Back in September 2013 when I started this blog, I wrote a short post about retirement strategy. It was my third post, and it listed out my basic retirement strategy while serving as an outline for what I’d write about on the blog. This post is an updated version digging deeper into my strategy.
A Side Effect of Blogging
Blogging about finance has a valuable side effect. Before sharing written words with the world, I make damn sure what I write makes sense. I think through my financial decisions thoroughly before taking action, and when I write about them, I know what I write is the best strategy for me while readers can compare it to their own situations. To put it simply, blogging about my retirement strategy and progress makes my strategy and progress better.
A case in point, while writing a previous blog post using the Roth IRA for early retirement, I learned that even though my wife no longer has income, we can still open a spousal Roth IRA in her name, doubling the amount of money we can save using that tax-advantaged vehicle. Before writing the piece, I thought she needed income. Through this research, BOOM – an extra $5500 of tax advantaged savings is available to us every year. Had I not written that blog post, I may not have figured that out and would have missed an opportunity to save more.
Below is the list of subject that I consider paramount to reaching my retirement goal.
Smart Debt Usage (formerly Minimizing Debt Usage)
Early on I wrote a post about the history of my debt usuage. I haven’t had any consumer debt for the last 10 years or so. The debt I carry is for my home and rental property. Both are at healthy levels.
My debt usage is conservative, so I’m open to taking on some more debt to purchase another rental property. I’m exploring the use of a HELOC on my home as part of this rental purchase. Buying the right property would be smart debt usage, and the opposite of minimizing debt usage. In fact, it would be maximizing debt usage.
Update – I have recently taken on some debt to pay for a home improvement project. I’ve considered using home equity to invest, but have not found a viable investment worthy of going into more debt for.
Spending Less Than I Make
Plenty of writers focus extensively on this subject. I’ve created a spreadsheet to calculate my monthly savings rate and it averages somewhere around 50%. I’m happy with this percentage considering our house payment is quite high because of the area we live in. Frugality blogs are plentiful, so unless I have some kind of tax-advantaged way of saving money to share, or savings on a larger scale than couponing, you probably aren’t going to read a lot about that here. Nonetheless, it’s an integral component of financial independence.
Dividend Growth Investing (DGI)
This is a topic I cover frequently on this site. It is the foundation of my strategy to achieve my retirement goal, but not an exclusive tactic. You can look at my most recent monthly update on investment income here, or my investment income tab here to see my current holdings. Many of the blogs I follow focus almost exclusively on DGI, and its a good strategy. But I want to continue to diversify into other income producing investments and ventures. Expect to read a lot more on DGI as I aim for my goal to own 20 stocks by the end of 2014. You can check out my blogroll of other like-minded investors here.
Real Estate Investing
I met with a real estate agent last week to talk about starting a serious search for a rental property. Done correctly, this could be a great development in my retirement plan. Done poorly, it could ruin it. From the looks of things, my local market is tight and investment opportunities are scarce.
Everything there is to know about my current rental property was covered in the post entitled The Details of My Rental Property. My tenants continue to pay on time without any issues. The unit has a roof leak, but that is an issue for the condo association to address. The condo association kept our HOAs flat for the year because they are in a strong financial position. They are completing a lot of needed maintenance work and updating some of the trim outside the condo this week. Every few months I get a minor headache from something that goes wrong there, but it usually goes away after a few days. Having excellent tenants is a big help.
Parenting and Family Planning
When our son was born, we had so many questions about his health. He was 100% healthy, but being new parents we were still nervous and clueless. Our pediatrician told us that the easiest way for parents to impact their child’s health in a positive way is to have a healthy marriage. Fortunate that our children were born healthy, we now need to provide a healthy environment for them to grow up in.
This is another topic I don’t write about much here because I think my readers come for other information. I’m still a new Dad with my oldest being just two years old. Being a Dad is part of this blog’s narrative, and I think it’s useful for other parents and those hoping to be parents one day to read it in that context.
