Reader Case: Can I Retire at 45 to Become a Yoga Teacher?

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Well, after 19 hours of travelling (we had a connecting flight which was delayed multiple times), we ended up stumbling to our Airbnb, all blurry-eyed, at 4:30am in the morning. Luckily we managed to inside without being robbed or mugged, fall exhausted into bed, only to wake up 6 hours later to launch an app. Good thing we’re retired, because I have no idea how we would’ve been able to accomplish this if we were on vacation and had to work the next day.

Needless to say, this is going to be a pretty hectic week with the app going live and all, and presenting in front of a crowd of rowdy librarians (seriously, librarians are the biggest party animals ever at launch parties, I kid you not.). So before we get buried in support e-mails and launch party logistics, I’m going get this Reader Case out:

Photo Credit: by Kennguru (Own work) [CC BY 3.0 (], via Wikimedia Commons
Hi FIRECracker,

I’ve never emailed a blogger before so here goes. I love your website (as gleaned from Greaterfool, a little flattery never hurts)! I especially love your case study posts, which break down clearly in numbers how to achieve financial freedom by a certain age. As a lawyer, numbers are not my strong suit. I would be honoured and thrilled if you would consider me for a case study.

I am hell-bent on retiring by 45 at the latest. I hate being told what to do, when I can take vacation, etc. It’s too bad I realized this after 7 years of mind-numbing, bank account ruining university. However, despite pointing a few people your way, most think I’m smoking something that isn’t quite legal yet. I am a 30-year old corporate lawyer. My partner is a cop so he has secure employment, and a pension that will guarantee him a good retirement income in 15 years. I am very jealous. For the purposes of this email / case study, lets take him out of the equation. We would only ever buy a house (currently not even a realistic prospect given where we live) based on his income alone. We would both like to have kids in the future, so I would estimate that we will have two kids, as I know that kids greatly impact a family budget. After retirement, I intend to teach yoga and I am currently completing my certification. If required, I could also do freelance legal work (this would certainly pay more than yoga!).

Last year I saved roughly $40,000 in my RRSP and TFSA and in cash. I saved $30,000 in my TFSA alone, and I had employer matching in my RRSP. My contribution was about $7,000. I also saved about $4,000 in my emergency fund. In total I increased my net worth by about $41,000 in savings alone.

I am starting a new, higher paying job soon and the numbers below are based on this new position.

So here goes:

  1. Gross Income: $118,000 base + $7670 employee matching
  2. Net Income after all deductions (Taxes, CPP, EI, Share Purchase Plan and Pension): $68,803
  3. Monthly Family Spending: Roughly $2400 (Perhaps $5000 total, we do not share finances)
    1. Rent is $1,900 – I give $1,100 to my partner to cover rent and utilities
    2. Car: $322, $130 insurance, ~$60 gas
    3. Bus Pass – $140 – new job has no parking currently, if I park there it will be $180/month parking plus and additional $70 in gas
  4. Liabilities: No debt
  5. Fixed Assets: No fixed assets (car is leased for another 2 years at $322/month)
  6. Net Worth: ~$96,000
    1. TFSA – $41,2000
    2.  LRSP – $17,522 (cannot use until 65)
    3. RRSP – $32,080
    4. EF – $5,000 cash

I am not going to succumb to lifestyle inflation as a result of the new job. After everything is said and done, the actual revised take home after deductions is about the same (my current salary is $88,000 + $3,000 employer match). My barebones fixed expenses are roughly $1,700 a month. I had the unfortunate experience of living on EI after articling and I know that this is roughly the amount that I would be paid by EI if I am ever terminated without cause. It makes me nervous to deviate too much from this number.

I would greatly appreciate if you could let me know the following:

1. Whether I am in fact on track to retire in 15 years? I would love to say I told you so to all the naysayers; and
2. Whether in your opinion transferring accounts to Wealthsimple through an advisor is worth the additional investment expenses? I know you use an advisor and would appreciate the input. I currently have my money invested in ETFs through Scotia iTrade. They have a bunch of commission free ETFs that I purchase every two weeks.

Sorry for the long email! Thanks for taking the time to read and consider my situation.


