It takes more than just a vision of what it is like to be financially independent. For me, I was planning on this for several years. And when you have a goal in mind, you shoot for the goal. The problem comes when the goal is near at hand, sort of like when a dog is chasing a car. Pretty soon, you catch the car.
So here is what went through my mind in deciding the day, how the time went by, and what I gave up.
For those of you that have follow my blog, I have had a “Countdown to Retirement” counter since the early days. It was over two years out at one point, and I kept lowering the days remaining as the days progressed. My financial goal was also getting close. There was a time when I thought if I hit the money first, I would leave. As I began to explore the ‘perfect’ date to leave, there were other things to consider.
Taking Risk
Financial Independence is all about taking risk. Do you invest in the stock market, real estate, buy gold, or start a business? Al these items activities are from the traditional risk model. They are well known, and mainstream. How you use them and take the your risk path may be different.
I chose the real estate route. There are many different flavors of real estate. I then chose the rental route, rather than doing flips, RE sales, property development, etc. I have done some flips, but in the end, I wanted cash flow. Lots of it. My method is also a combination of running a maintenance business, a property management business, and being a real estate investor. Even when I was mowing grass on the side, several of my customers would ask if I could help with various odd chores. I soon realized, that if I had ~20 customers with homes, I could probably make enough money just doing maintenance for these homes to live on.
At that time, it really did not occurred to me that if I also owned these homes, and rented them out, the cash flow would be even better.
Running Retirement Planners
I ran retirement planners’ multiple times a day. I used multiple retirement planners. The planners used different algorithms, like Monte Carlo simulators, historical simulators, and random. I had a spreadsheet that listed and calculated how much money I would need and have. I analyzed top down, bottom up, sideways both left and right. I calculated how much I should be saving based on my income. I calculated how much I should have based on my tax forms. I added up how much I actually did save and compared it to my projections.
All looked well, multiple times over. It was then just a timing mechanism to pass the days until my exit point.
First of the Year Jitters
Once the first of the year came, my final date became more real. It was no longer some imaginary date in some distant future year. It was this year. It was coming. And fast. I could not wait, but it was the first time I had any apprehension, and needed to make sure I was mentally prepared. I received my pay raise and saw my total benefits. WOW, this may be the last time I ever make this much.
January 1 Benefits
I had to be employed on January 1. I wanted to get a $400 subsidy from the company in my HSA. And get paid for the January 1 holiday. That meant I had to be on the job on January 2. Any money I made during those two days would help with a 401K and a match too.
I earn 20 days of vacation, so each month I earn 1.67 days. By working a single day, January 2, I get paid for new year’s day, a holiday. I get paid for the day I worked. I get 1.67 days of vacation. And I get any healthcare subsidy for the month. That single day of working is worth 3.67 day’s pay, plus the $400 HSA subsidy, at a minimum.
Bonuses
I wanted to get my bonuses. I have two bonuses, a long-term incentive (LTI) bonus in mid-February, and a performance bonus in late February. If I leave a minute before they are in my bank account, I lose them. So that was a date I have to stay employed through.
My LTI bonus doesn’t count towards my 401K. No deductions are made out of that part of the money, I suspect because it is from money I earned in prior years. I get a lump sum every year, and it vests over the course of the next four years. If I get $4,000 awarded this year, I do not get any until next year, when I get $1,000. I get that $1000 every year for four years. If I do that for four years, each year I get $4,000, $1,000 each for the preceding four years.
I also get a performance bonus. That is a lump sum that is deemed to be earned as I get it. My 401K contribution gets deducted from it. In a good year, it could be 15% of my base salary. I do not want to give up that kind of money, if all I have to do is stay a month or two extra.
Maxing out the 401K
I wanted to max out my 401K. Being over 50, I can put in 24K. I keep my 401K allocation at 75%, which is as much as the company will allow. That way, if I leave work from being FIRE’d, or fired, I have the most money into the account.
If I did not get any bonus at all, my 401K would be maxed out by 4/30/2016. Of course my bonus helps a great deal, but I wanted to calculate worst case. In 2016, my 401K was maxed out by 3/25 with my final contribution of just under $500.
The Final Run
Once that 401K was maxed out, it became a tough march to the final day. I remember thinking it was a LONG way away. I wanted to quit now. I was assigned to a project that did not make sense, or maybe I was so close I couldn’t make sense of the project. I was near my 100 days left mark, so I found a 100-day count down. Each day, I would cross off a number for the previous day. Each weekend, I could cross off three. Memorial day weekend, it was four days crossed off. Yes, that is my actual count down chart in the post.
