goals

Progress and Uncertainty on the Road to Early Retirement // Mid-Year Check-In

happy wednesday, friends. we’d like to take a moment before diving into today’s post to tell you how much we appreciate you. we love all the thoughtful comments folks have been leaving lately (please join in if you haven’t!), and it motivates us big time to keep writing content. work is crazy for both of us right now (don’t clients know it’s summer?!), and it would be easy to let the stress get us down. but having you here reading and commenting brings major joy to us that makes the stress easier to bear. thank you. :-)

and one more aside. after writing this post, and the paragraph above, this happened:

Plutus_Awards_Finalistswe had to re-read it about ten times before it sunk in. “is that us??? is there another ‘our next life’?” what an incredible surprise. the list of finalists is a who’s who of finance bloggers, and we can’t believe we get to be in that company. wow. sincere thanks if you nominated us!

now onto a topic that has had a lot of us freaked out lately — the state of our investments. or, rather, how we’re doing on our early retirement savings journey, which those investments are a reflection of. we monitor things almost daily, but since we don’t share numbers here, there’s not always a lot to say about it. but the recent (ongoing?) market correction has given us plenty to say!

the back story

we have had a vague notion for quite a while now that we didn’t want to “work forever.” and we generally had an attitude toward saving money (at least after we got out of debt about a decade ago), which we put to good use buying our first condo, our current “retirement home,” and our rental property. but beyond buying property, we didn’t have a lot of direction to our savings. we certainly didn’t have a strategy. when we moved to the mountains almost four years ago, we started calling what we were doing the “ten year plan,” even though “plan” is way overstating things. it was more like a ten year notion. but we did do some things that set us up well, namely buying way less house than the banks would say we could “afford.” we still ended up in a house that’s bigger than we need, though in a very normal neighborhood. mountain towns near ski resorts are full of fancy neighborhoods with expensive hoa’s, very few full-time residents, and a snooty vibe that we wanted no part of. we wanted to know our neighbors and not pay the $100K+ premium just for living by a golf course. but mainly, as we were both telecommuting to jobs on the opposite side of the country, and felt a bit expendable, we wanted to make sure that we could comfortably cover the mortgage and all of our other expenses on one income if one of us should get laid off. we saw this as an entirely practical decision, and weren’t even thinking of early retirement when we set our house budget.

but not long after we moved in, things started to click for us. we quickly figured out that we could pay off the house well ahead of the 15-year mortgage schedule, and set a goal of 10 years. then we gradually started to come across more detailed information on early retirement, including our favorite book on the subject and of course the ubiquitously “badass” mr. money mustache. almost two years ago, we formulated an actual plan to reach early retirement, and like so many others before us, realized we could get there faster than we’d thought. instead of eight years remaining in the ten year plan, we realized it was more like five or six. and that would include having the house paid off, and having enough savings in taxable investments and 401(k)s to sustain us, based loosely on the four percent rule (though not exactly, given how out of balance our investments are, in favor of tax-deferred accounts). at this point, we think our ten year plan will really only have taken six years to achieve, with the house paid off in just over six years. that is, if things go to plan.

big picture progress

looking at things big picture, we’re astonished at how far we’ve come in a short time, aided in large part by jobs that overpay us (though when we’re stressed out like now, we feel like we earn every penny). though we think early retirement is achievable for a lot of folks, we’d never say that having a high salary doesn’t help. for sure it does. we feel lucky every day to be in this position. since we bought the house four years ago, our net worth has tripled, and the year-over-year gains are pretty big, owing to us getting serious about saving and about paying off the house quickly (we include home equity in these calculations, to show progress), as well as growth in the markets since 2009.

we talked in this post about how a large percentage of our income comes at the end of the year, making it impossible to do precise planning or projections on what we’ll be able to save in a year’s time. we make the best of it by planning for what we’ll put away each month, and then agree that we’ll determine at year’s end how to divide our bonuses among taxable investments and mortgage payoff. while the uncertainty of not being able to project out our savings for the year is frustrating, it’s more than offset by the awesomeness of high percentage bonuses. if you can train yourself not to budget for them, they are an incredible way to save quickly and avoid lifestyle inflation, because you get used to living on just what you earn in your regular paychecks, not your total income. of course, over time, we’ve gotten used to living on way less than that, even.

