personal income Archives - Lazy Man and Money

If you are just starting this, I suggest you start at The Introduction – Part 0. Alternatively, you can jump to Our Early Retirement Plan: Where We Are Now (Part 1), Our Early Retirement Plan: My Personal Income (Part 2), Our Early Retirement Plan: My Wife’s Plan (Part 3), or Our Early Retirement Plan: Obstacles and Expenses (Part 4).

In the end, for us to succeed, we are going to have to continue to be motivated towards our goals, continue to learn about better ways to reach them, and act on the things that matter.

Part of the learning and motivation come from reading articles like the Money Magazine one that I highlighted in the beginning. Still others may come for friends and peers like My Dollar Plan’s escape from the rat race.

In part 2, I mentioned that retirement planners suggest that you can withdrawl 4% of your retirement nest egg each year and still maintain the principle. When I looked at our finances, we aren’t close to having the funds to live off of that. However, when you add my alternative income from “retirement lifesytle jobs”, an inflation-adjusted pension, two modest retirement nest eggs (and time to grow them), two investment properties, it may turn out to be a decent income. If we continue to practice our frugal lifestyle and catch a few breaks (me doing the child care while working – if possible, and getting cheap health care from the military), I think the plan is entirely possible. It’s easy for me to sit here and speculate, but what about a real world test? Glad you asked.

One of the most useful pieces of software is Bill Sholar’s FIRE Calc. I ran some rough numbers through there to see how we’d do. Looking at the publically available military charts it like my wife should have a military pension of around $50,000 in today’s dollars indexed for inflation. At the same time, my websites and businesses should be at least at $48,000 in annual income in 11 years. This is an extremely conservative estimate as I should make $40,000 this year – and I see a lot more growth on the horizon. Next we looked at what our expenses might be. Our rent, our biggest cost, is $24,000 this year. I suspect that we could easily get by on $50,000 given our frugal lifestyle. Just to build plenty of wiggle room, allow for some great vacations, or save some money for the potential children, I estimated that we’d need $80,000 a year. These numbers disregard any potential income from social security, our investment properties, or savings my wife might make until she retires. The calculator says that we could live until age 100 with around 11 million dollars. That might sound like a lot, but it is closer to $1.5 million in today’s dollars – still not chump change.

My hunch says early retirement is possible. The FireCalc tool seems to say it’s possible. It’s going to be something that I’ll have to look at every year, but at this point it looks like we are on track.

If you are just starting this, I suggest you start at The Introduction – Part 0. Alternatively, you can jump to Our Early Retirement Plan: Where We Are Now (Part 1), Our Early Retirement Plan: My Personal Income (Part 2), or Our Early Retirement Plan: My Wife’s Plan (Part 3).

In part 2, I explained how I can live a retired lifestyle even while I’m technically bringing in an income. In part 3, I detailed how my wife could retire early. Today, I’d like to go through some obstacles we have in attempting to retire early.

Children and Rising Expenses – Right now we are DINKs (double income no kids). We hope to have children some day. Children aren’t cheap, and there’s a whole slew of costs with them that I haven’t even begun to explore. I know that day care is expensive. I hope to be a stay-at-home dad at least part of the time. That would reduce some expenses from the outset. Additionally, there are some options available to the military for day care.
Education – With the aforementioned children, there’s going to be an education expense. This is one area where I don’t necessarily believe in frugality. I want to have enough money saved so that if our children can get into a great school, money won’t be a problem. My wife is of the opinion that the child should earn their way through college so they don’t become Lazy like dad. I think we can find a middle ground with this. Again, this is speculation since there are no kids at this point.
Health Care – This is one of the biggest reasons why people can’t retire early. Fortunately, the military has a great plan that we’ll be eligible for called TriCare. We haven’t looked at the costs of this in detail, but I think it’ll be a cost-effective solution for us.
Expensive Housing – Whether we choose to stay around San Francisco or move back to Boston, housing is not going to be cheap. This is going to be one of our biggest expenses. Though we could look to live in an area of lower cost of living, I’m partial to the two areas I mentioned because I know I can surround with smart people there. Besides the opportunities that brings, it would be good for potential children to also be surrounded by the same smart people.
Other Uncertainties – I’m sure there are going to be other obstacles. Life pops up with surprises when you least expect it (of course they wouldn’t be surprises if you expected them).

These are some things that are hard to account for at this stage. Thus any plan that we make has to add quite a bit of padding