Our Early Retirement Didn’t Go As Planned… Our Net Worth Went UP Half a Million Dollars!

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In contrast to early retirement modeling that looks for all the worst cases and failure modes, our actual life the past almost four years illustrates that good things can offset the bad events in life.

Financial planning for early retirement is pretty straightforward.  Figure out how much you plan on spending in early retirement then save up till you have between 25 and 33 times your annual expenses in your investment portfolio.  We initially planned on spending $32,000 per year plus a large lump sum for the three kids’ college tuition.  Using the 33x multiplier (which represents a 3% withdrawal rate), that means we needed $1,056,000 plus another $100,000 to cover tuition, or roughly $1,150,000 in total investments.  That’s about what we started with four years ago but now we have a lot more.

 

The Good:

We plan for the worst and hope for the best.  Fortunately, the past four year have been very positive.  Maybe we used our luck making machine.  Or maybe we aren’t as lucky as we think.  We’re earning more than we thought and spending about what we expected, and future expenses don’t look too bad.

More Work, More Money

When I quit working in 2013, we expected Mrs. Root of Good to join me in early retirement within six months.  Then her employer decided to be really really nice to her so she kept working longer than expected.  Her employer met her requests to take a paid five week summer sabbatical in 2014, and again agreed to a paid sabbatical of twelve weeks in 2015.  The sabbaticals were on top of a 40 hour work week with negligible overtime, four weeks paid vacation, two weeks of holidays, and unlimited sick leave.  After returning from the second sabbatical in 2015, Mrs. Root of Good submitted her resignation and tried to retire.

Unsuccessfully as it turned out.  Her employer offered a flexible work from home arrangement where she officially works from home for four 10 hour days per week.  The boss gave her a **wink wink, nod nod** and said she just needed to work enough each week to make sure nothing fell through the cracks as they worked toward replacing her.  She generally worked Monday-Wednesday for six to eight hours per day and some Thursdays, probably averaging 30 hours per week.  While still collecting full time pay!  This part-time-for-full-time lasted about six months before Mrs. Root of Good finally called it quits and promoted herself from part time work to full time retirement.

Mrs. Root of Good’s extra two years of work netted us around $120,000 after taxes and work-related costs in my estimate (she was earning $70,000 gross per year and we paid nearly zero federal income tax but we stilled owed payroll tax plus state income tax).  Toss that $120,000 on the pile and watch it grow!

Mrs. RoG enjoying her first day of sabbatical.

Mrs. RoG enjoying her first day of the flexible work from home arrangement that doesn’t include working on Fridays.

 

Who knew you could make money blogging?

I always wanted to do something “internet-y” and finance related while working but never found myself in a professional role that fit that desire.  About two weeks after retiring, I started looking into this whole blogging thing.  Mr. Money Mustache had a pretty sweet site so I figured maybe it would be fun to do something similar.  I spent the weekend reading and googling and youtubing all about how to start a blog.  How great is it to be able to jump into a new exciting project head first when you don’t have to deal with work all day?!

Two days after I started the intense blog research I figured out enough to register the Rootofgood.com domain name, set up my hosting service, and then I sat staring at that blinking cursor waiting for me to start typing.  The first couple of words I typed were “HELLO WORLD” (of course).  My little homage to all things programming/internet-y. Then I deleted it and got down to business (first ever real blog post and ALL THE BLOG POSTS EVER).

Almost four years and three million pageviews later, this blog is a little dynamo.  Root of Good currently receives an average of 50,000 to 60,000 visits per month.  In late 2015 I started offering Early Retirement Lifestyle Consulting.  Since conception, the net profit from the blog and related activities was:

  • 2013 – near zero
  • 2014 – $12,000
  • 2015 – $29,000
  • 2016 – $31,000
  • 2017 – roughly the same as 2016

Toss another $72,000 on the pile plus whatever we earn this year.

Though not all early retirees start a blog, many early retirees have a side hustle.  Some early retirees turn a hobby into something profitable.  Others retire from full time work while keeping the door open to very part time, flexible work arrangements by only accepting those projects or clients that fit into their early retired lifestyles.  I did both when I started a blog for fun that turned profitable within the first year and I started consulting an hour or two per week (less when the weather is nice outside).

When planning for early retirement many years ago, I occasionally used a “part time income in retirement” line item for forecasting purposes.  At the time I used a tiny annual income for this part time work.  In one model, I assumed I might earn $6,000 per year doing something one day per week for $15 per hour.  This was based on a little side hustle related to engineering data collection that I had some success with during college.  But more generally, $15 per hour represents a pretty broad swath of potential jobs and hustles, and eight hours per week isn’t a huge impediment to otherwise enjoying one’s leisure time throughout the week.  I could mow lawns, start a handyman business, repair appliances, run errands for the elderly and disabled, or drive for Uber (which wasn’t a thing when I was completing my early retirement models and forecasts).

The very part time work for $15/hr was more of a Plan B “what if” scenario.  Adding $6,000 income per year to supplement withdrawals from an investment portfolio means you can get by on a smaller portfolio using the four percent rule.

As fate would have it, I’m blowing that $15/hr threshold out of the water (ER Lifestyle Consulting rates are currently $125/hr and I’m considering raising those given the demand).  Total earnings from my side hustles are running in the $30,000 per year range right now.  And I don’t think I’m putting in eight hours of effort per week.  Life is good as is the financial solvency of my early retirement plans.

 

Spending is in line with budgeted amounts

We started out budgeting $32,000 per year for 2014 and increased it to $32,400 in 2015 to account for inflation.  In 2016 we bumped the budget to $40,000 in light of all the extra side hustle income and better than expected investment results.

Actual spending since 2014 remained pretty close to our annual budget:

We were over budget in 2014 by a few thousand dollars but under budget all other years so far.  That underspending comes in the face of an almost $9,000 major renovation in 2014, an $8,000 minivan purchase in 2016, and paying for the bulk of a $10,000 nine week trip to Europe in 2016 and 2017 (along with several other multi-week or multi-month trips in previous years).  In other words, we have a rather robust spending plan to fund a whole lotta living and the budget seems to be working out perfectly fine.

Four months of spending at just under $10,000 (Personal Capital screenshot).

Four months of spending in 2017 at just under $10,000 (Personal Capital screenshot).

And this is with three kids!  They are now age 5, 10, and 12 years old.  I’ll admit that we’re still a year away from the oldest starting the typically more spendy teen years, but so far we haven’t noticed a significant spike in spending as the kids get older.

Since we’ve already replaced the exterior siding and the windows, and we’re in the middle of replacing the roof right now, we don’t have a lot of major home improvement projects planned for the near future, so spending on the home should remain modest.  We just replaced the car last year, so that should last us quite a while too.  Those big house-related capital replacement costs are amortized and included in our annual budget.

Another area that can bust a budget is healthcare and dental expenses.  We’ve been fortunate to spend very little in this category other than a few doctor’s visits and routine dental checkups (plus a few minor procedures at the doc and dentist).  We haven’t used up our whole healthcare/dental budget in any year of retirement.

We track all our monthly spending in Personal Capital.  It’s a free, easy to use, and automatically pulls transaction data from credit cards and bank accounts so you don’t have to spend any time inputting transactions manually (or maintain another spreadsheet!).  Review of Personal Capital.  It’s also a great tool to consolidate and track your brokerage accounts, IRA’s, and 401k’s so you can track your asset allocation and keep an eye on mutual fund expenses automatically.  Tracking spending is in my opinion the best way to stay cognizant of where your hard earned money goes and what expense categories are dominating your budget.

 

College won’t cost as much as we initially budgeted

By most objective metrics, we are wealthy.  I assumed we wouldn’t qualify for any need-based financial aid for the kids’ college.  I was wrong.  I found out the FAFSA financial aid form doesn’t include the home value nor does it include retirement account values in determining financial aid.  As a result we look relatively poor on paper due to having over 75% of our financial assets in retirement accounts and a modest adjusted gross income around $40,000 per year.

Upon entering early retirement in 2013, I expected to pay around $100,000 in total just for tuition for 3 kids and almost triple that amount if we cover room and board, books, transportation, and other living expenses.