I kept thinking each day is 1% of my total time left. Then it was 2%, and soon each day was 10%.
Another Year of Pension
At the 1,000 working hours, I accumulate another year of pension, according to the plan documents. At age 65, that is ~$100 extra. As a non-COLA annuity, purchased today, it would be worth ~$13K. It’s not much, but after you have worked until 4/30, working another two months is not too bad – or so I thought…
June 23, 2016 was my 1,000-hour marker to guarantee that year of pension. Or was it? Payroll for 2016 started on 12/28/2015, which is the last week of 2015, so maybe it was sooner by 32 hours. The pension estimator we have at work changed to the updated amount on 5/30/16, so maybe I accumulated the 1,000 hours by the end of May?
To be safe, I went the full run, and 6/23 was mine.
July Benefits
Similar to the January benefits, by working 7/1/16, I got paid for a day. I received 1.67 days of vacation. I got July healthcare. It was a Friday, the day before a long weekend, and a slow day around the office. And when you only have a couple of work days left, it’s even slower. As in, I did not do any work.
Coming in on 7/5, I received two days pay, one for that day, and one for the 7/4 holiday.
Calculated out, I received 65% of my salary and only worked 50% of the year. It’s like a pay cut to work the last half of the year.
Giving Notice
I sent my notice in, via email, on Sunday, June 3. It was over a full month’s notice. I did not hear back from my boss until Tuesday, 6/5. He said “I am getting ready to submit this to HR. Are you sure?”
Crap! I was 100% sure and confident for the last 2+ years. Now I get the pop-up message “Are you sure”. As a IT person, that means you better check everything again, twice. So I did some brief calculations again, and said “100% sure”.
My bosses knew I was leaving, as I told them several times. It was also a standing joke, as I passed people in the hallway, “How many days do you have left?”. I always had a quick answer, typically within a day or two of the actual number.
On 6/29, the department threw a retirement party. They catered Jimmy johns for 90 people, with sandwiches, chips and soda. They bought a full-sheet cake, which was more than enough. They had a nice plaque, and a book for people to sign. It was a really nice touch to experience on my last week.
My Situation
My original financial goal was to have $1.5M in investable assets, a home paid off, and $75K in rental income after expenses. That way, I would have two sources of income, either of which would be enough to live on. It would be nearly what I was making at my job after some taxes, although I was spending considerably less. As it turned out, I paid off much of my rental mortgages, so I had to count the extra principle I paid towards the financial goal. You cannot have paid nearly $300K in mortgages and expect to have the same amount of financial assets than if you did not pay it. By doing this, combined with rent increases and a new rental, I was able to double my rental income after expenses.
In future years, I will get nearly the maximum amount of Social Security. A small ($1,262) non-COLA pension will start at 65, or as soon as I want to take it. The earlier I take it, the lower it will be. Between Social Security and the pension, that would be enough to barely live on, if I had to. So I am triple protected. Dividends are ~$2K a month, when I decide to take them. Currently they are reinvested.
Savings
I have saved an average of almost $200K for the past three years. That includes my company 401K match, 401K savings, HSA contributions, extra principle paid on mortgages, and after tax savings. The savings is more than 100% of my gross W2 wages. It does include some money that my employer pays in. Subtracting FICA, Medicare taxes and my tax liability from my W2 wages, my savings rate was ~250% of my take home pay for the past three years.
Inflation Protection
Hopefully rental income will be inflation protected. My VA Disability includes free healthcare, so that is inflation protected. Social Security is inflation protected. Investments, historically have outperformed inflation, so that is (hopefully) inflation protected.
The Conclusion
I quit my Job to be a landlord. So now, I am unemployed except for the rental income. Twenty-five renters, nine buildings (including my own home), and three 50% (or less) LTV mortgages. I gave up a job that made $113,001 in 2015 on my W2. I had 5 weeks of vacation (I bought a week in 2015 which lowered my W2 wage), 10 paid holidays, a pension, a 4% of salary 401K match (in 2015 it was $4,556), healthcare and a HSA subsidy. It was in an air conditioned and heated building, with free covered parking.
Did I give up too much? Should I have stayed?
Is your money more important, or your time? How do you know if you have saved enough?