Q: What are some of the moves I need to make to be work optional?

A: Here are the basics…

• Make sure you have an oversized emergency fund.

  • Most of the time, it’s recommended to keep six months of essentials (read: bills you must pay) in a separate account. If you are going to be work optional, six months might not even be enough, given the idea is you will not be working. Prepare nine to twelve months.

• Be able to replace the employer benefits you need.

  • Health Insurance: If you stop working and have an employer health plan, you can go on COBRA for a while, but it will be expensive. Eventually, you will either need to forego health insurance or buy a private insurance contract. You might be able to obtain health insurance coverage through an alumni association or a trade group.

  • Life Insurance: You might still want to carry life insurance as a way to “leverage” your dollars and be able to spend more during your life while making sure you can leave a gift behind for someone. Therefore, having your own independent life insurance will likely be needed. Getting insurance coverage while young and healthy will keep the cost down. No, you don’t need to “overfund” any policy, pay the premiums to keep the policy afloat….even though the insurance salesman will probably tell you something different.

  • Disability Insurance: Many employers will have a group disability policy you can join. These are great if you have a health condition that would otherwise prevent you from being able to get coverage on your own. The downside is that it’s tied to you continuing to work at that employer. If you leave, you will lose the coverage and have to either buy your own policy or find another group policy to join. for example,your alumni association or trade association might have a group policy you can join.

• Have assets you can use when you need them.

  • In other words, don’t have everything tied up in complex structures where it can take weeks to access money when needed.

  • No, credit lines/margin/HELOCs don’t count as banks can shut off lines of credit on a whim when they have taken too much risk. Margin lines can get called when the assets backing the line decline in value. You don’t want this to be the precise moment you need access to money.

• Have wealth away from your employer.

  • Stock/Equity Compensation: If a lot of your money is tied up in ISOs, NQSOs, or RSUs that have yet to vest, it’s not yours yet. While it will count in your net worth, it will not count towards your ability to be work optional until you vest and the shares become yours, as in sellable or useable as you see fit. The same goes for private company stock, where there are no buyers ready and able to buy you out. Once the value becomes realizable, it can be life-changing wealth, even multi-generational.

  • Unvested Retirement Balance: This is the portion of your group retirement plan that is the employer match, but you haven’t been there long enough to vest, or keep your employer’s contributions to your retirement account. Login and look for “unvested balance”, that’s how much you would lose if you quit. You might be surprised how much (or little) it is depending on how long you have been employed there and what the match is.

• Get rid of high interest and high payment debt.

  • We are not anti-debt advisors; it can be a useful tool. However, we have never seen someone become work-optional while carrying a debt with a high interest rate. Additionally, having high payments, even if the interest rate is low, will make being work optional much harder.

• Know the future will be expensive, so over-prepare.