After crunching some numbers on college costs using a few different assumptions, it looks like the worst case scenario will have us paying around $162,000 total while the best case scenario (which isn’t that far-fetched) has us paying just $31,500.  Those are totals for all three kids.  The updated forecasts come from better assumptions about scholarships and grants our children might qualify for given their academic achievements to date, along with a better understanding of how financial aid formulas work.  When I first retired, our oldest two kids were in second and third grade, and we really didn’t know how well they would do in school once the academics grew more challenging.  Several years later and they are doing great!

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Great stock market returns

Since I retired early, the stock market has been on fire!  As measured by the Vanguard Total Stock Market Index Fund (VTSMX), returns including reinvestment of dividends are:

  • 2013 – 33.4%
  • 2014 – 12.4%
  • 2015 – 0.3%
  • 2016 – 12.5%
  • 2017 (year to date through May 12) – 7.0%

International investments haven’t performed quite as well over the same period.  Our portfolio still managed to swell from around $1.1 million right after I retired up to $1.65 million today.  That’s a $550,000 increase in value.  About $100,000 of that increase can be attributed to Mrs. Root of Good’s extra two years of paychecks and my blog earnings (after subtracting the roughly $100,000 spent on living expenses during early retirement).  That still leaves us with roughly $450,000 of investment gains in the past four years.  Thanks Mr. Stock Market!

The returns have been so great that since the start of 2017 I have moved $90,000 from equities into the Vanguard Total Bond Market Index Fund (VBTLX).  Those bonds plus the $30,000 we have sitting in money market accounts will provide a multi-year safety blanket should the market decide that the party is over.  A six figure low-risk fixed income portfolio will help me sleep at night regardless of market volatility.

 

Successful travel hacking continues

I’ve been scoring huge credit card sign up bonuses and collecting points and miles from credit cards for over a decade.  Upon entering retirement in 2013, I fretted over the eventual end of all these easy bonuses that translate to free trips all over the world, even for our family of five.

It turns out I had nothing to worry about after earning 1,265,000 points and miles from sign up bonus offers in the almost four years of early retirement.  This gravy train keeps rolling down the tracks and shows no signs of stopping!  Some of the rules of the game have changed (Chase’s 5/24 rule is a key example) but there are still plenty of fish in the sea. So cast your net wide and don’t let all these delicious morsels slip past you.  Our credit scores remain a killer 800-something (out of 850 points) and card issuers generally don’t bat an eye at extending us even more credit.

All these free points and miles explain how we’re able to travel the world for weeks or months each year on a modest $5,000 to $10,000 annual budget.  Without free points and miles we would be incurring an extra $5,000-$10,000 expense per trip based on the past few trips.

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No more work = no more work related costs

I’m sure we save a small amount on lunches out and simpler wardrobes (shorts and polos just don’t cost that much, guys).  But the biggest work-related cost that disappeared was our second car.  We questioned whether we could cut back to one car and it turns out it’s not a problem at all with our current lifestyle.  It’s been almost a year since we dropped to one car and there have been just a few times where it would have been nice to have a second car.  But we made it work with just one car.

This one car does it all for us.

This one car does it all for us.

We walk, we can take transit, Uber is always a few clicks away (though we’ve never used it so far).  Postponing or combining trips and smartly scheduling appointments help.  We also enjoy spending time at home or within walking distance in the neighborhood, so there are multi-day stretches were our car doesn’t leave the driveway (but our feet still do!).

The money savings are unquestionable – maintaining one car costs half of what it does to maintain two cars. One set of tires, one set of oil changes, one set of routine maintenance, one set of inspections, registration/licensing, insurance, and taxes.  The time savings are even more important – fewer trips to the auto shop for repairs and maintenance.  It takes less time to check the tire pressure and fluid levels in one car versus two cars.

For us, simplifying saves time and money without being a detriment to our lifestyle.  Of course others’ experiences might differ.  We only drive about 300 miles per month (unless we’re on the road completing a multi-thousand mile road trip).  Many destinations are walking distance in the neighborhood. Our kids aren’t overloaded with after school and weekend activities (though we stay busy!).

 

The Bad:

I feel like we need a counterpoint to “The Good” so I’m sticking “The Bad” in here.

 

Health Insurance in a Post-ACA World

The future of health insurance is our biggest unknown going forward.  There’s a new sheriff in town and he’s adamant that the Affordable Care Act is horrible and must be repealed and replaced.  The replacement bill, the AHCA, recently passed the House and now sits with the Senate for further sausage-making.  What will we end up with?  Your guess is as good as mine.  The following is an excerpt from my April 2017 Financial Update article where I opine about the current health insurance situation in the US:

“Let’s look at the details of the AHCA as passed by the House.  Here’s the best summary I’ve seen of the current version of the AHCA compared to the ACA (courtesy of the non-partisan Kaiser Family Foundation).

Main takeaways:

  • ACA premium subsidies continue through 2017, 2018, and 2019 (so it’s not an immediate “repeal”). Your subsidy declines as your income increases up to 400% of the federal poverty level.
  • Starting in 2020 those buying individual coverage get a $2,000 to $4,000 tax credit per person for qualifying insurance (and policies don’t have to be purchased through the official Healthcare.gov Marketplace to qualify for the tax credit). Tax credits vary with age (older = larger credit) but not with income, however there are income limits where the tax credit phases out
  • Cost sharing reduction subsidies disappear in 2020 (currently available to those earning under 250% of the federal poverty level – it’s what makes my deductible $100, max out of pocket $1,200, and my copays $5-20)
  • In 2018, HSA contribution limits double to $13,100 for family coverage.
  • If a state chooses to allow it, insurers can charge more for pre-existing conditions for those that have a lapse in coverage. Possibly much, much more. Maintaining continuous coverage seems to be the way to go to avoid paying a lot more for pre-existing conditions.
  • Increase the age banding of premiums so that the premiums paid by older people aren’t capped at three times the premiums charged to the youngest people (under AHCA older people will pay five times what younger people pay – while only getting an extra $2,000 in tax credits)
  • No more individual mandate to have health insurance retroactive to 2016

Those are the basics but trust me, I’m leaving a lot out.  Medicaid and Medicare are tinkered with too.

The Senate will most likely make significant modifications to the AHCA, so it’s pure speculation as to what we’ll actually end up with once all the sausage is made.

My main takeaway as a 30-something early retiree that will be 40 by the time the ACA premium subsidies go away in 2020 is that I’ll be paying more for health insurance that will come with higher deductibles and copays.  Mrs. Root of Good and I will each get a $3,000 tax credit to use toward insurance that will probably cost $4,000-$5,000 per year per person for a basic plan, and possibly much more if healthy people choose to go uninsured (since the individual mandate will be gone and many people will pay more for health insurance, making it less affordable).  I don’t know what the kids’ policy pricing will look like or if they’ll end up on Medicaid (if that’s still an option given the possibility of AHCA-related changes to Medicaid), but I understand they’ll be eligible for $2,000 tax credits too (based on their age) if we purchase individual policies for them.

In conclusion, I’m mentally penciling in an extra $4,000 or so for health insurance and healthcare costs starting in 2020, but also accepting that a lot can change with the AHCA before passage (or it might fail altogether).  There might be a subsequent health care bill passed later on in 2018 or 2020 as the political winds change that could put our costs back in line with where they are currently under the ACA.” (end excerpt)

If this bill passes then the near-term damage of this law won’t be horrible.  But it’s still a lot of uncertainty in our early retirement financial plan.

A silver lining of the Republican controlled White House and both houses of Congress: tax cuts.  I’ve heard mutterings about higher child tax credits and larger standard deductions, which could save us some money on taxes to partially offset higher health insurance costs (or, rather, lower health insurance tax credits versus what we get under the Affordable Care Act).  Tax cuts can potentially benefit the economy depending on how they are structured, so it’s possible we’ll see investment gains too.

Stop and smell the roses

Stop and smell the roses

 

Have we reached the top in the stock market?

I’ll be the first to admit I have no clue but I know it’s been on a winning streak the past four years.  That’s not to say it can’t keep going up for several more years.  However, there’s a lower chance of strong continued gains year after year simply because there’s less room to grow when the market is already at high valuations compared to long term historical averages.  It’s the exact reason you would have expected big stock market gains in the long term back about 2009 when the market was valued at a third of what it is today.  From deep valleys rise tall mountains.