even without that sense of certainty, we still map out targets each year for where we want our taxable investments to be by year’s end, and where we want the mortgage balance to be. and we’ve hit our targets every year. we even got within a few thousand dollars of our targets last year, despite putting a large down payment on our rental property, which took a bite out of our taxable accounts. we came into 2015 feeling good.

where we are now

watching our balances over the past few years, we’ve been chugging along, seeing our numbers generally get bigger, and liking our progress toward the big goal. at the start of this year, we set december 2017 as our official fire date, for reasons not having to do with money, and decided to just make the finances work to meet that date. that meant getting even more aggressive with our year-end goals for the next three years, to levels that we knew would require real belt-tightening.

and the good news is we’ve been hitting all of our milestones this year — paying ourselves first from every paycheck, and prepaying the mortgage on schedule. between our 401(k)s, our mortgage principle payments on our home and rental, and our taxable investments, we save more each quarter than i earned annually in my first job out of college. it’s crazy to think about. (and it feels more than a little awesome. not gonna lie. no #humblebrag here.) of course we’re still in the dark about what our year-end bonuses will be like (they are hugely variable), but we were feeling like we could at least get within a stone’s throw of our aggressive targets, and make up any deficit next year.

and then the market correction happened.Β of course we know, rationally, that a correction isn’t a bad thing for us, and that it means we now have the opportunity to buy more index fund shares at a reduced price. but there’s no sugarcoating the feeling of losing a huge chunk of our progress. at one point last week, we were down almost as much as we’d invested in all of 2015. as of yesterday morning, before the latest plunge, we’d basically lost all of our progress since mid-may, about three-and-a-half months’ worth, almost enough to fund a full year of retirement, and it’s certainly much worse now. (i haven’t had the stomach to look today, not like it would do any good.) if you’d told me, right out of college, that i could lose an amount equal to my entire annual salary at that point, or more, in the blink of an eye, i’d have run away crying, and shunned the markets forever. yes, we know we haven’t actually “lost” any money, since we’ve sold exactly nothing, and placed our regular purchases right on schedule. but still. losing ground on something you want so badly and are working so hard for feels lousy. no way around that.

so what now?

we have no idea what the markets are going to do, and we have no idea what our bonuses will look like. all we can do is keep on keeping on. we’ll keep buying our vanguard shares twice each month, putting a little into cash accounts with every paycheck, letting our invisible 401(k) investments happen as scheduled, and prepaying our home’s mortgage. and we’ll practice as much zen detachment as we can muster, knowing that we’re doing what we need to be doing, and can’t control the rest. there’s a seriously good chance at this point that we won’t hit our targets for this year, and we just have to be okay with that. we’re committed to quitting at the end of 2017, no matter what, and if that means that our accounts are underfunded, and we have to freelance for a few years, then we’ll do that. and we’ll still feel incredibly fortunate every day to have that opportunity.

how are you handling the recent market rollercoaster? are you re-evaluating any of your goals or timelines? or are you practicing the most incredible discipline and not checking your balances? (you’re our hero if that last one applies!) please share!

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45 replies »

  1. Congratulations on the award nomination!! You deserve it! We love your blog.

    If only we didn’t use Mint regularly, we wouldn’t see our retirement balances! Since the correction, our accounts recovered a little more than half what we lost, so I feel good about that. Beyond 401k plans, we’ll start diverting our savings into rental properties beginning next year so that we have a couple of income streams later in life. Worst case? Our house is paid for so we’ll always have a place to call home.

  2. Market roller coasters are much easier to take for myself, as I’m still about 10 years away from FI. I definitely suggest reading the latest posts by Jim Collins and Living a FI for anyone stressing about it. I’m definitely still checking my balances. As Mr. GCC would say, exposure therapy makes these types of rides non-events. The ups and downs never really had any emotional impact on me, I guess I should consider myself lucky.

    I’m not changing any of my goals which is basically “invest everything over what I spend, no excuses”. Can’t believe you guys are just over 2 years away! That’s awesome! Keep it up :)

    • All true! And we know all that stuff rationally. The dips just mean more now that we’re closer, namely that we will miss our targets. But we still have time to make it up, and know we can figure it out either way! Even if we don’t hit our ultimate number goal, we’ll be fine. :-)

  3. I haven’t been paying much attention to the markets the past couple weeks, mostly since I’ve been really busy with work. I did sell one stock that I felt had relatively limited upside to add more shares of another I thought had been unfairly beaten down with huge upside. Hopefully it pays off. Besides that, I wish we had more spare cash laying around to invest, but we recently kicked off another real estate project that ate into our cash reserves.