Wow, a lawyer and a cop? The two of them could start their own crime drama TV show. Albeit, a very very boring CANADIAN crime drama TV show, but you know, whatevs.

OK so on to the numbers and MATHING THIS SHIT UP.

Overall, CL’s spending is well-controlled and her income is good, so that’s good. She’s also taking advantage of her TFSA (Roth IRA for Americans) and her employer’s RRSP (401k for Americans) match, which is also good. They should both be maxed out each year.

Since her finances are separate from her husband’s, we only have to look at her income and spending.

At a current monthly spend of $2400 x 12 = $28,800 annually, as per the 4% rule that gives us a target portfolio size of $28,800 x 25 = $720k.

And running our projections, given her current $40k savings rate ($68,803 – $2400*12) + $15,340 in RRSPs each year ($7670 her contribution, $7670 from her employer) = $55,340 and a conservative 6% ROI, she’ll be able to retire in 9 years:

YearStarting BalanceAnnual ContributionReturnTotal

So I’d say she’s doing quite well! At her current trajectory, she’ll be able to retire at 39. And it’s even better that she’s booting up that side hustle as a yoga teacher now, because that may make that retirement date even sooner. If she could come up with a halfway decent estimate of how much she’d make as a yoga teacher and doing freelance legal work, she can reduce that number even further because her portfolio only needs to make up the difference in your monthly spending and her new freelance income.

For example, if she can estimate an after tax income of $10k from those activities, her new FI number is $28,800 – $10,000 = $18,800. Now multiply by 25 to get a portfolio target of $470k, which means she’d get there in just 6 years. So she could potentially be done @ 36:

YearStarting BalanceAnnual ContributionReturnTotal

A couple things to watch out for. The first one is her partner. CL needs to make sure he is aligned with her desire to retire. If he decides to ramp up their spending she may be forced to bail them out and it would screw up her numbers. I’ve seen this happen to many friends who try to keep their finances separate from their partners. They SAY their finances are separate, but when their partner does something dumb like buy a car behind their back and then falls behind on their payments, they’re forced to bail them out.

The second one is kids. She mentioned that she’d like to have 2 kids. Since she’s Canadian, she won’t have to worry about healthcare expenses for them, and college costs are much more reasonable than our American neighbours, but it still makes sense to set some money aside. One of the best way to do this is contribute to RESPs (Registered Education Savings Plans). You can contribute up to $2500 annually for each child, and the government will match $500 each year, up to a total cumulative limit of $7200 per child. So that means the government would match your yearly contributions for 14.4 years for each child until you reach the $7200 limit. So if you put away $2500 per child annually, and invest that money tax-free at an average 6% return, for 2 kids after 18 years you would get:

YearStarting BalanceAnnual ContributionReturnTotal

So they would have $181,059.30 set aside for their 2 kids’ college expenses at the end of 18 years. Now, the costs set aside to raise kids is different from parent to parent. I know people who have raised them completely within the CCB (Canada Child Benefit) and other people who spends tens of thousands on daycare, toys, throwing lavish birthday parties, etc. It really depends on what type of parent you are.

Also, assuming her husband continues to work, he can use his insurance to cover their dental needs and additional costs of raising kids.

So assuming CL takes care of saving for their education in your RESP while tax credits + her husband takes care of the cost of food/clothing/dental costs etc and contributing to RESPs after you retire, this will set CL’s retirement date back by JUST 2 years:

YearStarting BalanceAnnual ContributionReturnTotal

This means CL will still be able to retire at 41. So, as of right now, she appears to be on track to early retirement within a decade. Congrats!

To answer her question about Wealthsimple, since we haven’t used it ourselves we can’t comment. Generally, we suggest people learn how to invest on their own before using a robo or otherwise as a crutch. This is why created the Millennial Revolution Investment Workshop every Wednesday so we can teach people how it works for free:

Those are our 2 cents for this dynamic duo. What do you guys think? Chime in the comments!

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69 thoughts on “Reader Case: Can I Retire at 45 to Become a Yoga Teacher?”

  1. This is a great case study! I like the suggestion to continue doing legal freelance work if needed while pursuing the yoga instructor passion.