Our portfolio might experience several years of sideways movement or suffer a double digit percentage decline.  Either of those scenarios are fairly common in the recent history of investing and it’s most certainly not different this time around.  That’s not pessimism speaking but rather realism.  It won’t mean the end of everyone’s early retirements but it will certainly mean we will keep a closer eye on expenses and income.  However our $120,000 of bond funds plus money market funds will provide a lot of stability for several years in the event of a market downturn.

 

Spending more on travel

I roughly doubled our travel budget from $5,400 when I first retired to $10,000 today.  We didn’t really know how much we would travel since our working lives were filled with work work work and just a few weeks of vacation time each year.  Travel is our safety relief valve – when our portfolio fills up to the top, this is where we let out the monetary steam.  We spend more on travel.  If we have to tighten our belts we can cut back in this area.

We’re also taking advantage of geographic arbitrage by traveling to places where the foreign exchange rate makes everything cheaper.  In 2015 that was Mexico (though we would have saved even more by waiting till 2017!).  In 2016 that was Canada.  2017 is a perfect time to visit Europe with the euro trading at the cheapest levels of the past decade.  If foreign currencies grow significantly stronger (= overseas travel becomes more expensive) then we might knock a few US destinations off our bucket list.

And if our portfolio drops by a half million dollars, we can cut out a huge chunk of spending simply by traveling less or choosing less expensive destinations.  I’m sort of looking forward to spending a lazy summer at home at some point in the near future, and a financial reason to skip a summer filled with travel wouldn’t be entirely unwelcome.

Spending more on travel is a good thing because it’s so easy to trim this spending versus other areas of the budget that are more rigid like housing costs or transportation costs.

Wouldn't mind a summer hanging around our house at all. :)

Wouldn’t mind a summer hanging around our house at all. 🙂

 

Almost four years into retirement, where are we now?

In a few months I’ll celebrate four years of early retirement.  From a financial perspective we are doing great.  We earned close to $200,000 extra that wasn’t anticipated due to starting this blog and Mrs. Root of Good working a couple years longer than expected.  Our investments have grown by an even larger sum.  And we’re keeping our spending generally at or below budget.

Our living expenses in retirement are funded from roughly $10,000 dividends and interest per year plus $30,000 income from Root of Good.  That means we don’t really have to sell any investments on a routine basis for living expenses.  Nor do we have to worry about withdrawing investments from IRA’s, 401k’s or my 457 account.

It also means the Roth IRA Conversion Ladder I planned to set up is partially on hold for now.  I still managed to convert around $4,000 from traditional to Roth IRA in 2016, whereas my Roth IRA Conversion Ladder plan called for conversions of $24,000 per year.  However, I was able to contribute $18,000 to my solo Roth 401k and $11,000 to his and hers Roth IRAs during 2016.  Yes, I have a Root of Good 401k plan and I play a shell game by living off the income from Root of Good while shuttling taxable funds into the Roth accounts.  You could say I’m “living off my portfolio like a real early retiree” and saving the $30,000 Root of Good income, which is also a legitimate way of describing my early retirement finances if one wanted to downplay the significance of the side hustle income (I don’t).  It’s a game of semantics.

The net result is $33,000 of additional Roth assets from conversions and contributions during 2016.  In other words, I didn’t follow my original plan but I accomplished a similar goal – increase the amount of funds in the Roth space so I can withdraw the contributions/conversions penalty free and tax free well before age 59.5 should that be necessary.

The unexpected income from Root of Good also means my decision to choose the Roth IRA Conversion Ladder over the competing 72(t) Substantially Equal Periodic Payments method of withdrawal was a sound one.  The 72(t) method is extremely rigid in the amounts you must withdraw each year once you start your initial withdrawals.  However, I knew going into early retirement that my income needs would vary year to year and there was always the chance I would have earned income (or get bored and go back to some form of work).  As a result, I rejected the 72(t) withdrawal method mainly because of the lack of flexibility in withdrawals.  I would really hate to be taking $30,000 of 72(t) taxable IRA withdrawals while earning another $40,000 between this blog and dividends and interest.

 

Now where are we headed?

Things look pretty rosy.  I took my financials and dumped them into the wonderful early retirement calculator at cFIREsim.com and determined that we could spend somewhere around $65,000 per year with almost zero chance of running out of money before age 90 even when we make conservative assumptions about income from the blog and other side hustle income.  Helping shore up the forecast is roughly $25,000 of expected Social Security income that we’ll start drawing in a little less than 30 years.

I don’t know that we’ll spend $65,000 per year but it’s reassuring to know that money isn’t a real constraint to our lifestyle.  We could increase our budget by 50% to cover a lot of unknowns such as higher health care/insurance costs and higher kid-related costs during the teen years.

Four years into retirement and our potential standard of living is approximately double what it was when I quit working.  It’s not entirely surprising given the conservatism of the worst case analysis performed under the “four percent rule”.  Most of the scenarios modeled in the four percent rule (which is closer to a three percent rule for very early retirees) leave the retiree with several times their initial portfolio value.  End result: a growing net worth in real terms for most very early retirees.

However I keep in mind that we might be at the top of a stock market bubble that’s about to burst and that we might see hundreds of thousands of dollars of our net worth disappear in a short period of time.  In that case, I’ll have to revisit what we are able to spend.  Until then, I’m not gonna worry about money and I’ll keep an optimistic but flexible attitude toward the future.

 

 

Any early retirees in the audience that ended up with substantially more than they started with?  Or did early retirement lead to new ventures or interests that turned profitable?  For those planning on retiring soon, do you have any plans to hustle on the side?  Let me know!

 

 

138 comments

  • I loved this post!!! One of the things that scare me if I were to retire today is definitely health insurance as well as the potential for the stock market to go in a free fall after all these bull market years.

    That is so incredible how highly valued your wife was at work. Seems like they really went out of their way to show her how much they valued her. I don’t feel like you hear about that all the time anymore.

    I would love to be in your position in a couple of years. I’m not quite there yet but I am definitely trying as hard as I can to get there as quickly as possible!!!

    • Health insurance is the big unknown for us too. Definitely curious to see how it all plays out in the next few months (or years).

    • There always seems to be that fear of a crash after such a rise in the market. Hopefully, as history shows, over tiem the market will continue to rise for all of us who are invested. Cheers

  • As always, thanks for all the details Justin! The big picture of how you “do” early retirement so successfully with a family is so easy to see in your posts. As far as college goes, your kids should consider the 3 year plan too. I did it 30 years ago, my daughter graduated in 3 years last weekend and my son is taking a course this summer – prior to leaving for his first undergrad year, to pretty much guarantee a 3 year graduation. High schools and community colleges offer tons of options for kids in HS to earn college credit. Our community college paid more than half the cost of a class – an “early college” scholarship.
    I am getting ready to end full-time work in June. I can’t imagine not having some kind of side hustle. We have plenty of travel plans – but there are a lot of hours in a week! It’d be hard not to earn some kind of money!

    • Re: the 3 year college plan – that’s a distinct possibility. I did that in college and managed to earn 2 degrees (one in Spanish, the other in engineering!). Between APs, college release during HS, testing out of courses and summer school before university started, I actually started my “freshman” year a few credits short of being a junior. Our kids will probably end up taking a lot of APs in high school most likely so that alone should earn them most of a year of college credit.

      That’s part of my “best case” financial model for college – each kid might only spend $10,000 or so to get a bachelor’s degree.

  • I was surprised when I looked into the Pell Grant system as well. If you have an AGI under $50,000 they don’t even take your assets into consideration. This greatly increases the chances of my kids getting large Pell grants. I’m not retiring soon, looks like 8 – 13 years depending on several factors, but I plan on working extremely part time once I leave full time work. I work about 7 – 9 months of the year now, and when I transition to early financial independence I will drop down to 2 – 3 months per year, and still earn enough to cover the vast majority of our expenses. I will continue working as a contractor during nuclear plant outages doing the exact same jobs I do now, just fewer of them.

    This ACA thing is such a nightmare. It’s insane how much time I have spent researching, planning, and of course dealing with the system to get coverage and medical care for our family. It will be interesting to see what happens.

    Can you imagine what your net worth will be in 20 years or 30 years? Your situation is reminding me of the details behind the trinity study….100% of the time a 4% withdrawal had a positive balance in the account after 30 years, this is what everyone works to, what most don’t read is that the median account ended with 15X the amount it started with.

