As I go through my financial plan, there are always some reservations about leaving a steady job with 4 weeks of vacation and a nice tech salary. I have checked my landlord retirement plan several times, like Santa checks his list, but a lot more often.
While I will not be without income, as I have my rentals, it certainly will be a life changing event. I will have an additional 40+ hours a week thrown into my lap. Here are some thoughts that run through my head as I begin the countdown to retirement…
I have read that more people fear running out of money than death in retirement. I can certainly appreciate the fear. Despite the fact that I save more than 100% of my gross pay at work, and have been for several years, it is a hard thought to get rid of. What if I have to move into my apartments?? They are certainly nice, but even if I could live there fine, the renters probably would complain…
Chasing the financial independence dream does have an interesting dilemma. Sort of like the dog chasing a car. Once you achieve it, what will you do with it? The same traits that lead you here, (like hard work, ambition and determination) may keep you from fully being here.
How Much Money Do You Need?
I do not have any kids, as I have always been on the early retirement bandwagon. I was an S&P 500 investor for a long time. I put a lot of money in the 401K plans, and a lot in the company stock purchase plans, if they had one. Each time I left a company I received a solid raise and always did a rollover from my company 401K to my brokerage IRA.
At some point in the mid-90s, I became a tech investor. It was the thing to be, the Nasdaq was racing to the moon.
I invested heavily, in a high risk stocks, in the 90s. Stocks like VRSN, SUNW, CMRC, AOL, CHINA, PLUG, RUBR, SCIE, WMMVY, CMGI, JDSU, RFMD, and many others, most of which are no longer around. As fast as they went up, they came down. I remember gaining as much as 40 points in a day on a stock like VRSN. I remember my portfolio losing and gaining as much as $40K in a single day. It was a great ride, and soon it was a losing ride.
Saving More
So I began to save, a lot. It was all mostly in a cash account. I figured that no matter what the market did, I could save more than enough to offset any gains the market might give, and prevent any losses. That worked OK, and I got back into fancy names and emerging markets. Some went up, some went down. I did not beat the market, but I did not lose money overall.
In any case, due to my savings and switching back to an S & P foundation, my stock portfolio is doing better. I have beaten the market in my 401K in most previous years, mostly due to my strategy of maxing out my contribution early in the year.
The stocks will give me a bit of cushion if I have a bad rental month. I do not plan on withdrawing any of it until I am at least 62, which will be six years after I leave my job. It is a solid amount, and will be more solid after a few more years (hopefully)… It is a set it and forget it allocation.
If I would have stuck to my original investment strategy, I would already have been retired.
Transitioning from Saving to Spending
Switching from saving to spending will definitely be the most difficult for me. While I will easily get used to not saving into a 401K and an H.S.A., it will be more difficult with the after tax money. While I will not go into the amount I save here every year, it is a solid amount. Even saving 10% of that would be a great saving. Yet, if I am only able to save 10% of what I do now after retirement, it will feel like I am going broke. It will be a great mental challenge for sure.
Several Different Sources of Income
To be secure in retirement, you must have multiple income streams. I am fortunate to have several.
I have a small disability payment from the VA, which is tax free with COLA, and is effective currently. It gives me access to free healthcare, if I do not die while I am waiting for an appointment.
The amount of money for a 10% disabled vet will not even pay for a cup of coffee a day, let alone be enough to live on. But the healthcare is worth something.
It is interesting how a person on welfare can get better healthcare than someone who served in the military.
I have started to use the VA for my healthcare needs, but will likely buy an additional policy. It will cover potential emergencies if I have one and am not able to go to a VA facility. If I am reading the documents correctly, the VA will bill my insurance company directly, but I will not have to pay any deductibles. It counts as an out of pocket expense, even though it is not any money out of pocket.
At 55, I am eligible for a small pension from the company I have worked for ~12 years. It’s not much at 55, but should be an OK amount, no COLA – at 65 years old. That will be nine years after I leave my job. So I have a gap I need to fill with income.
At 62, I have Social Security, but will likely wait until 70. I think I can survive on my investments, pensions and rentals between now and then. At 70 years old, I should have close to the maximum Social Security, with a COLA.
While there is always talk of Social Security running out of money, why is there never talk of welfare running out of money?
I have thought about selling some of the rentals beginning at ~62 or so, perhaps one every other year. That will take me to 74 years of age.
My own homestead can also be split into several lots. If I do that, I can have some extra revenue. Selling homes to my tenants will also be a potential source of revenue. Even three homes per year should add a bit to the bottom line.
Traveling After Retirement
So, in the meantime for the next few years after I leave my full time job, the rental income will have to suffice. As it is well over 6 figures, about 3-4 times what I spend now, I should not have difficulty in living. Being debt free, other than three rental mortgages, will also help. I do want to ramp up my spending a bit, and will be doing some traveling, likely in a fifth wheel, for a few years. Not full timing, but trips from three to six weeks at a time. Maybe even a few trips of three+ months. I will write about my adventures when that time comes.
Trips I have planned in my head are Alaska, Route 66, the national Parks of the South West (Grand Canyon, Zion, Moab, Death Valley, Bryce Canyon, etc.), a Mississippi River Trip, A Rte. 1 trip down the east coast i.e Maine to the Keys, etc. Whether or not I will get to live all of those trips, I am not sure, but I am hoping to fit some of them in. It’s something the DGF and I can do, and bring the dog along. Taking our time, as every day will feel like Saturday (unless it feels like a holiday).
What are your plans for when you reach FI? Will you have a problem spending, rather than saving? Will your lifestyle be able to increase or decrease?
Which do you like more, landlord stories, or landlord financial independence stories?