    And I could not agree with you more about being aligned with her partner. Its amazing how either helpful or detrimental a partner/spouse can be in one’s financial life!

    1. Thanks, MAR! It’s definitely important for the partners to be aligned. Very hard to row a boat if you are rowing in opposite directions.

  2. I’m guessing you have more information that tells you CL’s gender. I know you’d never just assume CL was a woman! 🙂

  3. Not that it matters but ditto to David’s comment. I was wondering the same thing as the readers question seemed a bit ambiguous while the response was very definitive.

    Anyhoo, canadian lawyer great start to your FIRE journey. I would say you literally don’t need more than the investment series refered to in the article to manage your money yourself. In fact, after weighing the various options, including roboadvisors, I used the millennialrevolution investing series to guide me through setting up a self directed account through questrade last month. It was so easy to get going. I’ve been investing in my account for about 6 weeks now and I’m so glad I’m doing it myself and not paying a fee ( no matter how small) to a robo advisor. I also recommend and andrew hallam’s book ” the millionaire teacher”. I read that whole book in half a day, it does a great job of simplfing investing. With the the millennialrevolution investing series, couchpotato model portfolios and andrew hallams book, I’d say you have all you need to get going on your own, do it!

    1. To answer your question, yes, I know CL’s gender. Some details in the e-mail had to be removed in the post to preserve anonymity.

      And thanks for the kind words on the MR investment series, Alana! I’m glad it’s been helpful for you. And yes, we also love canadian couch potation and “millionaire teacher”. Highly recommended.

    2. Thanks so much for your thoughtful reply! I thought I was seeing things at first when I saw my question tonight but I guess it was interesting enough to be featured! A friend of my partner’s is a financial advisor and suggested going with Wealth simple (through him of course) and it just didn’t feel right so that motivated the question. I so far have done alright following a 60/40 split on my own. I am going to print out this thread and make sure to read those books. Thanks again!

      1. hey CL! thanks for joining us and commenting! Meant to send you an e-mail to let you know your case is up, but it’s been a bit of a hectic week (app launch and all) and it slipped my mind. Sorry about that!

        1. All good I was at a wedding out of town this weekend anyhow and didn’t have data (have a cheap cellphone plan… go figure right!) So I wouldn’t have seen your email anyways. Thank you so much for taking the time to read and respond and ultimately post my questions on your blog. Seeing the actual numbers and knowing I’m not insane is very gratifying and I really appreciate you taking the time to do that. Regardless whether I actually pull the plug on my law degree or not is not really the point right now. I’m trying to buy myself options so that I’m not forced to continue in the profession simply due to lifestyle inflation. Stories like yours have really inspired me to pursue this path and have shown me it’s possible no matter what anyone else says. Oh ya… also that buying a house in the GTA is lunacy and we are constantly explaining why we are renting! I will keep saying no thanks to that thankless purchase! Thanks for all you do and I will most certainly be taking the investment series to heart.

  4. I know this is just the earliest possible retirement age given in these comparisons, but it always kind of blows my mind that someone working in a high flying career like a lawyer or doctor, earning well over 6 figures, would be happy to give it up to live on $29,000 (well below average wage) a year just to retire early. I’m a huge proponent of FIRE but I could never give up such an enormous salary and the luxuries that go with it to live a life of mediocrity (okay retiring at 45 isn’t mediocre, but their lifestyle will be for their entire life). I guess I just see it as a huge wasted opportunity. I couldn’t go through almost 25 years of education, get myself into the top 2-3% earners only to throw it away after 10-15 years of work to live on $29,000 a year, no matter how freeing it is.

    Put off your retirement another 5 years and that $788,000 will become $1.4 million, giving you $56,000 to live off instead of $29,000. Now THAT is enough to live a pretty luxurious life for the next 30 or 40 years.

    1. @FIRECracker What kind of app you guys are launching ? As an engineer, I always wanted to quit my job and focus on the launching my own business.

      1. It’s a book discovery app we made for a non-profit.

        I would say, in terms of launching your own business, it’s best to start building it on the side while you are still working (easier said than done, I know). We also found that it’s important to find a business partner who is good at marketing because that can make or break your app. You can write the best code ever, but if no one knows about your app, it won’t matter. Coding is 30% of the work, marketing 70%.