    • “Can you imagine what your net worth will be in 20 years or 30 years? ”

      It’s crazy. Even if we take out my blog income, at our current spending plus a reasonable assumption for college spending, we’ll have between $2 and 24 million at age 70 according to cFIREsim, with a median value of $7 million. And that’s in today’s dollars. So unless our future looks worse than the great depression and the 70’s stagflation, we should be 100% fine. 🙂

    • How do you get so many travel points ?

  • This was a great and thorough post. I’m in my 20s and starting late so I’m nowhere near retirement. You mention Uber wasn’t a company when you were planning which makes me wonder what other services like that will be available in the future to make money off of while in retirement. I wouldn’t worry much about the bubble about to burst. After it readjusts, you’ll be winning even more. Thanks for the value in this post

    • No clue what the next big thing/app/invention/tech will be. In general I think it’ll be easier to hire people for services and easier to sell your time/expertise on a global market. On the leisure/entertainment/lifestyle side of the equation, it certainly seems having fun is getting cheaper and cheaper. Ebooks, tech gadgets, $10 netflix unlimited subscriptions, cheap smartphones and video games, etc.

      • H RoG,

        The next big thing is “decentralization using Blockchain”. There is an explosion going in valuation of related (Crypto) coins in this space, especially around Smart Contract networks (see Ethereum as an example). You can ride this wave, probably takes a few more years before it is reaching maximum hype, before it consolidates. They also call this “Internet 3.0”.

        Study it, and put 10k USD in it, and do not watch for 2 years, and then be happy to have another big plus for your portfolio in Retirement 🙂

        cheers from ERE (Hankaroundtheworld)

        • I admittedly don’t know a lot about the technology (other than on a very fundamental level). Just checked bitcoin’s price and was shocked to see it’s gone up a ton over the past year!

  • You know things are going well when “Spending more on travel” is included as one of the “bad” things. 🙂

    Thanks for the behind the scenes peek. This provides a great deal of hope and optimism for FIRE hopefuls on their way up. Awesome to see that you are much closer to a best case scenario than a worst case scenario. (Although looking at your list of market returns makes me sad that I didn’t have the money to start investing until after 2013 was over…)

    • Yes, that travel spending isn’t entirely bad, just a negative way we deviated from the initial FIRE plan (negative in a financial sense – highly positive in the “having fun” sense).

  • I never really considered how early retirement could help so much on the FAFSA and college aid – way to work the system! I’m impressed how you can send 3 kids to college on not much money. Not bad in this world of inflated higher ed costs.

  • You folks are knocking it out of the park. Besides the positive sequence of returns, there is no luck involved at all…this is the result of a sound plan perfectly executed. Kudos to you! Everything to the “t” has been schemed and you definitely serve as a good role model for those looking to enter “ER” soon like myself.

    And I love the shell game you have going with being able to shuffle more taxable assets into Roth accounts! I suppose have less taxable assets will make it all the easier on the FAFSA and scoring there too. On Monday I have a post scheduled to walk through how I plan to pay no tax in retirement. It’s achievable and it gets me excited (gosh I’m a nerd)!

    Rock solid, RoG. Thanks for the update!

    • Yes, that shell game stuff is pretty cool. 🙂 Took me a while to realize I needed to keep on maxing retirement accounts to the extent possible even during retirement. I’ll be okay with near-zero taxable assets and a highly inflated Roth balance.

  • Great post!

  • I have to stay that part of the reason your kids are doing well is that you are at home. Greeting them at the end of the day, volunteering in their classrooms, and supervising homework. You are a great hands on Dad.
    It helps! I gave up my legal career but now I have 2’kids in elite liberal arts colleges which had acceptance rates of 15%. We chose the colleges based on how big their endowment was, which translates into a lot of grants! Free money! Our last child has straight As and she knows to look for colleges based on how rich the school is. The 3 will have no loans when they graduate!

    • That sounds awesome – looking for colleges based on their endowments!

      I’m sure being home with them helped a lot. We do spend a lot of time with them and watch over the homework pretty closely. And see who they are hanging out with 🙂

  • This post is the perfect antidote for the naysayers. Thanks for spilling ALL the details and showing people how early retirement can work really well.

    • But will the naysayers actually read any of this? 🙂

      • Some will. But they will be reading everything looking for *just one* excuse why the *exact* path you’ve followed wouldn’t work for them. That way, they can dismiss it with righteous indignation about how easy you had it.

  • What a great post. What great detail. Thank you.

    “Plan for the worst and hope for the best” is our approach too. We’re always pretty conservative with our plans (not just finances) and things just always seem to work out better.

    The “Plan B” side income is a good idea. I’m going to use that. Even if it’s never required it’s smart to prepare mentally for the possibility of earning additional income during “retirement”.

    • The earning extra income thing is a nice Plan B. And being open to making a buck is okay even if you’re retired. You get to name your terms of engagement and limit it to whatever you want/need.

      • Opportunities to make a bit of extra money always seem to present themselves, especially if you have the time to take advantage of them. Its nice to keep it as a Plan B though and not rely on that extra income.

  • I’m so excited for your increased net worth. It’s amazing how your blog has grown over the past few years and added some cushion to your retirement plan. I just started my blog almost two months ago about personal finance and have found your blog to be an inspiration.

    Thanks for sharing the details of your retirement finances! 🙂

  • Never heard of cFIREsim.com. Thanks for sharing that. Really cool calculator.

  • Justin:

    Your analysis of college, health care, etc. is simply awesome! Thanks for sharing everything so openly.

  • We left work for a year, and decided not to go back. Once we didn’t have 9-5 job, so many other good options opened up. Plus we weren’t spending as much between work cost, and money spent making up for the fact we disliked our jobs and we’re short on time. I don’t buy into all the “worst case scenario” fear. If everything, and I mean everything, goes wrong….well…we will have to be in the same boat as every other American. Gasp!

    • There you go – I’d rather be in a Great Depression-type financial event with a paid off home and whatever is left of a $1.x million dollar portfolio AND the propensity to live frugally in general. That’ll be way better than the alternative – high spending, low worth people that would be really screwed!

  • Great write up and awesome Mrs. Root of Good was able to have the flexible work schedule. Employer loyalty is so limited these days that they are more apt to hire some cheaper just out of college to save a buck mentality so it speaks volumes of her talent. I’m hoping we’re near the top of the market so that it comes down and I can invest more to join you in early retirement. All without hurting all out other early retirement friends out here. Keep enjoying your freedom!

    • No worries – it’s much better to be investing when the stock market is very low. And market corrections are usually short lived (as in months or years). Us FIREd folks are investing for decades. Lifetimes!

  • Good summary ROG.

    Most blogs I read have only existed during the last ~8 year run up in the stock markets.

    The US markets lost ~54% in 08-09. I know you have been moving a small amount into bonds. Have you calculated what another 54% correction would look like? That is certainly a worst case scenario, but it happened just 9 years ago.

    You could move to 60/40 or 50/50 and avoid some of the drama. But then, another 08-09 might not happen. Or it might be 30% or 25% down. Nobody knows.

    Take only as much risk as you have to.

    • I lost hundreds of thousands in the 07-09 crash, so I remember very well what it feels like. 🙂 For us, it’s pretty simple – we would lose $750-800,000 or so if it drops by 50%. A big chunk of that drop was just a few months in duration and it recovered relatively quickly.

      I’d still be feeling pretty good with $750,000 in equities, $120,000 in bonds/money markets, and a paid off house. 🙂 The blog income is of course icing on the cake. If this did happen, we would probably curtail spending on a lot of discretionary expenses. Maybe spend the summer in Mexico instead of Europe. 🙂

      I’ll probably stick some more $ in bonds if the market stays at current levels for a while. I don’t think I’ll ever regret having $100-200k in bonds (3-5 years living expenses). Today’s ~2% dip doesn’t even register in my mind as a worry due to this significant fixed income buffer.

  • I truly appreciate that fact that you don’t need to sell any investments on a routine basis for managing your living expenses. I have come across people who had to consider withdrawing investments and that’s really painful. It never helps you being a spendthrift during the early years; it’s always a better option to stick to your family budget. It really pays when you reach those golden years!

    • I wonder what it will feel like to sell $10,000 of something and transfer that money to checking and spend it on something? I’ve sold stuff to pay off the mortgage and sold some to move it to an IRA for tax savings purposes, which is just a way of moving money from one pot to another.

      I’m happy with the spending where it is today and if we find ways to spend more and get value then we’ll do that. But as it is, more spending doesn’t seem to bring a lot more value to us.

