Episode Summary:
In this week’s episode, Maggie shares how her family of 5 is retiring at her age of 41 and her husband at the age of 43. She shares how they financially got to the point of retiring early and how they plan to finance the next 40+ years of their lives, and her feelings as she gets closer to taking the plunge into early retirement.
Episode Notes:
Maggie and Greg are leaving two high-paying jobs at the peak of their earning potential. They have been financially and mentally preparing for this for years, though they weren’t sure when they would take the plunge. Yes, they can work again if they have to, and it comes down to it, but they do not plan on doing anything “for the money” in their future. Maggie digs into how they prepared to retire early, the financial aspects of how they will fund their retirement and their feelings as they get closer to this next adventure.
How they financially prepared to retire early:
- They’ve always been somewhat naturally frugal, though they still splurge on many things.
- They’ve lived below their means and had large salaries. So that mix made it reasonably easy.
- They were fairly late to the investing game. Maggie didn’t start investing until 2016, above five years ago, when she was 36.
- Maggie has participated in her company’s DCP or deferred compensation plan.
- It’s the combo of saving a lot and getting their living costs reasonably low.
- They have avoided lifestyle inflation as their salaries started getting higher.
Their money plan during retirement:
- This is all a mix of what they will make and what they will spend.
- As a reminder, their cost of living is low. We just did an episode a couple of weeks ago on what it costs our families to live in a year.
- They will fund their retirement through a mix of deferred compensation plans, rental property passive income, and investment income. They will withdraw investment income as a last resource and will only withdraw the amounts they need as they need it, so it protects them from ever having to take out large sums of money if the market is in decline.
- They are also hoping we spend less in retirement. They will save on taxes, they plan to do more travel hacking and finding deals, and just live a simpler life in many ways.
- They can also tap into their 401ks through a conversion ladder as a complete backup, but they do not plan to do this unless there is an extreme emergency. This approach also requires planning five years in advance.
Update on how Maggie is feeling:
- She is starting to realize her mindset is shifting around money. She’s never felt any scarcity around money in a long time and instead has felt abundance. Right now, her paycheck is almost nothing due to deferred compensation, and they are getting closer to realizing what it feels like to spend money when you have very little coming in.
- She is telling more and more people, and that’s coming with its own set of feelings.
- This is an adventure, and while she’s scared of many things, she’s lately more afraid of what life will look like if they don’t make this change.
- Mike reminds Maggie that she’s better on herself, and he has confidence in that bet!
Top 3 Takeaways:
- Early retirement is possible if you financially prepare in advance. It’s not about how much you make; it’s about the gap between what you make and spend.
- They will make some adjustments to how we spend money and their lifestyle, even if it’s just temporary, while they get their feet wet and see how things are going.
- This is a brand new set of feelings and emotions, and they are all working through them daily. They talk every day about how they feel and what emotions are coming up.
Show References:
- friends on FIRE episode #132 | Full-year expense review with our spouses
- friends on FIRE episode #108 | Mid-year expense review with our spouses
- friends on FIRE episode #096 | Freedom is the ultimate financial goal, not retirement