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Journey to Financial Freedom

· Neo : What are you trying to tell me? ...

· Morpheus : This is your last chance. ...

· Morpheus : What is real? ...

· Morpheus : Neo, sooner or later you're going to realize just as I did that there's a difference between knowing the path and walking the path.

· Morpheus : You have to let it all go, Neo.

The Matrix, 1999

What is this Financial Freedom Retire Early (FIRE) movement about? What it means to me does not have to be the same for you. We can agree on the broad definition and depart on our own course and choose our own FI path.

To us FIRE means having the choice to walk away from our primary careers and follow a different career altogether or a scaled down version of our primary careers.

My path to FIRE started during one of my deployments to the Middle East when I came across the Retireby40 blog. Several other blogs helped sharpen my understanding of what FIRE is about and how to achieve it, from MustardSeedMoney to OurNextLife, or even the Frugalwoods. If you are interested in learning about the FIRE movement, recommend you read several of those blogs, listen to podcasts to get an idea and form your own conclusion. With anything in life, figure out what works for you, apply it, and hope it works for your good.

Chris Hogan, (a member of Dave Ramsey’s team) likes to say that retirement is not an age, but a financial number. FIRE is all about the numbers, the numbers you need to be free. Your number is personal, different from the next person. Your number is based on the quality of life you want to live. You could live a very simple and frugal life like the Frugalwoods, in which case you probably can leave off of less than $30,000 a year, or something more robust, referred to as FAT FIRE, or maybe something like the lifestyle of OurNextLife. For us it is probably closer to FAT FIRE. We LOVE to travel. The wifey loves to eat out. I love the beach, so our FIRE lifestyle needs to include sufficient funds to satisfy our need to travel, eat out, and occasionally enjoy heading out to the beach.

Our FIRE age is set somewhere between 53 and 55.

But these are conversative numbers that I hope to speed up based on a higher savings rate, paying extra on the mortgage, and hoping the stock market hits a return rate that exceeds 7% annually. This is where we are as of February 2021:

Ages: I’m 47, & Mrs. Chocolate is 42.

Roth IRAs: close to 400k

some would say that having 1.4 or more in retirement is enough to be at FIRE, but we want are looking at it differently. We don’t want to touch our 401k amounts until age 59½ and we need to have the Roths cover our needs for 10 or more years.

Mortgage on primary residence: 273k. We recently refinanced and will write about our experience shortly.

Our FI goal is to pay off the mortgage completely. Some have a different take on paying off a mortgage and I plan to write about why we’re choosing this path.

Our RE goal is to have enough in the Roth, rental investments and my military retirement pay to cover our FAT FIRE lifestyle. I project that we need around 540k in our Roth and have the house paid off or close to being paid off where we can just whack it with savings, investments or a combination of the two.

If we get to 50 and beyond and we are close, we could do a couple of things, (1) downsize in home, so that we can live in a more reasonable house, pay cash for it, and put the money towards buying rental property or increasing dividend mutual fund, (2) semi-retire and get a part-time job to meet the shortfall, or (3) continue working for an additional year or more to get to the goals that we have set.

Old assumption pre FIRE revelation-October 2016:

Continue to max out 401ks and IRAs by investing 47,000 in retirement assets for five years and then reduce it to just 24,000 per year for the next five years. Total invested on retirement: 355,000, retire by the age of 59½.

New projection after finding FIRE January 2017:

Invest 48,000 in retirement assets by maxing out 401k and IRAs for one year and then reduce it to just 24,000 per year for the next eight years. Total invested in retirement: 240,000, all other income not used to live and enjoy life will go towards paying down debt or investing in other goals.

New goals as of January 2020:

Stop investing in 401ks;

Continue to max out IRAs;

All extra cash goes towards paying the house off.

I’m still working on a realistic budget, but this is what we think we need post FIRE:

Living expenses: 30,000 (2,500 per month) Likely cost of living budget

Vacations: 15,000 (5 trips during the year ( 3 major & 3 minor trips: (major 4,000 each: anniversary, mid-year, summer family vacation) (minor $1,000 each: three-four-day weekend trips)

Housing taxes, insurance and related upkeep: 10,000

MISC expenses: 15,000 (for transportation, clothing, miscellaneous and other activities)

Taxes to generate income needed: 20,000

Total amount required: 90,000

This amount is definitely FAT FIRE. I think a majority of FIRE folks try to keep it under $60,000 per year, probably less. We love to travel. Despite the projected 90k above, I’ve always planned on between 100k and 120k as a secure goal.

More numbers:

Is the goal of retirement at age 53 a pipe dream, or is it realistic? Let’s look at the numbers. I’m really shooting for 51 if I can lower my expenses and lower the projected retirement income from 120k to just $100,000. But for now I’ll project at 53 and I can adjust once I get three years out. At the end of the day, you really want to analyze and reconsider your assumptions and desires, as you get closer to that end goal.

Six years from now, when I reach age 53 I want to be:

(1) completely debt free including the primary home (or at least have a substantial amount paid off, perhaps a mortgage of less than $50,000 with a goal to pay it off at retirement);

(2) have at least 1.5 million in 401k retirement (given the fact that I will not take any money out for a minimum of 6.5 years to a maximum of 8 plus years, and I have a pension that will provide between 40 to 60 percent of the income I’ll need during retirement);

(3) have enough passive income (rental property and dividend mutual funds) to generate $25-35,000;

(4) pension income anywhere between $50,000-60,000; and

In total, I’m projecting an income of $100,000 in early retirement and 120,000+ during full retirement, after age 59½ (this does not rely on any income that may come about from a part-time job of any kind).

What happens if we hit the lottery and can get there sooner than 53? We would definitely retire sooner. As of today, we’ve come up with 100k as a golden number for our retirement budget, but there is no guarantee that this number is what we will need. Because of being in the military and having had to move every two years for the past 10 years, it is hard to predict our expenses because we have lived in several different states and in several different types of housing, from a five-bedroom house to a one bedroom apartment during that timespan. Realistically, it safer to be conservative and plan on having more money to face off any challenges. Moreover, you can always rent a nicer place when you go on vacation, drive a nicer car, or give more money to charity (likely a combination of all three) if it turns out you have more than what you need.

So the projected 100k is the amount I think will make my wife feel save and secure to meet any challenges during early retirement. But more importantly, having absolutely no debt except living expenses, makes any amount above $50,000 a huge windfall.


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