  • Hi, Amazing summary ! Something similar is happening to my neighbor who wants to retire, but her employer is making it very attractive to stay on with incredible flexibility. I like your blog a lot and don’t want this to come off in the wrong way, but do you ever think about whether it will morally OK to accept college financial aid when you don’t actually “need” it , despite what it shows on paper? I am assuming that your state can only provide a limited amount of aid overall, so your kids aid might stop someone else who may really need it – for instance a student whose parents are not savvy enough to have saved for college – which is not the students fault – should that student suffer because you have figured out how to beat the system? Again- this is not meant to be critical – instead it is a reflection of the thoughts I am having myself as I think about how to keep my own income low during the college years (which are coming in a year for me).

    • I don’t set the guidelines and don’t really know how well off others are (or aren’t) and what choices led them to their current income and net worth levels such that they do or don’t qualify for aid. I know we would be considered lower income if we applied to the Ivy’s (for example) as many of the applicants come from very high income, wealthy families.

      The good news (for those concerned about fairness in the system) is that some institutions look deeper into assets and income using another financial aid form (CSS??) that might be more accurate for our financial situation and make us look wealthier to the university.

      And as it stands now, I’m not doing a lot to “game the system” but I might look toward that in the next few years.

      • I have a similar net worth to Mr. Root of Good but I have ZERO qualms about positioning our assets and lowering our income to maximize college financial aid for our children. We’ve got six years before the first one enters college, so I’m just now getting familiar with the forms and rules. While I agree with Monica that it’s unfortunate that students are dependent on the spending/savings decisions of their parents, I consider it highly immoral that, when it comes to financial aid, it appears that parents are basically penalized for doing the “right” thing and saving for college on behalf of their children.

        Consider two families with the exact same income, but one family lives paycheck to paycheck, buying new cars every couple of years, etc. Meanwhile the other family lives frugally and diligently saves in a 529 for 18 years. Come financial aid time, the latter family will be expected to use those 529 funds for tuition and college expenses, while the former family is “rewarded” with a larger aid package. It’s the ant and the grasshopper, with an aid system that rewards the grasshopper.

        That aspect, coupled with insane tuition inflation over the past several decades, inspires me to do all I can to maximize financial aid by making sure that most of our assets are in retirement accounts/home equity.

        • That’s pretty much how I feel. And to extend it further, you could have a 50 year old couple that just retired with a pair of pensions paying more than what I can withdraw from my portfolio plus a fat seven figure retirement account but with zero taxable assets. They would be much “richer” than we are in terms of spending power but we would probably end up paying more for college with some small taxable brokerage accounts plus a moderate income.

          The formula also penalizes those with smaller families and awards those with larger families, especially those with kids spaced close together (like our oldest 2 kids).

          Plenty of inequity baked into the formula.

          • Agreed about the inequity in aid formulas. I don’t want to go too far with straw man arguments, but you might recall the stories from the 2012 election about Mitt Romney’s $102 million IRA. For the FAFSA, it’s plausible that someone with a nine-figure IRA balance and nine figures of home equity would be considered flat broke, assuming minimal income and assets held in taxable accounts. While that’s a very unlikely situation, the current rules clearly benefit families who minimize assets in taxable accounts, even those who are truly wealthy based on their tax-sheltered retirement savings.

    • I don’t think working the college system to your advantage is a bad thing mainly because the aid is tiered. My kids received zero state or federal aid but always got that nice little letter saying, “hey, if we had more aid, we’d help you out, but we don’t, so sorry. How about a hefty loan?” Thus even if you want to consider that they are “taking” money out of the available pot, they aren’t taking it away from folks on the bottom whom without aid could never consider college but instead they would be lowering the pool so those nearer the top who can (at least theoretically) afford college wouldn’t receive some help. While I would have appreciated some aid for my kids, I never planned on getting any because of our income. Do I feel that Justin should “pay” his fair share? Maybe, but then again if I’m not going to be angry at a high income multimillionaire having lived their life and made their choices and taken their risks just cutting a check to pay for their kid’s college like it’s a utility bill, why should I be mad at a frugal person finding a way to get their kids into college with aid, especially if they are good kids with a good shot at being good citizens. Now, if a large part of the population were all going FIRE and undercutting the system, I’d be more willing to change laws to minimize that impact, but we are talking a tiny fraction of the population. It’s like how many folks really take advantage of all the travel hacks put up on this site? I’d bet it’s a small overall percentage or the companies couldn’t remain in business, so the impacts are minimal to the overall system IMHO.

      • Question about this: “My kids received zero state or federal aid but always got that nice little letter saying, “hey, if we had more aid, we’d help you out, but we don’t, so sorry. How about a hefty loan?””

        Are you saying you filled out the FAFSA and it said you should get X amount of aid, but when they doled out the financial aid, there just wasn’t enough to go around so you got nothing? Just curious how it works, since I assume we would get whatever aid the FAFSA says we should get, and didn’t want to get shocked by a big fat $0 financial aid award come college time.

        • I’ve tried to answer this twice already, so if you get multiple answers from me that’s why.

          Short answer, you get what you are supposed to get. I suspect since my children attended state schools and aid was state handled, that this was a plus up based on folks who qualified and didn’t attend leaving more money in the state coffers to be redistributed up the aid ladder for that year. I suspect that we “qualified” for the aid because we had unsubsidized loans, but the probability of us receiving any actually benefit was next to nil, and it’s kind of insulting to get a letter telling you that you qualify for aid but the money has run out so better luck next year.

          With respect to FAFSA, as I recall they determine your family burden and then the school makes up the difference in a variety of ways, scholarship, grants, work-study, etc. which can vary from school to school in the mix they offer. The only place I think folks get a real surprise is when you include external scholarships. Say the school costs $25K, your family burden is 5K, the school offers grants and scholarships for $20K. However your child has gotten five individual $1000 scholarships from the local community. You think you are not paying a dime (e.g. $20K in aid, $5K in external scholarships), but suddenly the school drops their aid to $15K to ensure you still pay your “burden”. I did not personally experience this so didn’t dig into it, but I know folks who did. This happens, the school is only on the hook to ensure you don’t pay over your burden. So that’s one thing to be aware of and seek ways to mitigate (e.g. have the checks sent to your family and not the school).

          • That’s sort of what I’m afraid of. We get plenty of need based aid, then one of the kids lands a scholarship and the need-based aid is taken back dollar for dollar. Oh well, I guess we could have worse problems. 🙂

            • Having gone through this, the other thing to be aware is not every school will meet 100% of required aid. And we found that some of the aid was qualifying for loans. Not all the aid was in the form of scholarships and grants.

            • Oh yea! We received “financial aid” alright – in the form of unsubsidized federal loans…. they classify a loan as “aid.” My kid has above a 4.0 GPA…. and a 1340 SAT (94th percentile in math). The “aid” is $5500 starting the first year and I am to pay the difference out of pocket (call it $20k)…. that covers tuition, room and board, books, and other crap…. He will work this summer and we’ll cut costs where we can but it’s gonna hit.

            • …….and I’ll add! The “aid” package I outlined above was the exact same at all five schools we applied to. All five are VA state schools. Tuition/Room/total cost at each of the five was about the same. He’ll be attending Virginia Tech this Fall.

  • CrossvilleChuck

    Isn’t it amazing how the smarter and/or harder you work at something, the luckier you get? Whether blogging or travel hacking or taking advantage of the ACA rules, most of your “luck” has been due to smart initiatives on you and your family’s part. Well done.

    We had some large discretionary expenses that we undertook within the first year or so of my retirement three years ago. Even with that we have a higher net worth than we did three years ago, albeit less of a % increase than yours due to the spending (which were one time events that help us live on the road for 4-5 months of the year) and some stupid market trading moves on my part that have been corrected. And now that I have started SS at age 63 we basically have more than our expenses taken care of by two SS payments and the wife’s pension, not even counting our investment returns. That should enable me to hopefully accelerate our bottom line net worth, as long as the markets do not have a repeat of the late 2000s. Life is definitely good, my friend.

    • Yeah, it’s funny how luck works when you combine it with effort and skill 🙂

      I imagine we’ll be in a similar financial position as you one day – more money than necessary. We’ll never have the pension income, but I figure by the time I’m 67 and drawing SS I’ll need the SS payments even less than I would today!