Congrats on your upcoming retirement. I’m excited to hear all about what you do with all your free time.
Thanks Paul! It is still a year+ away, but I struggle to find the reasons to stay longer than this summer.
We will definitely have to do lunch again as we both get closer to the end days of the cube farm. Of course, you are mostly out of it…
I with you in that I think you should leave now (or this summer)! In my opinion you’re over prepared for retirement.
oh I hear you, but let me remind you, You have become a slave to a job, I don’t mean that in a bad way. I retired at age 39 with rentals. One you will find, HOW DID YOU HAVE TIME TO WORK, you will be busy and you can travel. My thought is, life is short, my dad died at age 59, my brother died at age 44, I think you have paid your dues with work. Walking away is hard but you have a plan and even can pick up more rentals, ride the rents up, You will be fine, Its common to feel the way you may feel at times, but you will love being retired. Time to really live, imaging traveling for a week once a month, or a month straight, you will fall into place nicely. I will say the next 22 months are a wild and even depressing ride as our economy is a mess and that has effected me,we are effected by the world around us.
If you feel really strong you can go another year, some love to work and if your job isn’t demanding well…. go with your gut, Probably rentals support you just fine 🙂
Thank you Cheri!
I wonder how I ever had time to do all the rehabs I did just a couple of years ago. I was working all day, then worked from ~5:30 Pm until 9:00 Pm. Then bought supplies for the next days work. Saturdays, Sundays and vacations were spend working on the rentals.
Someone once asked me if Tuesdays were as much fun as Saturdays. If Saturday is more fun, quit work.
Sounds like you will have some really good problems to deal with in retirement:
1 – 40 hours to do what you want
2 – 6 figure rental income (3 X what you spend)
3 – Sounds like a sizable 401K/IRA account to eventually tap
4 – A pension 9 years in to retirement
5 – Social Security when you decide to tap it (your plan is 70)
6 – You have the option to sell any of your properties (but you don’t need to)
7 – Sounds like even when you ramp up spending you will still have a surplus to save
8 – You could also do passion freelance work like writing…which seems to be something you enjoy. Why not get paid for it and pick the projects that are interesting to you.
9 – And of course you have this blog that you could always find some ways to monetize further.
Congrats on putting all the pieces to the life puzzle together in order to live life on your terms and of your design.
The world is your canvas…now go paint what you want it to look like.
Maybe even consider leaving this summer if you don’t need to stay. What is holding you back?
Cheers!
Thank you for the comment!
It is getting REAL close. I will be posting an financial update in early April to track how I am doing against my goals for 2015.
I hope that spending enough will be my biggest challenge!
Money was made to spend on the things you enjoy my friend, and if you feel you are covered for FI, I don’t see the need to keep working for others. Find the top 3 things you want to do, and get it done in the next two years.
Your rentals cover 3 times your expenses, that’s already FI if I must say. I’m sure you are unsure what to do with your new found time when you retire, but it will come to you 1 day at a time.
I will be doing volunteering, sporting activities, spending time with family, and business ventures when I reach FI in 8-9 years. Here’s to the markets correcting soon so I can buy some cheap shares.
Great Advice!
I just stumbled upon this website, and I have to say it’s been refreshing to read what has been already written! I’m in no shape (now) as the No Nonsense Landlord, but I like to dream big.
I came across this website after looking at my own situation (2 rentals, one primary home) and trying to figure out what I was going to do with the money I made from selling my primary house as I will be moving in about 6 months for work. My primary question was, “Should I pay down my rental property or invest in the market?”
As I’ve read much of this blog, my question has evolved a bit. I think 95% of us that have found ourselves at this blog are work-a-holics and enjoy working to some degree. My new question is now (I’m 33, married, no kids yet)…….”What do I do in retirement?”
I think my primary question has been solved, so thank you Landlord for that. But my second question is unsolved. I don’t think driving a 5th wheel across the country is what my wife or I desire; I thought sailing the Caribbean was my dream until I spent a few weeks this winter doing it and couldn’t wait to get back to work.
I’m curious as to what others plan on doing in retirement since now I think a part-time gig at Lowes for $7/hr sounds perfect…
Thank you for the comment and stopping by! Great job on your progress so far!
As time progress, i change my plans. I have also thought about a sailboat, or power boat, even if only for a month or two. Or a trip down the Mississippi river on a houseboat. I also thought about buying a place in FL or AZ, and being a snow bird. With the rentals in MN, I still need to pay MN non-resident income tax.
So, I will just probably take a week a month off (Thank’s for the suggestion Cheri!), or a similar plan. With longer trips periodically, until I begin either having the properties managed, or beging the selling process.
Sounds like you have all you ducks in a row. Multiple income streams along with multiple rental units. Very nice indeed. Good luck in your future retirement.
Keep cranking,
Robert the DividendDreamer
Thank you for the comment!
It seems like it takes forever, but the end result is worth it.
Love the retirement stories.. Wife and I started our countdown clock at 5 years.. Now got 3 years and 2+ months.. We can’t totally hang it up, but we can get off the high stress corporate train and downscale into something we want to do.. It is going to be tough to step off the high paying gig though…
Have you found your thoughts of what you will do in retirement change over the last couple of years?
Thank you for the comment!
The thoughts have changed a bit, but I have only had a year or so to think about it. I was too busy remodeling to even think about retirement. After filing taxes for the 2013 year in 2014, I paid in a lot. I paid off another mortgage, and my cash flow increased.
So, the 5th wheel sounds great, since we can bring the dog along. If I did not have the dog, I may just fly and hotel it. I like the 5th wheel idea though, for a trip to Alaska. Perhaps 2-3 months long.