This page is about our financial early retirement plan. If you want to know more about us and why we’re doing this, head over to the About page.
We retired early at the end of 2017 when I (Tanja) was 38, and Mark was 41.
We knew from before we got married that we didn’t want the life that we could easily default into — chained to our desks 40 or 50 hours a week for 40 years, living for the weekends and our four weeks of vacation a year. We wanted to climb big mountains, see parts of the world most Americans never venture to, and have time for major creative and service ventures.
We have always craved a life of adventure, and we’re still pinching ourselves that we made it happen!
Our Retirement Financial Plan
Our financial plan encompasses three major phases, one of which is now complete:
1. The accumulation phase, a total of six years, four of them laser-focused, of aggressive saving and mortgage paydown, to build our assets to support early retirement without ever needing to earn income again. (Completed)
2. The early retirement phase, when we’re living somewhat modestly off our taxable investments and rental income (and a very limited amount of side hustling in the first year only), and we get our health care through private health insurance. (Current phase)
3. The traditional retirement phase, after Mark turns 59 1/2, when we’ll live a little larger off our tax-advantaged/tax-deferred investments — 401(k)s and IRAs — and get our health care through Medicare (or its future successor). (Future phase)
The Accumulation Phase
Income and Savings Rate
The only real way to save for early retirement is to live well below your means, and we did that in a big way, accelerated hugely by some luck and high earnings. We earned above average salaries for most of our careers with the final few years in the top three percent of household incomes, and despite living in a high cost-of-living area, we saved a high percentage of our after-tax income, namely by not inflating our lifestyle as our incomes increased and by banking windfalls (year-end bonuses, tax refunds, etc.). You don’t need to earn as much or save as quickly as we did to retire early, but it sure speeds up your progress.
Dealing with Debt
We got rid of our consumer, car and student debt long ago (and were crazy fortunate not to have had much student debt to begin with), so weren’t dealing with that in our aggressive saving years. We’re big believers that anyone pursuing early retirement should make sure this debt is long gone before pulling the plug on your career.
We got lucky and were able to buy our home in 2011, near the bottom of the market following the 2008 crash, and bought waaaay less house than we could supposedly “afford” because we knew our goal was to pay it off quickly. We paid off the house in early 2017, only a little over five years after we took out the mortgage. We still have a mortgage on our single rental property, but we’re not in a hurry to pay that off because our tenant in essence pays that mortgage payment.
Building Family Support into the Plan
We’re big believers that accumulating enough money never to work again isn’t worth much if we can’t use some of it to help those we love. So while we were in the accumulation phase, we made a sizable personal loan to a relative to help them pay off medical debt, and bought our rental property specifically to rent it to another relative with special needs. Both of those steps set us back slightly on our saving progress, but we were able to adapt our plan to make both things good investments in the long run.
Want to know everything we did financially to be able to retire early? Here’s the full rundown.
The Retirement Phases
Our early retirement plan relies on having two major stages of income and health care coverage — before we turn 59 1/2 (early retirement phase), and from age 60 (income) and 65 (health care) on (traditional retirement phase), roughly represented here:
The first ~18 years of retirement (the early retirement phase) is funded by our taxable investment accounts entirely for the first 10ish years (with a small supplement from the personal loan repayment in the first three years), and by a combo of our taxable investments and rental property income after the rental mortgage is paid off in 2029.
Our investments are primarily well-diversified Vanguard index funds, currently with approximately a 70/30 overall ratio of stock funds to bond funds. We live first off fund dividends, and second off selling shares.
Later (in the traditional retirement phase), we’ll be able to tap our 401(k) assets, which are well-funded thanks to Mark maxing out at an early age. At that point, we’ll be able to step up our quality of life significantly.
We do expect to earn some other income in retirement, which we’ll view as a hedge against sequence of returns risk. But our plan is based on not needing any additional earned income, so we can make decisions about any work we choose to take on based on whether it’s fun and meaningful, not based on how well it pays.
Ensuring that we always have access to high quality health care is super important to us, and is not something where we’re willing to gamble. We’re expecting to have to keep adapting as the rules change and the limits shift around, but for now we expect to buy private health insurance from the exchange for our first 23ish years of retirement, until we’re eligible for Medicare or its future equivalent. (We bought our first exchange plan in late 2017.)
The Life Part
We know “retirement” means different things to different people. Here’s what it means to us:
Retirement means never having to work again.
We absolutely will work a little in retirement because we plan to have many retirement years in front of us, and we have naturally inquisitive minds that crave problem-solving opportunities and the chance to help people. The work we do, however, is work that feels like fun to us, that we choose to do.
We saved enough so that we could never work again, and we’ll only do jobs that provide us with worthwhile benefits (like free ski passes, free travel, a creative outlet, a way to have fun or a way to support nonprofit organizations we love). We already do and expect to do lots more unpaid volunteer work for causes that are important to us.
We didn’t trade our careers for jobs. We traded them for permanent control of our time and brain space.
Come along for the next phase of our journey!