  • Appreciate the big picture of your nearly four wonderful years since you waved goodbye to work. Your early retirement has clearly achieved escape velocity, and those of us still in thrall to gravity wish you all the very best, wave a tad wistfully, and dream of a future that sometimes feels impossibly far away.

  • Congrats on coming out further ahead in early retirement than when you started!

    Love hearing this kind of insight on the intricacies of what’s taken place in your early retirement. A lot of us are blogging about our game plans and what we expect things will be like, but it’s definitely not the same.

    Learning about the pros and cons of what you’re actually going through is fantastic… and it’s good to hear that the cons have been relatively few for you!

    — Jim

    • I spent a lot more time budgeting, forecasting, and planning back when I was working compared to how little time I spend now thinking about it (other than the time devoted to describing it here on the blog 🙂 ).

  • I’m amazed at the life you have set up! Great job! I would love to have a job where I only had to work 8 hours a week and earned $30,000/year. That’s the life!
    I’m really excited to hear about your trip to Europe. I bet you guys are counting down the days!

  • I could run cFIREsim.com simulations all day- and perhaps I shall. You stole my day! I was surprised at how much of a difference SS made- it totally was the deal breaker/maker for my scenarios. My addiction to high COL areas is the other killer. I wish, I wish I liked small to mid sized towns.

    • SS is no joke. Probably the most underappreciated safety net even for us rich fat cats aiming for FIRE. For us, we’ll end up with a $25k COLA’d pension basically at age 67 which is almost enough to fund a bare bones budget. That means if we spend all our portfolio by then (in the next 28-30 years) then we’ll almost be okay for life. 🙂

  • Love your posts, a lot of helpful information and a lot of things to think about.
    Recently Mrs FR and I had a conversation about early retirement and what we would do, and my wife told me that she likes what she does and she’s planning to work even after we don’t need to.

    What about me though, I know exactly what I would do:
    – Adventure traveling on my motorcycle and exploring the world
    – More quality time with my family
    – Sharing my story with other people and proving that American Dream is alive

    • Sounds like a good way to spend early retirement! 🙂 My prediction: your wife will grow envious of your freedom and decide working isn’t as much fun as it once was. 🙂

  • I know exactly what you mean RoG! My net worth increased $500k in the (almost) two years I’ve been “early-retired”.

    I only planned for our portfolio to grow about $50k per year (2.5% annual growth outside of expenses), but we absolutely crushed that estimate. It’s surreal!

    We pull in roughly $50k/year in dividends, so if the market bubble pops, it shouldn’t be a problem.

    Taxes ended up being an absolute dream too!

    Great post btw!

  • More frequent articles would be nice. Earn that $30k!!

    Enjoy when you do write though.

  • A lot of people worry about what can go wrong in a retirement. We target our withdrawals and savings to be able to handle the worst case scenario. But there is also a probability things can go a lot better than planned. I think you are proof of that!

    Probably the biggest surprise for me after quitting is how lucrative the travel hacking can be. It’s easily saved us thousands from our expected expenses. We will be staying in Spain for free thanks to your Airbnb travel hacking tips 🙂

    • Yeah, the travel hacking is a huge deal for our travel budget. I guess when I say I have a $5000 or $10,000 travel budget people have a certain idea of how far we can get on that. However it’s really 2-3x that budget when the flights and sometimes lodging is free.

      Having time to plan these trips equals a lot of cost saving, too. We’re able to find better deals.

  • Bravo on the first two joint years of ER. You are way above plan and that will continue.

    My last day is July 5th, when our joint ER begins at 41. (Wife has stayed at home for five years). I asked for severance as opposed to quitting and oddly it worked. I’ll be getting approximately 40k to exit my career, before unemployment.

    Life is good.

    • #Jealous 🙂

      I tried to get Mrs. Root of Good to fish for a severance package and she wouldn’t do it. I think her severance would have been of a similarly large size too.

  • You hit the nail right at the spot. Early retirement has been demistified. I love the way you detailed everything. Thanks for writing this.

  • David Mayville

    When you calculate your total investments (net worth) do you include your home value and other real estate investments? We currently have our home paid for and the value is about 260,000. We also own two commercial properties that are paid for and leased out with a value of 125,000 each.

    • I do because my home is a relatively small part of my net worth and I could always sell it and move somewhere else and use the proceeds to rent for well over a decade. However it’s important to note that I don’t use the house value as part of my investment portfolio value that I use to calculate how much I can spend each year (the four percent rule). The house isn’t an investment for me – it’s a place that provides mostly rent-free housing.

      So for your rental properties, you can include in your net worth but I would use the cash flow from the properties to help meet your monthly expenses, and not include the value of the properties in your investment portfolio value (if you’re planning on taking 4% of portfolio value for living expenses each year, for example).

  • I love this post. I’m one year into my own retirement and hearing from folks who are farther down the path does a lot to keep the jitters at bay. I need to learn to cook the way you and Mrs. RoG. The photos you’ve shared of some of the meals you enjoy are mouthwatering. I feel so clumsy and awkward when it comes to cooking. We could easily shave hundreds more each month of our expenses if we mastered this.

    • I love that I have time to try new dishes now. For example, I spent 4 (!!) hours making tikka masala from scratch this past Saturday. I made a huge amount so we could have leftovers. I think I nailed it because everyone is excited to eat the leftovers for the fourth day in a row. And now I’m thinking about making the recipe simpler so it’s quicker to make next time around. Fun challenges and you get to eat the (hopefully) delicious results. My advice – next time you find something you love at a restaurant, try to replicate it at home. Youtube is your friend as are the many food/recipe sites out there.

    • Cooking is fairly easy for the intelligent systematic person. You’re starting as half an expert: you already know what good food tastes like! An hour a day of (useful) cooking shows or Youtube videos, and you’ll get there in no time. Just get some decent tools, including a GOOD thermometer (thermapen or such), and pay attention to how various factors impact the outcome. A bit of study and experimentation and you’ll (nearly) master a given dish, then another, then another…

      MUCH simpler than being successful at finances and retirement. 🙂

      • I do alright and don’t even have a thermometer!

        • I did not have one, but got one a few years back as a gotta-suggest-something Father’s Day gift. I was a decent cook before, but not to the point of touching the meat to know how done it is. This has made a big difference for me:

          (1) Not overcooking chicken just to make sure it’s safe. At the same time, setting the finished pieces aside so they don’t overcook while the thicker piece finishes up.
          (2) Cooking salmon to a proper medium is a glorious thing
          (3) Getting the proper water temperature to make happy yeast when baking bread
          … and others I am sure.

          But, in regards to the original poster: having this advantage when learning to cook would have saved me plenty of bad meals from overcooked or re-cooked meats.

  • Nicely done! We all think of the negatives and “what ifs” and here you are kicking ass!! The healthcare debacle is one that will be ongoing for everyone in the FIRE community…I’m curious to see what will happen and thankful I’m still working so it all has a chance to smooth out. Looking forward to hearing about your trip. 9 weeks of travel?! That in itself is worth all the hustle that got you to FI. 🙂

    • Yes, this is a “trip of a lifetime” that we could take basically every year forever. Pretty wild when you think of it, but “this is what we saved all that money for” is what I keep telling myself.

  • Still far from retiring, but great to hear it worked out that well. Interesting aspect on planning for retirement, but still leave with so many aspects still being unknown or affected by changes. As it comes to the when is a good time to retire, we might never know what lies truly ahead of us.

  • You’re doing awesome. Congrats!
    You guys made a ton more money than expected and I love it. Make hay while the sunshine, right?
    The stock market can’t keep going like this. Everyone expects lower return in the years to come. That’s okay, though. We’ve been on an awesome run.
    I’ve retired almost 5 years and our net worth doubled. It’s pretty crazy. Our expense went up too, though. When I quit, our budget was bare bone. Now we spend a bit more. I’m pretty sure we can hold at this level.

    • Same here. I think we went into retirement planning on spending like we did when we were saving and working. Now we’re realizing we can spend a lot more and not risk going broke. Took a few years to loosen the purse strings. And we’re wealthier now too, of course 🙂

  • For anyone wishing for a good approximation of a historically safe withdrawal rate based on the current (over)value of the stock market, MadFientist has a great tool. Just go to Mad Fientist and click on laboratory, calculator and Safe Withdrawal Rate.