    • Funny — being busy at work is actually a good thing in this instance! No good can come from looking at balances right now. And, if Mr. ONL is to be believed, things will stagnate for a while now, meaning we’ll all be able to buy shares at a discount for a while. We’ll see…

  4. The roller coaster is only scary if you jump off. Though I’m certainly feeling the drop in my stomach. This month was hard. I invested more than normal and barely finished up for the month. Ahh the joys of having so little invested I can nearly control whether I’m up.

    I have a near and dear goal that I’d LOVE to hit by next month and it sucks that I’m going to have to rely on the market to get there. Unless the market wants to rally and I can surf it in with a smile on my face. :D iwanttohitmygoalsobad

    • Yeah, that is the downside of all the upside of the market — being a bit powerless over where things end up. But I hope you hit your big goal! At least you can sleep easy knowing you have the investments, and they’ll pay off at some point, even if not in the short term.

  5. Regarding the markets and investments, I like to think of it this way. The ultimate goal is to retire when the markets are down, not up. This means that over the first few years of early retirement, which are THE most important years in an early retiree’s life, the markets will have a greater likelihood of realizing stable and consistent growth – just when we need the market to be stable as we get used to our new lifestyles. Imagine if you had retired this year, then the correction hit (and continues to hit). For both of our FI date plans, I think having the correction hit in 2015 couldn’t have been timed any BETTER. Better this year than next.

    Also, I always remind myself that we’ve experienced several years of substantial growth in the stock market without a significant dip. We’ve been able to accumulate a good amount of wealth over the last 4 or 5 years nearly risk free. It’s been great, but as always, BALANCE needs to return. In fact, we *want* balance to return. It means the other shoe probably isn’t going to fall right as we’re easing our way into early retirement, which would be the absolute worst time for all this to happen.

    I have a 90/10 stock to bond split in my retirement accounts, and over the past 10 years, I’ve seen a 13% return on my investments – which is incredible. While this dip in the market does bring those values down a bit back into the realm of reality, it also presents a lovely little opportunity to buy even more stock that is now on sale, which we did plenty of last month. Our net worth did drop, but honestly, we don’t give a flip. We aren’t retiring today anyway.

    From what I’ve been able to determine from your writing, I think you guys are doing wonderfully. You definitely have your heads pointing in the right direction with all this. Being uncertain is a natural part of life, but remember, things will ALWAYS work out for people who are willing to adjust and shift their positions when life throws them a curveball. You guys seem ready and able to do just that, which means you’ll find a good deal of success when early retirement comes in 2017.

    Congrats on the nomination! :)

    • Thanks for this, Steve. This is my favorite comment of yours ever. :-) So wise. And great point about the timing. That all feels right, even if the correction means we won’t hit our targets for the first time this year. Sad trombone sound. And in truth, even if the markets never recover, which of course they will, we’ll still be able to afford a full retirement, just a more meager one than we’ve budgeted for. But if we’re willing to work a little, which we are, we can make up the difference. Or, hey, maybe we’ll go full-time RV like you guys! We keep saying that, to reassure ourselves. “Well, we can always sell the house and be campground hosts.” ;-)

  6. Congratulations on the Plutus Awards nomination, that is amazing!! :) Zen detachment….yes! That’s a great way of putting it. Since this is the first real correction I’ve experienced since investing, it’s been an interesting feeling. I sit in as the Records Keeper for our 401(k) committee at work, and the older generation employees are definitely sweating bullets. I’m learning so much now at 25, that I have a general idea (so far) of what I will be doing when I get closer to retirement age. I actually have been avoiding my balances, but the one time I logged into Betterment to check on some of my portfolios, they had a message basically announcing to stay calm that featured statistics of how many people weren’t checking their portfolios due to the correction (which immediately made me sign off quickly – oh persuasion haha). It’s difficult when much buzz is generated! Keep the course, and I’m sure you both will be pleasantly surprised when 2017 roles around! :)

    • Thanks, Alyssa! :-) How great that Betterment has that message up! USAA, which we view all our accounts through, just has a general “here’s the market outlook” message up which we haven’t looked at, but it sounds bleak! Ha! We’re going to try our best not to look at all in September, until the end of the month, and get into the habit of looking less often generally. That will be a good thing!