        1. Nice. That’s amazing putting your eng skills to good use.

          I know i have been doing that on a side. Couldn’t agree more coding is not the hardest part. I am in the stage of finding a business partner but it’s hard to find someone who’s passionate as much as you’re.

          1. Nice! It’s definitely hard doing that while having a full-time job, but as they say “do what others won’t today so you can achieve what they can’t tomorrow”.

            As for the business partner, generally you’ll want to find someone in the community that you are building the app for. You start with finding out what the community needs, and then making connections through there to build exactly what they want. Once you are embedded in the community, you’ll find people just as passionate as you about the project.

    2. ” I could never give up such an enormous salary and the luxuries that go with it to live a life of mediocrity…”

      That’s why you are not CL and she is not you. Good thing we’re all different people with different tastes and preferences. Otherwise the world would be a very boring place.

      1. An early retirement is entirely subjective. I could retire early and move to Ethiopia and live like a king if I wanted.

        All I’m saying is I would find it hard to have the ability to live a life of complete luxury only to give it up to live a life of still worrying about money. If this person is happy to give up a large six figure income to retire with a $29,000 cash flow and subsidize it with side income in retirement, so be it.

    3. @Vancouver Brit I do see your point and to be fair my husband has argued the same point. He asked why i would give it up when I have just hit my peak earning potential. The money is nice sure, but far from my main driver in life. This portfolio would cover my base expenses and then I will have freed up time to work at things I actually want to do. That’s also why I mentioned doing freelance legal work. After 10 years more in the profession I will be marketable enough to work for myself. I have no intention of living a life of poverty level spending. I love to travel but I already manage to do that on my current expenses. My plan is to cover my fixed expenses and supplement as needed. Also, my husband saves a decent amount per year as well and he will eventually get a pension. At the end of the day, we will not be eating cat food (we will leave that luxury for our cat 🙂 ).

    4. It’s all about priorities. Obviously, Vancouver Brit, yours and Canadian Lawyer’s are very different.

      I’m very fortunate that I was able to retire (last year, at age 43) from a career that was no longer a good fit for me. Now, I travel whenever I want, garden, paint, spend time with people who are important to me, and I organize a food/gardening social group in my city. I might start a small business later, but I have no intention of working for someone else ever again. Mediocrity? Bah!

    5. I’m in a financially better boat, but still have the exact same desire as CL. Everybody’s style is different. Don’t discount the awesome goals of others just because they don’t suit your tastes!

      Also keep in mind that it’s very likely CL will continue to bring in income, so the portfolio should grow drastically over the following few decades **before** “normal” retirement age.

      You go, CL!

  5. What about mat leave? Probably no income for at least a few months (if not a year) x2. Then childcare costs for the years the couple is still working full time away from home. A rather big omission!

    1. In Canada, your employers must pay you for at least 6 weeks while you’re on mat leave. Then you’re on EI afterwards. So no, there would not be no income for a few months or years. Even if her savings drops to half for 2 years, we’re looking at a few months to a year of delay for her retirement. No big deal.

      The childcare costs is a good point. I don’t know how much childcare costs are in her area, so that is something she would need to factor in. Also, it depends on when she decides to have kids. For the first year, she would be on mat leave so no childcare costs there, and at the age of 4 onwards, kids go to school, so no childcare costs there. At most she would need child care costs for 2 years for 2 kids, which she can factor in to see if her husband’s salary can cover it.

      1. Absolutely false that the employer must pay for any amount of mat leave. Depends on the job, but I would guess large majority do not offer mat leave ‘top ups’. Yes there’s EI, approx $500/week before taxes.
        Assuming mat leave of 1 year, that’s 3 years of child care needed before eligible for school (1 yo to 2yo, 2yo to 3 yo and 3 yo to 4 yo), per child.
        Yes kids go to school from 4yo onwards however only from 9am-3:30pm, and only Sept-June. Unless their jobs are flexible or they have willing family around, many parents need before and after school care to cover their work day, as well as child care for PD days, March and winter breaks, and the whole summer.

