are able to find work that pays at least reasonably well, and they both have a lot of contacts within their respective fields.

During those years, they live as far below their means as possible. They eat inexpensive meals, minimize their use of vehicles, avoid cable television, and so on. They both read a lot and go on lots of short hikes and marathons.

After a few years, they have a lot of post-tax money saved up. Once they hit a threshold that the two of them have calculated, they start getting ready to depart on a big adventure. They either quit their jobs or take on a several month unpaid leave of absence and the two of them switch into a completely different life.

One time, the two of them walked the entire Appalachian Trail. Other adventures have revolved around national parks. Right now, they’re actually on another trip like this, walking the length of the continental divide.

The expenses of this trip are covered by their savings. At the end of the trip, they return home and pick things up where they left off, either returning to their old jobs or moving on to new ones.

Their philosophy is that they will probably be unable to do something like walk the length of the continental divide or walk the full Appalachian Trail when they’re old, so if they’re ever going to go on an adventure like that, they need to do it when they’re still relatively young (they’re in their forties). If they burn all of their years working all the time and saving for a more traditional retirement, they will find themselves retired and likely no longer able to do these kinds of things.

The Reverse Plan

I like to think of what these two have done as the “reverse plan.”

The “traditional” plan for retirement is to work along a career path for some number of years – 30 or 40 or so – so that you can live a financially stable life in retirement. This path allows you to spend most of your income throughout your life, but it requires you to devote a lot of your time to work during most of the years of your adult life. This plan makes it difficult to take on a giant “adventure” like walking the entire Appalachian Trail, but it does guarantee security in retirement.

The retirement plan I’m on is a bit different. I’m working on a career path for a number of years – say, 15 or 20 – that will allow me to live a financially stable life in retirement, but that retirement will come much earlier (I’m hoping for 45 or so). Unlike traditional retirement, this plan requires you to live significantly below your means as you’re banking so much money for retirement.

This plan makes it difficult to leave for a big adventure in the next few years, but it does allow you to hopefully retire while you’re still able to go on a big adventure like that. The idea of spending several months after my children depart for college doing something like walking the Appalachian Trail sounds really appealing. I call this the “early retirement” plan.

The plan my cousins are on is what I would call the “reverse” plan. It does incorporate elements of early retirement, but it reorients them a little bit. Much like my early retirement plan, they are choosing to live significantly below their means and bank a lot of their income.

However, rather than shooting to retire in 15 or 20 years, they’re shooting for a more traditional retirement age. Instead, they’re using that excess money to finance a bunch of life adventures, like walking the Appalachian Trail or the continental divide.

Advantages of the Reverse Plan

The “reverse plan” has a bunch of advantages, one being obvious and some of the others being more subtle.

Obviously, the big advantage of the “reverse” plan is that it enables you to do things that seem outside the realm of possibility of ordinary life for most people. Most adults are in a situation where it is very difficult to just walk away from their job and hit the Appalachian Trail for six months. This plan simply allows you to take on those types of adventures.

At the same time, it still allows you to save for a traditional retirement. You can do both! You just contribute the usual 10% or so of your income to your 401(k) or your Roth IRA, and you also save more for adventures or other plans you may have using your post-tax money. That way, you can use that money with no strings attached depending on what your plans are for the moment.

I also consider a healthier career relationship to be a secondary advantage. Living with the “reverse” plan means that regular lengthy breaks from your career are built right into the package. Such breaks are perfect for refreshing you in your career path and leave you in a mental and physical position to be a top performer when you return from your adventure. It becomes a sabbatical from your career, giving you time away from job pressures and time to just unwind from all of it.

Disadvantages of the Reverse Plan

Of course, every plan like this comes with some significant disadvantages as well.

For this plan to work, you have to be a prodigious saver and live well beneath your means. That’s also true for the “early retirement” plan that I’m on. It’s not easy for most people. There’s a reason that the savings rate of the average American family resides in the single digits. America is a consumer society, tempting people constantly with all kinds of different purchasing opportunities. In order to follow a different life path that doesn’t leave you chained to your career for 40 years, you have to reject those temptations a lot. Some people manage to do it through willpower, but I actually think it’s easier to just check out of most of it and find other things to value.