  7. I have been checking my balances! Mostly out of curiosity. All of the money I have invested in stocks is money I have no need for for several years, so I’m not worried. It was fun to see how much better value I got for my end of month 401(k) purchase than my mid-month one though ;)

    • Glad we’re not alone! Though so far we’ve stayed strong and avoided checking yesterday’s damage. :-) That’s a great perspective to keep, thinking about what a great value you’re getting with your buys now!

    • Thanks! And of course you’re right — we know things will come around, and we’ll be glad that we stayed disciplined for a long time. :-) And we feel your pain — we dealt with debt, too, and thought all through the booming 2000s that we’d never be able to buy a home or save. But we definitely know now that everything we did in those years put us in the great shape we’re in now. Same thing will happen for you. Stay strong! :-)

  8. Congrats on your well-deserved award!

    We are also concerned about the markets. I understand that markets will always have corrections and fluctuate, but we both still have a bit of anxiety over it. What I’m concerned about most is this continued volatility. We are well diversified which takes the sting out a little bit, and aside from the 401(k) plans which we have maxed out, we also have invested substantially in equities on our own. We keep a solid amount of cash ready to go for when the market turns sour and I keep a list of what’s on sale so we can take advantage of the buying opportunities. Yes, it’s market timing, but we feel okay with it because it’s in addition to our employer plans and we have made a substantial amount of money from investing during the downturns. We have also been discussing the possibility of investing in real estate to increase the mix. It would be nice to create some additional income streams.

    • Thanks! It’s great — and unsurprising! — that you’re in a position to capitalize on the crash. As for real estate, it was never part of our plan to be landlords, and we bought our rental house because a loved one needed a place to live and we were the only ones who could help. But now that we did it, we’re really glad. We know that it will give us an income stream after the mortgage is paid off (right now it’s break even), and we also know that, worst case, we could always sell our house and move into the rental house, which is a huge source of comfort. And our tenant pays the mortgage, meaning that this big source of diversification and security is basically free for us now. Pretty sweet. :-)

  9. Congrats again on Plutus! Super exciting! Are you guys going to Fincon? I don’t remember if you’ve mentioned it. We won’t be attending this year, but I hope to go next year. Time will tell… We deal with a similar windfall in October (PFDs baby!). We find out how much it will be mid-September and it drops into our accounts the first week of October. We never know how much we’ll get (though there are many guesses published), so it’s hard for us to calculate what we’re doing either until that comes. But that is my favorite financial day ever! (And I actually hope it happens on a really down market so we can use it all to buy stocks on the cheap!)

  10. Congrats on the nomination! Definitely deserving!

    The silver lining about the recent downturn is at least it is happening with 2.3 years to go instead of November 2017. There should be a good amount of time to recover if in fact this is finally the correction/pullback everyone has been waiting for for 4 years :)

    The best part is that you guys aren’t adjusting your plan because the market got bumpy! The biggest thing that can screw up a plan is when you throw the plan out the window when things get a little rough. Great job! :)

  11. Markets are crazy right now! It seemed like the 1,100 point Dow drop last week was a good buying opportunity, but who’s to say a full recovery is in place. Investors are scared and it seems like no one can confidently decide to park their money in bonds, gold, cash, or equities. Good luck navigating!

    -DP

  12. Congrats on Plutus, that’s awesome! I can’t really recall how much we’ve lost, as I let Mrs. SSC check all that, and except for the random times I log into those accounts (seriously maybe 3-4 times a year) I assume everything is going A-OK. :) We discuss things way more detailed so I generally know how things are going, and well, since Mrs. SSC loves “spreadsheeting” and running different FIRE scenarios, I literally get “We could FIRE in 2017 if…” type emails and snapshots of graphs and charts 1-3 times a week. It’s reassuring for me, but it may backfire for her, because now I’m like, what will it take to pull the trigger earlier?! Hahahaha
    Like you said, we have no idea what the markets will do, what bonuses will look like, if we will have jobs in a year, so until then, we’re planning to just, Buy, buy, buy! Especially if we get a severance package in another month… :)

    • Thanks, Mr. SSC! Okay, so here’s what I’m hoping for you guys: That if the layoff comes, you get a nice, fat severance package before the markets rebound, so you can get a sweet buy out of it. :-)

  13. During trying times, I always imagine Aslan telling me: “courage, dear heart.” Because, really, that’s the only thing we need to pull through when we are faced with situations that are beyond our control.