        1. Forgot to add, I don’t know how lawyers get compensated but independent contractors typically don’t pay into EI so not eligible for EI on mat leave.

          1. Yes, are you right about the mat leave. The 6-weeks mat leave I’m remembering is only offered by certain companies.

            As for her position, I was under the impression that she is a full-time employee (hence the employer match for RRSP) and not a contractor, so she would be eligible for EI. The freelance part would only happen after she retires.

            1. That’s correct. I’m a full time employee with a top up. My husband is as well. My income would definitely go down for awhile but so would certain expenses related to working. I have lived on EI before so I know it’s no picnic but having the employer match goes a long, long way. His salary can definitely cover it.

          1. True for school age related child care costs. But if she waits until she’s retired at 39 to start having kids, she may not be able to get pregnant.

            1. I wish I had 9 more years to wait to have kids but sadly you are right. It’s not worth risking my fertility. I’d rather work awhile longer not to have that issue. I’m just trying to strike the appropriate balance between working, saving and having a life and having g a family is a large part of that.

              1. I hear you, it sucks that the most fertile time is when people are generally still early on in their career. I brought the age thing up because some women have a warped perception of fertility by seeing Hollywood actresses routinely have babies after 40. The truth is after 35 fertility really does start dropping off precipitously. So wait until you’re ready, but don’t wait too long!

                My other advice would be to make sure you and your partner are on the same page about finances and starting a family. Splitting up is financially bad but adding kids to the mix is probably financial ruin with respect to being able to retire early.

                I wish you the best of luck! It’s an exciting (and nerve-wracking) time of life, but it sounds like you are on your way to being well prepared for it!

  6. A lawyer and a cop… Nnnnnice, I like this case study just because of this. (I have to mention that I LOVE cops and have a lot of friends in blue).

    This plan is very doable (is this even a word?) but with only one assumption – you, guys, have to be on the same page financially.

    I’ve been married for 10 years and for the first 7 years we were stupid and followed examples from our parents, we didn’t combine our finances and didn’t share our financial goals. And it was tough, I can tell you that.

    But 3 years ago we mage a couple of changes:
    – We combined our finances and bank accounts
    – We shared our goals and became on the same page
    – We started doing monthly budget (every month)

    All these helped a lot, not only for our finances, but for our marriage as well.

    Friendly Russian

    1. I say “doable” all the time. It’s not really a word, but I don’t give a crap 😛

      Kudos for working out the finances with your spouse! I can see how it can be challenging if both people are not on board.

    2. Thanks Friendly Russian your comment is duly noted. Also we hear that all the time everyone thinks it’s funny we are together. It only works because I’m not a criminal lawyer 🙂 we just became common law for the purposes of the income tax act so we will have to look into the benefits more fully. I definitely agree with at least being aligned on the mutual goals for the future and we have been talking about what that will look like. We aren’t actually married yet so combined finances I guess just have not been on our radar, if we continue down this path together though then it is something we will seriously consider. It seems that nothing breaks up a partnership quite like money so it’s an important conversation to have! We have also talked a bit about pre nups as he has been working longer and has more assets to lose. Nothing signed yet though. Thanks again, a welcome reminder to have an important discussion!

  7. “However, despite pointing a few people your way, most think I’m smoking something that isn’t quite legal yet” that’s why I’m so reluctant to tell people about this site. Aside from my spouse I have only told 2 people about this site because I haven’t even told many people that I’m semi retired now and my spouse is fully “retired” (not earning a paycheque but building his art career) because I know people are just going to be jealous and bitchy about it. I grew up in a family that trash talked everyone behind their backs and almost every place I’ve worked has been largely the same so I don’t like sharing this stuff with people unless I think they are going to be open minded about it and there is a good chance they can benefit from it. I know so many people who would find out what it was about, look at their own financial situation (most of my relatives and coworkers are completely broke living paycheque to paycheque and wouldn’t be able to invest anyway) and be like “I could never do that” and then just use it as more fuel to badmouth me with.

    1. Your comment reminds me of the quote: “We have to do the things others won’t do today so that tomorrow we can have the things other won’t be able to have”. (paraphrasing). I think Les Brown said it.