You also need to have a strong professional network and career contacts, or at least a very flexible job. You’ve got to be in a professional situation that allows you to walk away for periods and then return with professional opportunities still in hand. To do that, you need to be a strong performer at work when you’re there, and maintain a lot of contacts, both among your peers and among potential employers. If you have a great reputation and a lot of good contacts, it’s easier to find work when you return from your adventures, perhaps even returning to the job you held before you left.

Also, other life factors can make many options very difficult. I’m a parent of three young children. It is not realistic for me to walk out on that responsibility and go walk along the continental divide for several months. I might be able to plan out a summer adventure of some kind with my children in tow (in fact, I’ve been kind of planning this for an upcoming summer, as we’re thinking of hitting a ton of national parks for several days each during one single summer), but some things are just unrealistic due to the other factors in my life. Different people have lots of different factors that might make this difficult, from career insecurity to medical needs.

First Steps of the Reverse Plan

If this kind of thing sounds appealing to you, there are some steps you can start taking that will help you get started on this path. The nice thing about these steps is that even if you choose not to follow through on this path, these tactics will also provide at least some positive support to whatever path you choose.

Step One: Assess Your Goals and Figure Out Why You’re Doing This and How Important It Really Is To You

The initial appeal of the “reverse plan” often comes from people who are perhaps a bit frustrated with their current career path and have these pleasant dreams of doing something big like walking the Appalachian Trail or exploring Denali or something else like that. That dream seems wonderful and it’s just enough to get people to pay attention to something like this.

The thing is that such ideas are still just dreams. Dreams are often not counterbalanced by reality.

People are often not willing to make major changes in their day-to-day life to achieve that fuzzy dream that they have. The idea of doing the Appalachian Trail in a few years isn’t enough to convince a lot of people to actually choose to cancel their cable or live in a smaller apartment or eliminate one of their cars.

For this kind of “reverse” plan to work, you need to have goals that you actually want to follow through on in the next several years and you have to want those things badly enough to make real sacrifices and lifestyle changes to make them happen.

How do you figure that out? Look through your goals. Figure out the goals that excite you most. Then, start making a real plan for making that happen. How much will it cost? When will you need that money? Can you maintain your career through that goal? How can you save that much money in that timeframe?

A real plan for something like this is going to tell you really quickly whether this is something that’s a flight of fancy for you or something that you actually want to attempt. It’s going to take a lot of work to make it happen. Is the dream strong enough to make it happen?

Step Two: Start Living Far Below Your Means

Believe it or not, 76% of Americans live paycheck to paycheck. That’s right – less than a quarter of us are actually living below our means. We’re in the minority, like it or not.

In order to live substantially below your means, you’re going to have to start making choices that are notably different than other people with your income level. There’s no way around it.

You’re going to have to live in a smaller place than you can afford. You’re going to have to drive an older car than you can afford – or perhaps go without one entirely. You’re going to have to eat out less than you can afford. You’re going to have to enjoy fewer entertainment options than you can afford.

Some people immediately define that as misery and check right out of the plan. They’re not going to do this because it will make their life terrible and not enjoyable and so on, and they’ll often even toss insults toward people who do choose such a plan.

My reaction to that? So what.

First of all, there are tons and tons of wonderful things to enjoy that you often overlook if you have money in your pocket. You don’t even look at many of the low-cost options if you feel as though you can afford other options. If you can afford 500 TV channels, you ignore a television that just has 20 free over-the-air channels. If you can afford to eat at nice restaurants you ignore many lower cost dining options. If you can afford the best, you often ignore many other things in life.

The solution here is to just strive to find free things to entertain yourself and cheap options to fill your needs. Try them. Make yourself a meal with inexpensive ingredients. Go on a hike at parks near your home. Read a book. Create something. Make something. See what you can do without dumping out money.

Second, many people fill their life with a nonstop string of “pleasure bursts” that bring them short-term joy and long-term difficulty and go in for another “pleasure burst” as soon as the first one fades, masking the long-term challenges that it causes.

