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.
During Dad’s final year of work, I was backpacking the world. When I returned from traveling, I was broke and unemployed with no leads on a decent job.
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.
Straightforward Math
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.
When I look our net worth compared to our family expenses today and in the future, we aren’t that far away from making the numbers work. As long as the stock market doesn’t crash.
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.
It’s financial independence before full retirement.
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.
Why 2022?
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.
Conclusion
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.
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brian says
congrats on picking a date and a goal!
Retire Before Dad says
This new goal was overdue. Time to turn up the heat!
Ray says
RBD, do yourself a favor and work one week longer, retiring in the first week of June. If your company health plan is similar to the plan at the company where I retired from last April, you can get 18 months of Cobra coverage starting on the 1st day of the 1st month after you retire. Thus a May 27 retire date will allow you to start Cobra on June 1 and a June 1 retire date will allow you to start Cobra on July 1. With a July 1 start date, add 18 months and you will be covered through Dec 31 of the following year. You will have to check with your HR department to verify this, but it is nice to be able to finish the year on the same plan, then sign up for a new plan for the following year. I retired in April 2016, thus my Cobra runs out on 10/31/2017, and I need to sign up for coverage for Nov & Dec of 2017, then sign up again for 2018. (I wish I had worked until June 1 so I would not have to worry about getting a plan for the last 2 months of 2017). Good luck!
Retire Before Dad says
Ray… thanks for the tip. Very good point. My current company resets its plans on June 1st. 18 months of cobra would be a nice transition period. But I never considered the end date 18 months later. Definitely need to keep this in mind and adjust if necessary.
-RBD
The Green Swan says
I love the 2022 Project and creating that lifestyle change to make life a little more worth living earlier than full-blown FIRE. We have been thinking for some time how we want to “ease” into retirement…start slowing down on the work front a bit, find a happier job, etc. Waiting to the kiddos are out of daycare has been in the back of our heads as well. Once those expenses are gone, we’ll have their college money set aside, and have a lot more flexibility in the budget.
Guy says
FYI for other readers: $40,000 a year is $3,333 before taxes and medical insurance. If you have not reached the age to draw Medicare then expect to pay 2k a month for two people in their 50’s. This leaves you $1,333 before taxes.
My goal is $5,500 a month passive income – $2k medical and live off $3,500 minus taxes. This gives us enough padding to pay for new HVAC, new roofs, vacate rentals, traveling, and health issues as we get older.
We will not need to touch our 401k and when social security kicks in it will be extra gravy.
Retire Before Dad says
Guy,
Sounds like you have your plan set. Our plan has some numbers with it that I’ll be sharing in the future. When I break it down by income source, the numbers add up quickly. I don’t want to touch the 401k either. Would start with Roth contributions since they can be withdrawn without fee, tax, or penalty.
-RBD
FiscalVoyage says
Great stuff!! good luck on your target date!! i hope you make it or even before the date!!!
Retire Before Dad says
FV.
Of course, earlier would be better. I’m already cutting my date by about 8 years. But plan to continue some kind of work to bridge between age 47 and 55. We’ll see how it goes!
-RBD
Fritz Gilbert says
Love It! It’s your life, and you’re designing the life that’s right for you. There’s a reason it’s called “Personal” Finance, and you’re smart in setting a “SMART” goal that gets you where you want to be. Soooo excited to see how this plays out for you! I’ll be following along, and rooting for you on your journey!
Best of luck. May 27, 2022 will be here before you know it! I think you’re going to be well prepared for that date!
Retire Before Dad says
Fritz,
Yeah it’ll be here quickly. My son is five-year-old, and that time flew past. The next five will move even quicker. So it’s time to get to work and start focusing!
-RBD
Dividend Growth Investor says
Congrats on setting up your concrete FI target date. Based on what I have read about your main income source, I think that 13 years of misery would be too much anyway.
I would actually love to read the complete details. I find those exciting! I look forward to seeing how you set everything up to reach your goals!
DGI
Retire Before Dad says
DGI,
I wouldn’t call my job misery. But the though of missing out on what’s possible is. That’s why I set this new benchmark. It hits me with more urgency, and requires us to make some sacrifices now. I’ll definitely dig into the numbers in a future post.
-RBD
Retire Before Dad says
Put it on the line!
brian503 says
Love the line in the sand. We work harder/smarter with a specific goal in mind. Good luck!
ML says
Awesome plan. How confident though are you in the 4% rule?
I’ve read some that given the research was done in the 90’s when interest rates were significantly higher, and that it is based on historical interest rate averages, its not realistic with today’s rates. With today’s interest rates, returns on “safer instruments” being lower makes the viable safe withdrawal rate actually lower.
Also, life expectancy is higher and is increasing.
Seems that unless you have significant cushion, the 4% rule could be risky.
Retire Before Dad says
Not 100% confident. My aim is lower. 3% or lower, combined with other income sources that are not being drawn down. Real estate, business income.
-RBD
Rich from www.pennyandrich.com says
Just curious, would you be pushing for this earlier date if you enjoyed your job more? One of the big obstacles, in my mind, to retiring early with young kids is that I wouldn’t be able to jet off to Tahiti at a moment’s notice while they are in school, so … I’d probably feel a bit confined to household obligations and end up working from home anyway, for less pay. I think I know what you’ll say but curious nonetheless on how the equation would change in a better job situation …
Retire Before Dad says
Rich,
It’s the 40 hour+/week commitment that I don’t like. I’ve complained a lot about my company and line of work. But all in all, it’s ok. If I loved work that still required 40 hours of my time, not on my terms, yes I’d still be pursuing the earlier date.
Few people truely love their work, But often say so because they don’t think they have other options. Or say they love the people they work with, even if the job is so so. Give someone $10 million and see if they continue working. That’s where the real answer is!
-RBD
Rich from www.pennyandrich.com says
That’s a great point. I enjoy my work as far as it goes but if you offered me $10MM, I’d probably quit. Probably. Or I’d bring such brute corporate honesty and to work that I’d either get fired or maybe even move up faster, because I’d have less caution in playing the games. $10MM is a sure thing, risk is off the table.
BUT if you offered me $1M and told me I’d need to live off $40K per year and my money would fluctuate based on investment returns, I’d say no thanks.
I need to think this through more in terms of a real equation, but it’s some combination of enjoying my work enough to put up with the time commitment in exchange for current and future income security.
To turn the tables — if someone offered you $10MM, would you be doing side hustles and all the rest? Maybe comparing apples to apples would be the fact that I get more satisfaction from my 40/hr a week day job than any potential side hustle.
Took me a while to get here but I guess if you enjoy the idea of side hustles and slimmer margin for error more than full time work and wider margin … there’s the calculation … maybe?
Good thoughts.
Financial Velociraptor says
w00t! So happy for you. I think you are making the right decision.
DividendMongrel says
Good luck on your goal RBD. Sounds like you’ve been busy!
Dividend Diplomats says
RBD –
Three Words: THIS IS AWESOME.
-Lanny
Joe says
Good luck! 2022 is still a while out. You can do it!
Health care is a big issue for sure. Hopefully, it will be better soon.
Utahbill says
My project is 1-1-20 (January 1st 2020)
I like your plan. No guts no glory.
I don’t see your plan as risky. In a worst case scenario, if it wasn’t working out, you could always get another job.
Remember, there is only so much sand in the hour glass.
Bill