  • Great summary, and congratulations again! It’s an inspiration to see how you’ve continued success. I’m hoping to mark my path to FI and find my niche.

    Btw, that college photo looks like the walkway between old campus and cross campus at Yale. Can’t really tell b/c many other campuses use a similar layout of arch including Duke.

    Hehe, many borrowed tuition dollars went into my prior education…was it worth it? Still trying to figure that out.

    • I think that is a pic I took on the University of Chicago campus a few days before I retired early. I’m a weirdo that considers walking through college campuses a form of tourism (and they have a sweet mummy museum on campus too). But they do all look the same. Probably because they’re imitating European college campuses 🙂

  • I have a question with the FAFSA process…so it seems (or what I got from the post) that early retirement is beneficial for college affordability? Since the house and retirement accounts are not counted, retirement makes sense if the timing is right. My husband and I bring up the topic of children sometimes and we’re trying to figure out a good outline of the next 20-30 years. Stuff like FAFSA will alter our plans.

    Thank you for the compelling read. I’m new here and I just subscribed.

    • Yes, if you have a paid off house and most assets in retirement accounts combined with a very small income, you’ll be sitting pretty for the FAFSA formulas (assuming they are static for the next couple decades 🙂 ).

      • From my reading, it sounds like Roth Conversions count towards AGI and therefore factored into FAFSA calculations. I’m a ways out from it, but might make sense to do bigger conversions leading into the last year or two of high school, to really reduce AGI.

  • Healthcare remains the biggest issue. Very expensive, but I am almost twice as old as you. The biggest surprise about retirement is my income. I always planned on making less money in retirement. Between my pension, social security and my retirement savings my income is higher than it ever was when I was working. Who knew!

    • At least the higher income will offset some of the additional healthcare costs. And you’re fortunate to be close to Medicare age (assuming you’re almost 2x my age). Costs should drop a lot at that point and you’ll get a lot more cost stability versus what I would expect under AHCA should it pass.

  • Here your income report clearly pictures that your decision on early retirement was absolutely right. Your crystal clear explanation n every aspect of life like health, earning and others is much helpful for the followers.

  • This was a great update! I’m totes-jelly of your blog success. Market has treated me well too. It’s a good thing because, hindsight 20/20, I pulled the plug too early and got really lucky. I always expected to work part time as a consultant for a few years but it was never needed.

    Keep devouring your prey RoG!

  • Well Done!! Great post! Love how simply it’s all coming together. The ACHA thing really scares us and we’re not quite sure how to take it yet. Hopefully someone will figure something out. It’s kind of shocking how much your assets have grown.

    That being said, what are you thoughts on taking a little more risk and stopping a little before your official “number”?

    • The more you are inclined to part time work or consulting or taking on gigs/projects in retirement, the more easily you can take a bigger risk and quit with a smaller pot of money. With the markets at a fairly high valuation right now, I’m not sure I would encourage anyone to jump without really having “enough” though.

  • “We could increase our budget by 50% to cover a lot of unknowns such as higher health care/insurance costs and higher kid-related costs during the teen years.”

    That’s awesome, and one of the main reasons I chose to work a few “One More Years” beyond FI. I want to be in a position to increase our anticipated budget if we want to or have to for any reason. I have no magic eight ball, but I’m not expecting the next four years to be as kind as the last four. If they are, fantastic!

    Best,
    -PoF

    • That’s a smart approach and makes a lot of sense in your occupation. I imagine it would be harder to go to a part time position or part of the year position if you need to pick up some extra cash in a couple years should you need to take the stress off your portfolio (though I think you’ve mentioned locum tenens positions on your blog at least once??).

  • I really enjoyed this blog post. Even though I’m not an early retiree! I like the positive-ness.

  • How do you determine how much to move from stocks to bonds? (the $90,000) I’ve been wondering about using the p/e (the Shiller index?). So for instance if now p/e is 29 then 29*some_factor should be in bonds, the higher the p/e the less stocks and more bonds.
    But I don’t know so I have no bonds, and very little cash.

    • I don’t have a formula. Just a gut feeling. Things are getting high, I’d like a nice chunk of fixed income assets for stability, and now looked like a decent time to snap some up. If they get higher I’ll add a little more fixed income. If things drop a ton I’ll be selling those fixed income investments as necessary to avoid selling stocks at a steep loss.

  • Using Canada as for geographic arbitrage? Hiliarious. The only reason that ever worked is because oil prices messed up our Canukistan peso 😛 Otherwise Canukistan is NOT cheap.

    Congrats on 4 years of retirement and your kickass networth! I can’t believe you managed to only spend $23,802 in 2015?! You budgeted $2700 for July in Mexico and you only spent $498?! Even MMM can’t top that. Well played, sir. Well played.

    • Purchasing a primary residence isn’t cheap perhaps, but other costs seem very reasonable (at 1.35 Canadian Pesos to the USD anyway). Groceries actually seemed the same or cheaper than the US. And I don’t think I could find $5-6 Korean BBQ like we enjoyed down here in the US. Nor the $2 falafel wraps. Let’s just not discuss beer and liquor prices, or my thesis will be destroyed… 🙂

  • Wondering if you’d mind sharing a breakdown of how much of your net worth was “behind a wall” in retirement accounts when you retired?

    I have a ER date in my head, but my primary worry is that 70% of my NW is in retirement accounts, which means there will be some complications in accessing it for monthly income.

    • Can’t you do the Roth Ira conversion ladder, or get SEPPs?

      • Ladder during working years isn’t tax efficient for me. SEPPs are a possibility, but I’m looking for more advice. Would like to preserve maximum tax flexibility and SEPPs don’t do that.

    • About the same as you – around 75% tied up in various retirement accounts. Check out the Roth IRA Conversion Ladder if you haven’t seen it already. We have a growing Roth IRA balance we can withdraw penalty free, as well as an HSA and a 457 (penalty free withdrawals any time). So we have some options and right now we’re focused on building the Roth IRA ladder as tax planning permits.

  • I have to think that with the current administration’s priorities and propensity for actually putting them into action, the market will do well over the next couple of years. I think much of the impeachment talk is bluster… but a second term seems unlikely at this point. The market will likely begin to factor that in during 2020, or as soon as it becomes apparently that a democrat will be elected. That’s assuming that the republicans don’t make this a one term presidency during the primaries… but in any case, uncertainty is bad for the market so I suspect we’ll see some weakness in 2020 or even in 2019. Until then, hoping for 2 or 2.5 really strong years.

    Of course, this all presumes we don’t wind up invading North Korea or something else wildly destabilizing.

    • Your crystal ball works better than mine. 🙂

      I’m not sure where we’ll end up in 2018 midterms or 2020 presidential election, and almost as uncertain about the fate of the ACA and AHCA.

      Agreed on the geopolitical risk – invading N Korea or some other country could cause a lot of noise in the global economy with its second order effects.

  • Midwestern Landlord

    I agree with you that given your natural tendency to be frugal and the size of your portfolio / reserves, even in a depression like downturn you will be fine. I didn’t have the discipline it takes to save large chunks of my income during my working years so I had to find another way with rental real estate. The one large downturn to retiring imo from a portfolio of financial assets (in today’s environment) is the relatively low reliable income that it derives via dividends, etc. It is not so much a big deal in your case because of your overall situation. But others have a bit of a tighter situation when they have no other outside income and less saved that $1.5MM.

    I also agree that we are in a situation now where the bull market has been in place for several years fueled by low interest rates and portfolios are artificially high. I like having the reliable monthly rental income in place that is recession proof. Granted it does take some management / work. In my case around 8 hours a week just like yourself with the blog.

    • I imagine your income stream from rentals will be more constant than a % withdrawal from a portfolio assuming your properties are scattered about beyond one city or state. I like the cash buffer in my case – helps me sleep at night since it’s a matter of WHEN, not IF, the next big market correction happens.

  • Greetings! Great post as always – really enjoy reading up on your financial advice and how you made retiring early work so well for you.

    Since you mentioned traveling hacks, I was wondering if you ever considered Housesitting as a means for travel and income. It is a low-maintenance job and has the benefit of free accommodation. Housesitters have the chance to experience a different lifestyle in a new location. I recommend visiting a website like Housesitter.com to view opportunities for you! You get a lot of the same benefits of travelling without the cost!

