Summertime – a time for half-baked family trips and fighting kids. I’ve certainly heard that (title) question enough from the back seat. Might as well ask it myself…
We’ve been working hard towards Financial Independence / Retire Early (FIRE) for a long time. Coming up on the goal after these years, are we there?
It’s a split decision.
I think we’ve reached FI and ready for RE. My wife thinks we have more to go. I think she’s crazy; she thinks I’m nuts.
We’re probably both right.
A few years ago, we set the goal of $2.5M of investment assets for FIRE. This would produce roughly $100,000 in spending capacity annually. We thought we’d spend $50,000 each year, excluding taxes & charity. We would have roughly double our core spending amount – a method/goal I adopted from my original favorite FI blog: Brave New Life. Over time, our asset growth should easily outpace spending.
Are we FI Now?
I’d say yes. About a year earlier than even hoped for. But there’s a mess of fine print.
The good news: As of last net worth update, we have almost $2.5M of investment assets.
The bad news: Commercial Real Estate Properties 5-12 (that is my creative, net worth update parlance) are under-construction projects therefore aren’t producing income yet. Those account for $900,000 of our investment assets. Using the 4% rule and excluding these assets, that reduces $36,000 of spending power (leaving us at $64,000).
Oh yeah, and spending is up too (vs our goal). For the last 2 years we came in 30% above on the spending mark at $65,000. Plenty of fat is available to trim from normal categories. And of course, there were extraordinary items included. On the other hand, we excluded relocation/house costs, and haven’t bought a car in a while. Probably each year will have it’s “one-time” items. So let’s call $65,000 our (lazy) permanent spending level.
So basically our productive investment assets at 4% withdrawal would support our spending level. We’re financially independent in the most aggressive sense. No champagne laying around, but I popped a cold beer to celebrate / finish writing.
I’m good with this – I’d say I’ve reached FI. Our non-productive real estate assets will start producing something in the future – in just a couple of months for a few of them. I also believe we’ll continue making some money after retiring. My wife will probably keep her part time work because she likes feeling productive. I’ll probably consult on some things once I retire. Also, I’ll probably build a house or two to see if I can. I’d imagine I’ll make some money from that (even if nothing better than an hourly rate).
But what about the second half of “FI-RE”…the Retired Early portion?
Marital Harmony and the breakup of FI-RE
Are we ready as a family for me to retire now? No.
Honestly, a lot of it has to do with not having a unanimous vote.
My wife is awesome, sharp, and balanced. Cute too. But she’s uncomfortable with the whole “Financial Independence; Retire Early (FIRE)” topic. She’s apprehensive of being different and doesn’t like taking risks. Is frugal but isn’t really interested in going deep in personal finance…she thinks it’s a little close to the “love of money.” Always errs on the conservative side – it’s more conservative to keep your day job. Not a perfectly matching makeup for an early retirement candidate.
She’s patient and trusts me, and only for that is open to the concept. We’ve talked about it ad nauseam for her. She’s taking a pretty big leap with this FIRE thing/plan. So I need to stick to the spirit of the agreement for her sake. We were aiming to have assets that create double our ongoing spending, and set aside $$ for one-time costs.
In that sense, we haven’t met our goal.
So while I’ll now consider that we are financially independent, I won’t actively pursue an early retirement until we hit a newly adjusted asset/income target. If I got fired or something, conversation is back on. This (barely) gets my wife and I back on the same page, which is very important. If our real goal is a happier & more fulfilling life…probably need a stable marriage.
So back to the calculator…what’s my fate?
We’ll adjust our spending up $10,000 to account for some charitable giving, medical, or unexpected recurring costs…$75,000. A big give by me.
Doubling this gives $150,000 annual income. This should more than account for taxes, miscalculations, and an overarching safety factor. We’ll do our best to minimize these and just have our savings grow each year.
Using the 4% rule, ($150,000 / 4%) leads to base assets of $3,750,000.
We decided to also save $250,000 for the boys’ college and a couple of family cars over the years. Maybe even a house addition…although the math starts getting pretty fuzzy. The number probably had more to do with making our goal an easy & round number.
That resets the goal at $4,000,000.
This new goal is exhausting for me to write. I kind of want to cry. I was running as hard as I could for the finish line, and it was moved at the last minute. And somehow, I’m the one who moved it.
So here’s how I’m coping. I don’t hate my job; I actually like it a good bit. I don’t think I want to be doing exactly this in 5 years, but certainly another year is fine. With a little luck, it won’t be too much longer than a year.
With the real estate world still humming, I’m generating new assets quicker than I ever imagined. Seems to be about $250k per quarter. And in a few quarters, we’ll have some real cash flow from a bulk of currently-under-construction projects. It won’t be bad to make sure the proforma cash flows bear out to expectations. Maybe even sell/recapitalize a few along the way.
A few revalued assets + a few new construction positions, and I might be at the $4M number before too long. Might still make our summer 2017 original goal.
And a good reminder for me to quit trying to make it a race in the first place. Either I’m happy or not – meeting a goal isn’t going to provide lasting enjoyment. Make sure my priorities are set, independent of situation. Appreciate life regardless; be content with the blessings I have.