It’s a lot easier to avoid thinking about your lack of a long-term plan if you’re enjoying a bunch of pleasures every day – a latte in the morning, some entertainment in the evening, a restaurant meal or three, and so on. It makes you feel as though your life is good and there’s no need to change it, at least for a little while. When that burst of pleasure fades and you begin to see the lack of a plan… well, it’s easy to fix that with another pleasure burst, right?

The difference is that you do have a plan. You don’t need an endless string of pleasures. Instead, focus on the big picture of what you’re trying to do. What are you doing right now to make your plan a reality? Did you spend today making your plan come to fruition? Answering those questions well will make you feel fantastic and you won’t need such pleasures.

Step Two-and-a-Half: Start Saving Both for Retirement and for Your Other Goals

When you start cutting back on your expenses, you’re going to find money left over in your checking account at the end of the month. That’s the result of cutting your spending without cutting your income.

The thing is, you can cut back all you want, but if you don’t do something smart with the money that you’re not spending (or, even worse, find some other way to spend it), you’re going to find yourself not making any progress on your plan. You need to be using that money in an effective fashion.

There are a lot of plans for what to do with that money out there and they’re honestly just variations on each other depending on the risks that the creators see in people’s lives. For instance, I see identity theft as a significant risk, so I encourage people to start by building a cash emergency fund in a local bank of at least $1,000, first and foremost.

After that, start knocking down your debts, starting with your highest-interest debt. Make minimum payments on all of your debts each month, but throw everything you can into an extra payment on your highest-interest debt (without adding to your debt in any way). Your goal should be to get rid of all of your high-interest debts and, eventually, all of your debts.

Once you have that debt under control, start saving for your goal. If it’s within the next five years, just save in a savings account. You should also be saving for your real retirement using a Roth IRA or a 401(k) plan.

Do all of that and you’re well on your way to your goals – and the best part is that even if your goals change, you’ll still be set up well for your plans.

Step Three: Start Building Strong Professional Contacts

One major challenge that people face when they’re trying to do something like this is career interruption. The idea of taking a six-month break from their career for what essentially amounts to a sabbatical can seem like career suicide to some people.

However, the truth is that good performers that have a lot of professional contacts usually have opportunities available to them if they step away for a short while and return to their field. Some employers will hold a spot for top performers, filling in that spot for a while with a temporary worker. Others will simply make it a priority to re-hire such a person.

There are very few fields in which good performers with a lot of strong relationships aren’t valued. There are very few fields in which such people can’t quickly find work after a sabbatical.

So, in order to get that kind of security for yourself, you need to do everything possible to become a strong performer with a lot of positive professional relationships.

How do you do that? Seek to do everything at work as well as possible. Try to avoid getting so buried under things that you can’t produce quality work. When there is downtime, use that time to build skills or work on non-urgent tasks that still need completing. Don’t just waste time there. Avoid being negative, especially behind the backs of others.

Work to establish positive relationships, especially with people who seem to be willing to treat you the same way. Do the same with your boss. Do the same with other people in your field outside the company, whether in face-to-face interactions or online via social media. Try to use social media and/or community opportunities to build a professional presence of some kind. Speak up at meetings, even if it seems scary. Volunteer for tough tasks, especially ones where you have to present or speak publicly.

Those are the kinds of things that top performers do, simply because most employees are either unwilling to or are scared to do those things. It requires work, it requires courage, and it requires putting some of your negative instincts in your back pocket.

Final Thoughts

The reverse retirement plan is a great plan for someone whose primary life responsibilities revolve around their career. If you’re single or married without kids and have some big dreams, you can make this work. My cousin certainly has – I’ve been enjoying the wonderful pictures she’s been sending from her hiking along the continental divide.

My own life responsibilities make this somewhat more difficult; for me, early retirement makes more sense. However, if you put me in a situation without children, I’m pretty sure Sarah and I would go on an adventure like this every single summer, as we would effectively work 10 months out of the year and take a two-month “sabbatical.”

If this seems appealing to you, don’t be scared. Start taking the steps that will make it happen. Develop a real plan. Make yourself truly valuable in your career. Start spending less than you earn and use that difference wisely.

Even if you end up not quite pulling the trigger on your reverse retirement plan, you’ll still be able to use many of the benefits of the steps you’ve taken for whatever else you may choose in life.

Good luck!

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.