I’ve always pictured retirees as carefree shuffleboard playing Floridians and old-guy golfers in butterfly collared shirts and plaid pants. My Dad fits this mold except he has no desire to move to Florida and his golf wardrobe isn’t that cool.
He retired at age 56 in 2002 and hasn’t worked one day since.
My parents spend their days doing whatever they want. A typical day includes a round of golf, lunch with friends, and shopping for material objects that spoil their grandchildren and clutter my basement.
Their savings and income are more than enough to fund a lifestyle they wouldn’t change if they won the lottery.
But inspired by my Dad’s recent accomplishment, I set a goal to retire one year before he did, to prove that I could live a prosperous life better off than my parents.
Since I started writing about early retirement on this blog, I’ve realized that my Dad’s work-free lifestyle is not the only form of retirement.
People retire from careers, but continue to work because it brings them satisfaction, not because they require an income to live the life they want.
My desire to reach a full retirement by age 55 hasn’t changed.
But through writing this blog, and inspired by other like-minded freedom fighters, I’ve determined I need a more aggressive objective to pursue.
It’s time to put it on the line.
The End of Ambiguity
Way back in January of 2016, I declared a New Years resolution to “start preparations for a near-term, pre-retirement lifestyle adjustment”. After reading it, my Dad texted asking what the hell that meant.
I couldn’t put my finger on what it was exactly, so I kept the description vague:
The second resolution is a work in progress. I’m not ready to share any details yet, but there are some major aspects of my life that I believe I can change for the better. Better for me, better for my family. My resolution is to start preparing for a major lifestyle change in the next three to five years. The general goal is to work less and have more freedom sooner, rather than wait until I fully retire.
And I’ve mentioned this under my breath a few times since then.
As of now, I have another 13 years before I turn 55. The thought of continuing to work at the same office job until 2030 was once unappealing, though things have changed more recently.
Following the resolution, I started exploring the possibility of making the math work for me sooner. So during 2016, I assigned some numbers to this idea and realized I may be able to “retire” even earlier.
But it’s not the traditional retirement of travel, golf, and shuffleboard that I’ve always envisioned. It’s more of a hybrid between financial independence and creative entrepreneurship.
By modifying our family spending, building income streams, prioritizing what’s important in our lives, and adjusting our expectations, I’ve concluded that we can achieve a form of financial freedom earlier.
I’ve always measured investment income to track my early retirement progress. When yearly passive income crosses annual expenses, it’s a perpetual money machine to fund your lifestyle.
That’s one way to look at it.
As most money nerds already know, financial independence is also achievable through something called the 4% safe withdrawal rate. That’s based on a study in the 1990’s that determined that a retiree can safely withdraw 4% of savings every year and still have enough to last for retirement, based on a number of assumptions.
The 4% withdrawal rate makes the financial independence math straightforward.
For example, if you have a $1,000,000 in savings and investments, you can withdraw up to $40,000 per year to cover your living expenses. As long as your annual expenses are below $40,000, $1 million is enough to retire.
Therefore, the benchmark is to save 25 times your annual expenses. Once you hit that number, you’re financially independent.
That said, I’m not planning to set a net worth goal and quit the day I hit it. Much of my net worth is in the stock market, and that’s a volatile place (I’m now diversifying away from stocks).
I still consider investment income to be the foundation of my early retirement. But in my new plan, I expect to combine passive income, side business income, Mrs. RBD income, and safe withdrawals to cover expenses.
The 2022 Project
Yeah, I gave my new plan a name. It’s The 2022 Project. A name makes it clear for discussions with Mrs. RBD and easy to mention here. Maybe I’ll add a countdown timer to the sidebar.
So what is The 2022 Project? It’s the “near-term, pre-retirement lifestyle adjustment” I’ve been thinking about for some time now.
Our family may be wealthy and fortunate enough for me to not be anchored by a full-time job for the next 13 years. If we can put our sights on this goal as a family and make a few adjustments, we can achieve it.
I picture a life where there’s more time for kids, marriage, travel, health, friends, adventure, hobbies, businesses, and other pursuits.
Maybe we’ll even spend some time living abroad.
Full-time work prohibits me from doing many activities I enjoy. When I’m not working, I’m with my family which is my number one priority. But I long for the day when the kids are at school, and I’m home actually completing my to-do list, or golfing, or off on a long bike ride, or planning our next family adventure.
These activities are hard to accomplish today. But everything I want is possible when there’s more free time.
I’ve already sketched out a few round numbers in my Moleskine. These are tentative goals for passive income, side business income, Mrs. RBD side income, total savings, and plans for the rental property.
I won’t bore you with the details today (I’ll bore you another day). Today’s about the bigger picture.
The original goal was three to five years from early 2016. But after looking at all the considerations, my preference is to work until our kids are all in elementary school. Preschool is a big cash flow sucker at the moment and will be for at least another three years. We’re not paying absurd amounts, but with two in preschool at a time it adds up.
My youngest daughter starts kindergarten in the Fall of 2021. We’ll cut our last preschool check in May of that year.
The following May is when I’ll quit working my full-time job.
I’ve set the date for May 27th, 2022. That’s the Friday before Memorial Day weekend. Just after my 47th birthday. More than five years from now.
1857 days from the day this post is published.
A date is a more effective goal to set than a number. Because when the numbers get big, the can fluctuate wildly. A firm date requires a frame of mind.
Five years is enough time to get our ducks in a row. We’ll save aggressively, cut recurring expenses, and plan ahead for expected and unexpected large expenses.
Ideally, passive income will float most of our living expenses with side gig income handling the rest, so that we don’t need to draw down our retirement much early on. I think that’s realistic, even if we don’t move.
It seems especially realistic since I’ve created some side income already. That gives me a few years to build even more, and Mrs. RBD is hoping to start earning on the side too.
This post has been a long time coming. Setting our goal and putting it on the line is the first step toward making this lifestyle adjustment a reality.
Major challenges are still ahead.
The biggest challenges I see today are health insurance and saving for college. Healthcare is expensive and much more difficult without an employer. It’s a large ticket price, but we’ll just need to factor it in.
We’ve also committed to paying for each of our three children to attend four years of in-state college. I’ve already priced this out and determined it’s the greatest risk to my full retirement at age 55, let alone earlier financial independence. That’s why we started saving for each child right after they were born. But continuing to save when I quit full-time employment may fall by the wayside.
This new target date isn’t a guarantee. External factors could sneak in. Our lifestyle could creep out of control if we’re not disciplined. More likely, I may not have the courage to abandon the security of a full time job with such a young family.
But if I don’t set the goal, there’s no chance of reaching it. So I’m putting it here on the internet to hold myself accountable. As we get closer, the reality will set in and the numbers will need to firm up.
For now, not much will change. I’ve been headed in this direction for some time now.
Favorite tools and investment services right now:
Credible* - Now is an excellent time to refinance your mortgage and save. Credible makes it painless.
Personal Capital - A free tool to track your net worth and analyze investments.*Advertising Disclosure: RBD partners with Credible which offers rate comparisons on many loan products, including mortgage refinances and student loans. This content is not provided by Credible or any of the Providers on the Credible website. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by Credible. RBD is compensated for customer leads. Credible Operations, Inc., NMLS Number 1681276, not available in all states.