    I only started investing this year and the market correction did not affect me that much. Although I haven’t checked my superannuation (retirement fund) yet, I tend to forget about this one mostly because it doesn’t come out of my own money. But now that I was reminded because of your post, I better see how it’s doing.

    Good luck, you guys! And congratulations again on the Plutus! :)

    • Nice. :-) And it’s better not to check your balance! We love the advice of Vanguard founder John Bogle, who says not to even open your retirement account statements. There’s such a strong temptation to “beat the market,” and your best bet is literally to do nothing. So that’s what we’re doing, just with a little bit of a frown instead of a smile. :-)

  14. In the current market, I try to focus on what i can control: the plan. I do believe in my index plan for the long term.
    That being said, I am far away from my FIRE date, So I am not too busy right now finding out what the impact of the markets and bonus is on my end date.
    kudos to you for having a date set, and being flexible in what you do after that date. I have read already a few stories of people that all confirm the same: the closer you get to the amount in the spreadsheet, the harder it becomes to make the move.

  15. I found your blog a week ago, and I’ve made it this far. Shows how much I love it and needed it. So many thoughts, where do I start.
    I sold my business a month AFTER this post was written. I now wish I had the cash at the time of this correction, because as you have learned it was short lived. Now I’m 70% in cash and afraid to invest in this stock market. Though I have been buying oil/gas royalty stocks and Canadian REITS (looking for dividends in not overplayed places). I have an employment contract that runs through the end of 2016, so I may be ER’ing it right along with you. I haven’t looked ahead to see if you are still on plan. But if you are like me, I am getting nervous and coming up with reasons to keep working as it gets close. I still have two kids in school, freshman and sophomore, so why not work and take them on an expensive European trip. It’s all free money if I’m still working. At least that is the latest thought running through my brain. It changes daily.
    One thought about investing: it’s alright to stick your head in the sand, but don’t only do it during bad times. We get excited when things are good and buy more, and hide when things are bad. That’s why most individuals lose horribly to index funds. Not saying that you are doing this since your investing is scheduled, but it definitely proved to be a good time to have thrown a little extra money.
    Anyway, I’m excited to keep reading on to see how you are doing.

    • Wow, thanks! What a nice compliment. :-) Definitely with you on not wanting to sink more into the markets right now with the high valuations — we’re still doing our normal amounts, but not extra. And if markets stay where they are, we’ll put more of our year-end bonuses into the mortgage than into the markets… but five months is still a long time for the markets! And I can also definitely understand wanting to keep working, or at least entertaining the thought — the likelihood of a recession or at least major correction sometime soon feels more likely all the time, and we just wrote about sequence risk and how much it could hurt our future if we get negative returns in our early years of ER. And we do sometimes throw in a little extra money when the markets dip, but in general we just stick to the same twice a month no matter what schedule. :-) Good luck with your journey! Thanks for reading and commenting!

  16. I”m curious how you’re feeling about this correction almost two years later, now that you’ve hit your target (I saw the tweet but haven’t caught up to the post yet!). Yesterday was our first “blip”, down a few grand and my head says it’s fine/calm down, but my heart says “our hard-earned money!!!! *sad face emoji*”

    Does this short drop even resonate anymore? I’m still new in this game and can’t help but check the accounts daily (apps make this SO easy) and maybe read a few articles while I’m at it. I guess I’m asking — does it get any easier?!

    Can’t wait to see what’s in store for you in the meantime :)

    • Good question! And the answer is, “What correction?” ;-) Turns out that one was short-lived, but now we’re also more practiced at riding these things out. So ask me again after our first real correction in retirement, when I’m sure it will feel scarier, but for now we’re much better at tuning out the short-term market fluctuations. I’m a big fan of just not even looking at those balances, except to update things at the end of the month — it has helped my peace of mind soooo much! (So I guess my answer is YES, it gets easier.) ;-)

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