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LONG post alert!! I started a discussion on the Retirement forum and became surprised that so many people are against early retirement. Although I did find a few that have also did early retirement and enjoying it most think they should be locked in a job until the traditional age. We moved to here on the Treasure Coast in 2010 from Palm Beach County to allow for our family of 5 to be financial independent and loving every minute of it. I have met a few people with similar experiences but wondering if others they are others here that moved to Treasure Coast for the cheaper cost of living to allow for retirement especially early retirement.
Here is some information about my family and how we got to early retirement
Through careful saving and planning, we managed to accumulate enough wealth to make us financially independent which allowed us to retire at age 37 and 34. When we retired we expected to have fun, but not this much fun! We currently live in Port St. Lucie, Florida with our three wonderful children.
My wife and I had regular jobs working roughly 9 to 5 each day and we saved most of our paychecks. When we first started working after college, collectively we made under $200,000 annually. When we quit working, our household income topped out around $185,000 annually. While working, we consistently pumped our savings into 401k’s, IRA’s, HSA’s, 529’s, and regular brokerage accounts. These investments grew enormously over roughly 12 years and made us financially independent today.
Numbers
Here are our numbers since working full time and saving for our retirement. The portfolio values below do not include home equity, just investments and cash. During these 12 years, we were also making extra payments on our mortgage and paid it off completely (we purchased our home in Port St. Lucie in 2010 so was very lucky to purchase a 4 bed 3 bath on a lake for only $120K unheard of now). Those extra principal payments are not counted in our portfolio but ditching the mortgage certainly enhanced our financial position in early retirement.
401k matches and profit sharing contributions are not included in salary. The reported salary does include annual bonuses we received.
HEALTH CARE
As also mentioned before we have a private health insurance plan with Affordable Care Act subsidies. Though the full price of the plan is $900 per month, we qualify for subsidies bringing the cost down to $130 per month for a plan with $0 deductibles and a $1,000 maximum out of pocket expense. That’s based on an AGI of $42,000 per year (our annual withdrawal from investment income). In addition to the $130 per month (or $1,560 per year) for health insurance premiums, we spend around $400 out of pocket for doctor’s visits.
We have three young kids and receive the Florida Healthy Kids insurance for only $15 per month. Our family doctor is in network, as are most of the local hospitals.
We are self insured for dental. Our dentist offers a $99 special for a cleaning, x-rays, and exam. Between the two of us, we visit the dentist five times per year for routine care. We budget another $500 per year (on average) of non-routine dental work (cavities, root canals, or other major procedures). The kids get free dental care as part of the Florida Healthy Kids insurance and our current dentist participates in that plan.
Overall, we have budgeted $3,000 per year for medical and dental expenses which seems ridiculously low for a family of five until you consider the extent of the subsidies we receive.
COLLEGE SAVINGS
We have a 529 plan for each of our children. Our kids will be able to attend college and somehow we will pay for it and we can remain early retired.
I see the best case scenario playing out like this:
$24,000 cost of attendance for 4 years – BEST CASE SCENARIO:
$4,000 – cut costs on room and board, misc. expenses (live at home with us?)
$6,500 – average need based grant (probably free money but maybe some loans)
$4,000 – merit based scholarships and grants
$6,000 – various jobs and internships
$3,500 – spending from our 529 accounts
If this plays out, we’ll have three years of spending at $3,500 per year times three students. Our total will be $31,500 in today’s dollars, and our kids might leave college with a small dose of those dangerous student loans. That’s about $10,000 less than we have in 529 accounts today, so we are well prepared if this scenario occurs.
But what if our kids end up being “average” and what if they can’t or won’t economize on housing and food?
$24,000 cost of attendance for 4 years – WORST CASE SCENARIO:
$6,500 – average need based grant (probably free money but maybe some loans)
$4,000 – various jobs and internships (they’re average; the earnings are lower than the optimistic scenario)
$13,500 – spending from our 529 accounts and investment portfolio
In this scenario, where our kids are very average, can’t economize on costs, get no merit based grants or scholarships and deliver pizzas or bus tables instead of engaging in paid activities related to their field of study, we are left with a $13,500 bill every year. That means we’ll be paying a combined $162,000 for three kids for four years of study. That figure exceeds our existing 529 balances by $119,000, so we’ll be digging deep into our investment portfolio to cover the shortfall. I have mentally set aside $200,000 in our portfolio to cover some variation of this worst case college funding scenario plus other big, lumpy one time kid expenses, so we’ll be okay financially.
Whether our kids excel academically and need very little parental financial assistance, or whether we end up paying for the majority of their college costs, we’ve got it covered in our early retirement financial plan.
Social Security
Wanted to share how early retirement affects Social Security. I came across this post which sums it up pretty good Early Retirement Social Security/. Pretty much it is important to know and calculate SS bend points, Average Indexed Monthly Earnings, Primary Insurance Amount to forecast SS income. For example someone earned only ~$350K during their lifetime you can look at that point from a Rate of Return perspective. A person earning $350K would pay $21,700 (or 6.2%) in social security taxes. At age 67, they would receive ~$9,000 in social security income. That’s a 41% Rate of Return! To be sure that doesn’t take into account the years you have to wait to get that return, but it’s still a really good deal for early retirees and aspiring early retirees.