On days I’m in the office, I see my kids for 3-4 hours almost every night. Days I work at home I see them throughout the day. I’m learning a lot, but always keeping in mind that everything I do and say will affect their futures.
We plan to raise them to be completely independent by the time they are in college so that we can travel. Family problems can derail a retirement. I wrote about this in the post Learning From Your Coworkers Who Cannot Retire where I describe a guy who worked until his mother died at age 95, because he had to. His situation, and others I’ve encountered, shape the way I think about raising a family while planning my retirement.
Meticulously Tracking Progress and Forecasting
I like spreadsheets. Some are overly elaborate. In a recent spreadsheet I forecast financial independence by age 51 or 52. Since my goal retirement age is 55, I was happy to see this. However, it was just one model of financial independence, and subject to endless tweaking. Someday I may adjust my retirement date, or redefine retirement, or enter some kind of pretirement. But for now my retirement date holds steady.
Educational Saving and Investing
I have chosen to pay for my kids’ college. This will be a huge expense and will likely delay my retirement date by a few years. But in my mind, it’s worth it. My Dad has always said paying for his kids’ college education was the best money he ever invested. I tend to agree that the right degree, at the right school, for the right price is a great investment, and one of the most generous gifts a parent can give.
I started a separate page on this blog called Virginia 529 Simplified that I developed during my own exhaustive research. I continue to update it regularly when I learn something new or a link changes. Just the other day I found out the tax-advantaged limit I was using was wrong because the law can be interpreted a different way. If you live you in VA and have kids you may find this page very helpful.
Opportunity Savings (formerly Emergency Savings)
My cash account is relatively large because I am saving for a rental property. I recently read a blog post by J.D. Roth about Opportunity Savings. This post inspired me change the way I think about this bank account full of cash. It is more of an opportunity savings account than emergency savings. I’m well past the 3-6 months of recommended emergency savings, so this money will more likely be used for good opportunities that come up, be it a rental property, undervalued stocks, a business opportunity, P2P lending, or some other place I can get a return on my money. Read that article, it will change the way you think about your cash stash.
Healthy and Happy Living
This isn’t a health blog. But I do think that financial independence and peace of mind is good for your heath. What good is retirement if you don’t have your health?
Someone I know is undergoing treatment for a serious illness. Her inactive lifestyle has never been healthy. Now in her late fifties, she still needs to work to pay for her standard of living, even though she may not have much time to live. Her sad situation is a daily reminder how important it is to reach financial independence, and do so with personal health intact.
What to do When I Retire
The primary driver of my desire to retire at age 55 is travel.
I don’t read travel blogs, but I’ve tinkered with the idea of starting a travel tab on my menu. That said, I don’t know what I’d write about specifically because I am not traveling much now with two young kids. I did travel quite a bit in my 20’s and before having kids, and enjoy reminiscing about the 45+ countries I’ve visited. Maybe I’ll add some of my favorite photographs, or perhaps write about some places I’ve visited when they become relevant in the news (like Ukraine).
Ideally my wife and I will travel for 20-30% of each year when we retire. That leaves a lot of time to do things at home. The hobbies that come to mind immediately would be reading, investing, yard work, home improvement projects, fishing, skiing, swimming, and cultural performances (theater, ballet, etc).
Travel hacking is a popular blog topic, particularly for those seeking financial independence. I’m currently not all that interested in this subject because of the hassle of opening multiple credit cards. My family is a few years away from taking any significant vacations where we fly. I suppose it never hurts to start saving miles. As much as I love to travel, travel hacking may not be something of interest until we get closer to our retirement date. But the more I read about travel hacking success, the more interested I become.
Revisiting my original strategy is a chance to rehash over everything and refine my plan. I hope to make this a semi-annual post so that certain topics don’t get lost. Savings and investing is the primary driver to reach my retirement goal, but retirement planning is multifaceted, especially compared to our previous generation’s retirements.
Do you have a written retirement plan? How frequently to you refine it? How have recent life events changed your perception of retirement?