Finances

Life Goals: Early Retirement

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Disclaimer: this is by no means financial advice and I am not a financial adviser. The following is just my plan and I cant say if it will work for sure or not.

There is a concept within the debt free community called FI/RE or Financial Independence/ Retire Early and it is literally my life goal. Financial independence means the ability to do work that sparks your soul without having to worry about paying your bills. It doesn’t necessarily mean you retire early. It just affords you the opportunity to do other things without financial stress, ie you reach financial independence. Was there ever that job you wanted to do but it wouldn’t pay you enough to live?  If you’ve reached financial independence, you can take the job with the low pay or work part time and your monetary situation will still be fine. That is a path some people go. There is a blogger (Mr. Money Mustache) that chose to go this route. He quit his high paying job and now picks up part time jobs or does construction work to fill his time.

My end goal is to fully retire somewhere between age 52-55. It’s not that I hate my job. Or that I have a burning desire to be my own boss or start a business. I don’t want to work at all. I don’t think I’m lazy (although maybe I am a little). I’m not afraid to put in the work now to hit that end goal. What I really want is to wake up every morning and do whatever I want and not be concerned about going to work to make ends meet. Will I still work now and then? Possibly. I don’t want to be bored. But in this future I envision, I will spend more time outside, walking in the mountains, traveling, and probably volunteering at local animal shelters.

So how do I accomplish this goal? Measurable, attainable steps/goals along the way. Step 1 is continue paying off our non-mortgage debt. I have high hopes that will be done by August 2019. Step 2 is concurrent. In early 2016, I stopped contributing to my 401k to increase the amount I was paying to debt. At the time I felt okay with my decision because I have mandatory contributions to the state pension of 9.5%. Meaning that whether I want to or not, my retirement system is taking 9.5% of my paycheck before I ever get to see it. It sounds like a good thing, but it kind of sucks for reasons I don’t want to get into right now. Anyway! That means I haven’t contributed to my 401k in about 3 years so I have missed out on 3 years of compounding interest. Starting in 2019, I am planning on increasing my contribution to 5% which is equal to about $3,000 over the year.

Step 3 is to save up some money for my emergency fund. Since I was on the Dave Ramsey plan, I only have $1,000 in my savings account. I would like to get that account up to $10,000 which is around 3 months of livings expenses. Step 4 and step 5 again will happen at the same time, probably mid 2020. Step 4 is to increase the amount we’re paying towards the house. Paying off the house early is an important step because it reduces the amount of money we need during retirement. Hopefully the house will be paid off in 2027. I would be 35.

Step 5 is to increase my 401k amount to 10%. By 2020, that should make the contribution $7,700ish. When the house is paid off, I should be able to increase the amount I’m putting to retirement again, aka step 6. Ideally, I would max out my contribution so $18,000/year.  From age 35 – 52ish, we should also be able to save/invest half our income since, in theory, we wont have any other debt. And then at 52, it’s retiring time! The amount that you need for retirement varies, but 26 year old me thinks that I would be comfortable retiring with one million keeping in mind that current financial advice says people may need more than that.

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