If that same person lived to age 87, they would receive a total of $180K in social security income despite only paying that initial $21,700 in social security taxes.
Running out of money in early retirement
Spending all the money in our investment accounts would definitely qualify as an “early retirement failure”. This kind of failure is what some early retirement naysayers claim will happen if you quit working before age 65. But is it really possible to suffer this kind of catastrophic early retirement failure? NOPE
1. We only spend a tiny fraction of our total investment portfolio each year.
2. Dividends and Interest. (Relatively stable)
3. Availability of other income sources ( I am still up to date and plan keeping up to date with my programming skills and my wife is up to date with Accounting so we can always do temp gigs to fill the gap in income.
4. Flexibility With Annual Spending (Even though we have 50K budgeted for annual expenses we have some wiggle room with vacations, gifts, dining out, etc.
5. Social Security We are still three decades away from Social Security. Under the current SS rules, we will be entitled to payments that can fund two thirds of our retirement budget. Maybe Social Security will still exist when we become eligible, or maybe SS will be modified to our detriment. I’m guessing it will still exist in some form. We have not explicitly factored SS into our retirement budget, but knowing that there’s a good likelihood of receiving something 30 years from now provides an extra layer of financial security.
Early Retirement Boredom
Some people are not cut out to provide their own entertainment all day. Think of prisoners serving a life sentence. After decades of incarceration the inmates would have an extremely hard time adjusting to life outside the walls of their cell.
Maybe the office cubicle is the perfect environment for those who can not handle the freedom of choosing what to do all day.
Early Retirement with Kids
The biggest benefit of retiring early with kids is that you get to spend lots of quality time with your kids. You get to actually know and interact with them as other human beings seven days per week instead of only seeing them for a few hours each day during the work week. Working tends to cause stress and exhaustion, and that interferes with the ability to establish high quality deep relationships with your kids.
We save a lot of money on kid-related expenses while not working. The biggest savings come from being our own daycare and preschool. With monthly prices often exceeding $1,000 for one child, a family with multiple young children can easily spend $25,000 per year on childcare. As the kids get older, costs usually go down (if you can find a good free public school), but before- or after-school care and summertime care can still cost a small fortune.
Also being 2 hours from the Mouse and other attractions in Orlando we are able to get cheap Florida resident annual weekday passes and can make a quick trip any time of the week. There are lots of free activities during the weekdays that we are now able to take advantage of. Our local library walking distance from us offers story time for different age groups two or three times per week. The community center next door to the library offers two hours of free open play for kids up to age five twice per week. The community parks, hiking trails, and pools are also great free (or almost free) places to take young kids during the week. These places are like ghost towns when all the other parents are at work.
Yes I saw your posting in the Retirement forum and couldn't believe some of the responses ! Most based on Jealousy, my wife and I retired in 2011 and we moved here from Western NY . I was 51 turning 52 and she 50, came here with a NY State pension and moving here with low housing costs , taxes and COL allowed us to retire and be comfortable, not rich but comfortable. Never have had trouble finding things to do , plenty to do and see here. Kudos to you on accomplishing what you set out to do. Don't let others boo hoo your choices
I agree that it is a great deal of jealously. I myself am trying to reach your level of Financial Independence and retire early. I appreciate your information in your post and would appreciate any additional advice you could provide in how to attain financial independence and maintain it. Congrats on your early retirement!! Maybe you can start a FIRE club here on the Treasure Coast.
I think boredom with early retirement, lifestyle creep (not everyone wants to live on $42K a year), health care fears, and lack of financial discipline makes your story very rare. I think it's great though.
I wouldn't want to early retire at 37 though. I'd want financial independence to leave my soul-crushing high paying job so I can actually do the job I really want to do which has significant financial risks. I'd have boredom problems. I don't mind work. I mind what I'm doing now and want to try something else. The problem with trying something else is the huge pay cut you will have to take in moving to a totally different field with no experience.
The good situation the OP has created for he and his wife is all the time with their children and once the children are out of school, either the OP or his wife can return to the workforce should thye choose or need to. Kudos the them both.
I know different people are wired differently but I'm in my seventh year of retirement and not bored on day yet .
I agree that it is a great deal of jealously. I myself am trying to reach your level of Financial Independence and retire early. I appreciate your information in your post and would appreciate any additional advice you could provide in how to attain financial independence and maintain it. Congrats on your early retirement!! Maybe you can start a FIRE club here on the Treasure Coast.
Thank you. The key ingredient on being Financially Independent and Retiring Early is spending less than you earn. Therefore you will need to jot down all of your monthly expenses and income in excel or other tool and make adjustments where necessary. Once you know your annual expenses you will know the magic number you need in order to retire when you take into account the Trinity Rule of 4% safe withdrawal. In regards to investing I take the lazy approach and use a robo advisor and invest in index funds that track the S&P 500 index. They are low cost and give you returns that match the trend in the market as a whole.
You should keep working and stop planning and penny pinching for early retirement. Especially with 3 children involved.
Really? The original poster has a 1.4 Million Dollar portfolio and paid off home. Does not have childcare cost and assuming has dept free car(s). How much do you think they need each year being that they have the bulk of their fixed costs already covered?
Last edited by PSLCarPool; 04-16-2018 at 06:53 AM..
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