    • I’ve considered it but never pursued it much. I don’t want to have to do much work or be stuck in a less than desirable location when on vacation, so enjoy the flexibility that comes with paying for lodging. We’re slightly tied down to a schedule still, so we don’t have complete freedom over when and where we go due to kids and their school schedule.

  • This is such an inspiring post! I’m thrilled to hear that things are going so well for your family. I’m looking forward to the time when we can downsize to one car. To me, that means a great reduction in stress since we’ll both be home. Congratulations on four strong years of early retirement, and enjoy your time in Europe!

    • It took a LOT to convince us that we didn’t really need 2 cars (after owning 2 cars for basically our entire adult lives!). Mrs. Root of Good worked from home the six months prior to her retirement, and that was our “trial run” more or less, where we figured out the only reason we needed a second car was for her to get to work (she still had to go in 1-2x per month those last 6 months). Since I was the Chief Car Maintainer, dropping to 1 car is wonderful.

  • Very interesting read and thanks for sharing. I am very impressed, I hope one day I can retire early too. Thanks for sharing everything and I hope it continues to provide you with the lifestyle you desire. Cheers

  • Nice Recap! Sounds like you guys are doing very well. Its amazing how earning a little side income can help with the overall success of ones early retirement plan.

  • Thanks Justin for this post and keeping it real with such great detail about your retirement lifestyle!

    The parts of your writing in this post which were most valuable to me were:
    – As a parent, I thoroughly enjoyed reading your analysis of best and worst cases of financial aid. Being poor on paper is great, isn’t it?
    – The shell game of shuffling money around to get more money into Roth accounts while drawing down from the taxable.

    A Roth conversion ladder is great and all, but you drive home the key takeaway for anyone in early retirement or planning to do so — flexibility. And the 72(t) to me really is a devil’s contract that is really only for a very small minority.

    Apologies again for not getting to meet up with you when I lived in Raleigh for all of 2 weeks. I get the added minor complexity for my 2017 taxes (another state to file). The upside is I’ve already learned more about taxes and how different states approach them differently.

  • As always, examples like this our inspiring to anyone who wants to live a more flexible, enjoyable life without sacrificing 40+ hours / wk in an office. Are the dividends you are living off of coming from a taxable account? Or do you just withdraw “original contributions” from a Roth as a way of doing this?

    The one big threat I do see long-term to early retirement stability, which you are seeing playing out with ACA repeal, is political instability in the USA. It used to be an unspoken rule that once an entitlement was created it usually was never ended (but rather adjusted over time). If we can no longer count on any continuity in policy as administrations and congressional majorities change, then that adds considerable risk to early retirement as well as many other areas of life. We probably all take for granted that we will eventually be covered by Medicare at 65, but I’d say that should no longer be considered a foregone conclusion. Paying market prices for health care at 65+ years of age, even with some subsidies, would mean many thousands of additional funds you would need to save (assuming you could obtain a policy if underwriting becomes a facet of health insurance life once again). Anyways, I don’t want to sound too gloomy as it’s also possible we could end up with Medicare for all one day if there’s a strong enough backlash, but in the present that doesn’t seem a possibility given gerrymandering, electoral college, etc. The thing I appreciated most about ACA was that it took quite a bit of uncertainty out of the picture from a health-perspective and de-coupled my decision-making from consideration of current employer benefits. It’s not perfect but my assumption was that it would be improved over time, not sabotaged for the purpose of scoring political points.

    • The dividends I’m actually spending (the $8-10,000 per year) are from our taxable accounts. I could get to the Roth dividends pretty easily by withdrawing the original contributions, but I’d rather leave that $ in the Roth space until I actually need it.

      I’m with you on the big risk of entitlement programs being modified or going away. SS and Medicare are the two big ones that we assume will be mostly intact by the time we hit retirement age (which might be designated as a few years later than what it is set at today). You are right, losing Medicare would be a big setback for all of us. I guess there’s always emigrating to a sensible country somewhere else where medical care simply doesn’t cost as much. Either buy insurance in the new country or pay cash out of pocket since costs are more reasonable than here in the US.

      • It’s not that easy to move to other countries permanently, and their laws are constantly changing. Thailand used to be easy, but they have really cracked down on visa overstays. As long as you have an income stream somewhere will be open to you, but the level of medical care may not be what you are used to or comfortable with, and you may have to move again as laws change unless you have citizenship in another country.

        • Seems like people figure out a way to end up where they want to be. I’m happy here for now. If conditions change, maybe somewhere else will bring more happiness and I’ll figure out how to make that somewhere else happen. There are at least a handful of countries we could probably move to and get permanent residency without too much of a fuss (if you don’t count reams of photocopies as fuss!).

  • Jean Rodriguez

    Congratulations! You guys are awesome. Thank you for sharing your success story.

    I do have one question, have you considered living abroad? One thing I discuss with my wife is possibly living abroad, like Dominican Republic (since we are both from there). The currency exchange from Dollars to Pesos is great and could definitely stretch your retirement funds.

    There was an article I read in which they projected an estimated cost of $1,000 per month. This would include all utilities, rent and some outside expenses.

    Thoughts?

    • I’ve thought about it, and even wrote a whole article about it! In a nutshell, I think we might enjoy the lifestyle somewhere abroad but the lack of high quality free public education for our kids means we’ll likely have to pay for private school, tutors, or deal with homeschooling. Any cost savings from lower COL abroad would be sucked up by tuition and fees. I’m not sure we could swing the core living expenses on $1,000/month and live like we do here, but if we moved into a smaller house and still lived pretty simply it might be possible (other than tuition and fees).

      • You are comfortable with medical care in other countries, but not the schools? That’s interesting- you seem highly educated and capable of supplementing public schools with homeschooling as necessary, should you desire to. It’s a lot harder to manage your own cancer treatment!

        • Educating 3 kids would become a full time job. Possibly a full time job for two people. And I’m really not that smart when it comes to pedagogy for advanced topics beyond about middle school (or maybe I’m smart enough to realize I’m not smart enough to be more effective at teaching this stuff 😉 ). The education thing takes up a ton of time and we have goldmines right here at home (for free, or $600/yr if you count the share of property tax).

          In contrast, we spend about 4 hours per year consuming healthcare right now (a physical, 0-1 sick visit, and a pair of dentist visits). Should cancer arise, we would be hands on but obviously defer to medical professionals (here or abroad). I don’t think “foreign country” means lower standard or quality of care necessarily.

  • Ironically, the market is driving me crazy. Yeah we’re all making a killing and it’s hard to see the end of that, but we know the end is around the corner…or is it? Every time I forget to balance my portfolio (due to pure laziness) to reflect more bond funds – equities go thru the roof. Procrastination is earning me 18%!

    I’ve read predictions that the market will top at 23k – 25k, using a “melt up” paradigm that claims that prior to every major downturn there is an extended irrational meltup period and supposedly we’re melting up right now. Sounds good but then you hear Buffet is going long on tech and oil and you have to wonder what the heck is he thinking this deep in a bull market??

    Where’s my damn eight ball??

  • Justin,
    How do you calculate your future SS benefits? I know that I will have a lot of zeroes calculated into my “35 years” of Social Security earnings and therefore I’m unable to get a handle on what will happen to my benefit. Got any suggestions?

  • Congratulations! Sounds like y’all have done something right, for sure.

    We’re kind of in the same boat, but not as well off as y’all. My wife retired in 2009 and I retired in 2014, with both of us at 54.

    We have my monthly pension, and we draw from our investments each month. Despite the draws, our portfolio continues to grow. Sure do love money making money.

    All the best in your adventures!

  • We’ve now been FIRE 19 months and our initial misgivings which were similar to yours have largely subsided. As with you, our family “book value” (net worth) has actually increased during FIRE and most all of that is due to the rising stock market and rising Berkshire Hathaway. My side gig (tour guide) isn’t nearly as lucrative as yours yet it provides exactly what I was looking for – fun – with a little income thrown in. FIRE has also allowed me to focus on life quality a lot more so we eat better and do a lot more stuff in nature. I focus a lot of brain power on optimization of resources vs having a high QOL – I find that challenge to be a huge intellectual turn-on. My biggest looming challenge is kid #2 going to college (we did the dual HS/Community college scholarship this year)… nevertheless, when colleges see assets like stocks they come grabbing. Any earned income I get I put into a traditional IRA to both offset college grab and to lower income… wake me in 3 – 3.5 yrs

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