beach pier at sunset
Finances, FIRE, Goals

Our Plan to Retire Early (By Age 50, To Be Exact)

beach pier at sunset

If you’ve been hanging around this blog for awhile, you probably already know that I’ve been a bit obsessed with the idea of FIRE (financial independence / retire early) for several years now. However, while I’ve mentioned my enthusiasm and passion for this subject in the past, I’ve never actually set a hard and fast goal or deadline or made a specific plan on how we’d get there.

That’s all changed now.

I don’t know what it was (though I think starting the flower farm business this year definitely had something to do with it), but we finally decided to just start going for it.

(For your reference, both my husband and I are the same age, and we both will turn 35 at the end of September this year. So, that basically means we have approximately 15 years to get our retirement plan in place.)

What Kind of FIRE Are We Pursuing?

In the FIRE community, people have come up with a few different labels of which kind of financial independence they’re striving for. I won’t go through all the labels here (you can check out this blog if you want definitions of different types), but for our purposes, we’re shooting for “Barista FIRE,” which basically means that we want to have enough of a passive income strategy in place to cover nearly all of our needs, but that we’ll still plan on working part-time on the side to supplement the rest until we reach a more typical retirement age.

The thing is, we both love to work, so we’re not really going for the whole “retiring” thing—we mostly just want to have enough money in savings and retirement funds so that we can pursue work we’re super interested in, regardless of what it pays, and on a much more flexible time schedule.

I’m basically already doing this with my flower farm venture (which has been a dream of mine for quite awhile now), but we’d like for Matt to be able to have the same option.

The 3 Main Components of Our Early Retirement Plan

1. Pay off the mortgage in 15 years or less

Like the majority of families, our biggest chunk of money each month goes towards paying down our mortgage. We bought this house at the end of last year on a 30-year fixed-rate plan, so if we were to only pay the bare minimum each month, we wouldn’t pay off our house in full until we were 64 (aka, nearing typical retirement age).

If we can pay off our house by the age of 50, the amount of money we’d need in our semi-retirement would be significantly less per month, as it would mean we had no debt whatsoever (since our mortgage is our only debt).

I plan to do a whole post (or series of posts, even) on this subject in the future, so I won’t go into further detail here.

2. Fully fund our traditional retirement IRA’s

Right now we currently have three traditional retirement funds set up — two for me from my former employment as a teacher, and one for Matt (though his current work doesn’t offer any retirement benefits, so it’s just an old 401k that we converted to a Roth a few years ago).

Depending on how you do the calculations, we estimate that we’ll need around $1 to $1.25 million by the time we’re at traditional retirement age. We could get by on less than that if the house was paid off as planned, but that would give us more options for travel, giving, etc.

Although this number seems crazy right now, we’re actually doing pretty well for our age (though not well enough to hit our goal at our current rate, so we’ll need to start stepping it up soon).

3. Invest enough in index funds to cover the years before we reach typical retirement age

The earliest we can draw from our retirement funds without penalty is 59-1/2. If we just call it an even 60, then that means we need to come up with enough passive income elsewhere to cover the decade from age 50 (when we’re planning to have Matt retire from the traditional workforce) until age 60, when we can start to withdraw funds.

While we might look into alternate revenue streams in the future (such as buying a property that we rent out), we recently opened up a brokerage account in order to invest in index funds for the sole purpose of funding this first decade of early retirement. And, like I said above, we’re not actually planning on retiring completely from paid work—we’re just allowing ourselves the option of pursuing part-time options that we’re interested in, without having to worry too much about making enough to cover all our expenses. Depending on the nature of the part-time work we choose, the amount needed from the decade from age 50 to 60 will vary dramatically. If we end up both working at something we love (such as me still doing the flower farm and Matt doing something else), we might bring in $3,000 a month even just working part-time hours. With a paid-off house and no other debts, we could feasibly need to draw just $15-20K a year or so during that decade, mostly just to help cover healthcare costs.

An ideal scenario would involve us either investing $200-250K in a brokerage account by the age of 50, or investing at least $100-150K and then having a rental property on the side.

Time will tell.

How Do We Plan To Do This, Exactly?

No, we did not all of a sudden start making six figures a year. No, I don’t plan to return to the traditional workforce anytime soon. However, we have proved year after year that we can live comfortably and not spend a ton, so the first strategy is to use raises and windfalls (such as tax returns and the future child tax credit money coming this year) to further our financial goals rather than to increase our lifestyle.

The second strategy is to be very intentional with any profit we make from the flower farm. We won’t turn a profit this first year (not surprising), but in future years, we could potentially be making a profit of anywhere from $5 or $6K (in the second and possibly third years of the business), to upwards of $15-20K if we could expand operations and invest in infrastructures such as a greenhouse or high tunnels. Granted, that’s not a ton of money to be making during those months when I’m basically putting in almost full-time hours, but this is also something I’ll be doing for just part of the year, and it’s something I love and would kind of be doing anyway.

Even if we use a few thousand dollars each year to go towards more fun things like traveling or making home improvements, we could still be using the rest of those profits to invest in our retirement or pay down our mortgage faster.

The Secret to Success

Honestly, when you look at a goal this huge, it’s easy to just want to give up before you even start because the numbers seems impossible.

But over the past few years, I’ve stumbled across a secret that has been an immeasurable help in setting us up for financial success. No, it’s not automating money transfers into savings (although that’s helped a lot). It’s not even keeping a monthly budget, though we do that (loosely), too.

Nope, the #1 thing I’ve done that has helped us stay the course is to track our net worth every. single. month.

I already wrote a whole post dedicated to why and how I do this, so I won’t go into too much detail here. But basically, I track our overall net worth as well as a subset of all the things that contribute to that (such as the current values of all of our retirement funds, or how much we have saved in our emergency fund). Knowing that I’ll be entering all those numbers into that spreadsheet every month and seeing our progress (or not) towards our goals motivates me to make sure I’m at least doing SOMETHING every month to make sure we’re not losing sight of our Big Picture Goals. Because let’s face it—it is HARD to pass up the shiny, new things you want RIGHT NOW (usually books, in my case) in order to put away money for the distant future. While we don’t deprive ourselves completely (for example, I joined Book of the Month for my special monthly treat to myself, and we opened up a “fun money” account to put some funds aside every month for Matt to use however he wants), tracking our progress helps to ensure that we don’t give into every whim.

Another way I keep myself on track is to keep my amortization schedule handy for my mortgage and to highlight each monthly payment amount as we reach it so that I can clearly see how far ahead of schedule we currently are. In the past, I also printed off a free debt payoff chart from the Internet and colored in a square every time we paid off a certain amount towards the mortgage.

While you don’t have to nerd out and do a big ol’ spreadsheet like I do every month, it has been proven time and time again that when you record and measure your progress, your progress rate accelerates. So if you’re looking to make some headway towards some financial goals, give this a try! You might be surprised at how much it helps.

Final Thoughts

I still need to sit down and hammer out some more specific numbers in order to get the plan fully in place, such as the average amount of headway we need to make per month to reach each of our three sub-goals in this. But even just having this general plan thus far has already made a difference in how I approach our money each month—instead of waiting to see if there’s money left at the end to go towards goals, I make it a point to make some headway upfront, and I let the rest of the month take care of itself.

I’ll be breaking down this topic further in future posts, but I wanted to drop this here on the blog so that you could know what we’ve been working on!

I’d love to hear your thoughts on retirement, especially retiring early. Is this something you’d ever consider?

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