      1. “We have to do the things others won’t do today so that tomorrow we can have the things other won’t be able to have”

        awesome quote. have to remember.

      2. Yes but in the case of FIRE it’s more like “We have to do the things others won’t do today so that tomorrow we can DO the things other won’t be able to DO” since FIRE isn’t so much about having as it is about doing.

      3. Also, while we are sharing quotes. “no one’s yet explained to me exactly what’s so great, about slaving 50 years away on something that you hate, about meekly shuffling down the path of mediocrity, well if that’s your road then take it but it’s not the road for me” – Photosynthesis by Frank Turner. It is an awesome song about being an artist and refusing to give up on your dreams and follow the herd but that line applies to FIRE as well.

        I play write songs, sing and play guitar and when I turned 29 a couple years ago I did a cover of that song for my birthday and posted it on facebook. Last Christmas I was visiting with some relatives and a was talking to my cousin’s spouse who is a stay at home dad. I knew he would totally understand why I was selling my house and moving to a place where it was cheap to live to pursue a more enjoyable career path so I shared my plans with him. Later that day his son asked me to play some songs for him, a lot of the songs I know aren’t suitable for kids so I played Photosynthesis and when that line came up I looked over at the dad and gave him a nod and he had this huge grin on his face and the other 8 people in the room had no idea why. I felt kind of bad though because on the other hand my dad was also there and I know he worked hard to support our family at a job he hated but he did it because it paid well.

    2. I hear you, Liz! It’s definitely challenging for others to understand FIRE, and I can see why there would be jealousy and bitchiness. I tend not to talk much about it with my friends and family either…I only open up if they ask. That’s why we love meeting other FIRE people and chatting with this FIRE community online. Only us weirdos understand each other. And that’s okay. Going against the herd is hard but it’s SO worth it!

    3. I’m glad someone else understands where I’m coming from. At times I wonder if I have gone off the deep end but then I have to remember that I have a fundamentally different relationship with money and spending than 99.9% of people. I did not grow up in a wealthy family. I grew up knowing I needed to save money and I paid my own way through 7 years of university. Saving money can suck but worrying about how you’re going to pay for basic essentials sucks more in my opinion. I never want to worry about money again and this is a way for me to have some level of financial independence / security. I have stopped talking about this to all but a few people and keep my friend group to people who are OK with more moderately priced activities (eg hiking, baking, etc.). Going to pricey restaurants is enough to induce an anxiety attack for me.

      1. “At times I wonder if I have gone off the deep end but then I have to remember that I have a fundamentally different relationship with money and spending than 99.9% of people.”

        I actually feel like everyone else is crazy and my spouse and I are of the few sane ones! I can’t believe the way people dump their money on things they don’t need: buying brand new expensive cars, buying the newest iphone every time a new one is released even though there’s nothing wrong with your current phone, pricey restaurants as you mentioned, going out to concerts or just dumping a ton of cash at the bar/clubs, etc.

        “Saving money can suck but worrying about how you’re going to pay for basic essentials sucks more in my opinion.”

        Totally! It blows my mind when I see people who blow their money on tattoos and salon visits and then complain about how broke they are that now they can’t afford to buy medicine or now their pet is sick and they can’t afford the vet bill.

  8. Sounds like a great plan. They can retire at 39 or as one commenter mentions hold out? to 45? The choice is up to the couple and they can adjust their plan as they go. The important thing is that you have laid out the numbers for them … and so they have a basic idea of an earliest case scenario … to measure their progress against …. etc etc etc …. Many FIRE folks don’t necessarily fully retire when they reach their number goals … but have a choice to continue on and/or do other things part time etc through various side gigs … or even start a bizness 🙂 etc etc etc … God Bless, Beijing, China 🙂

      1. So true, Michael. The decision is always flexible. If they end up with unexpected childcare expenses, they can always delayed her retirement. And if they end up saving more than unexpected, accelerated it. Nothing is ever set in stone. FU money gives you the flexibility to choose. They can always massage the plan and change it as they go.

      2. Thanks for the comment Michael. The age is not set in stone. More so I was trying to see if it was even possible. It was gratifying to see that the numbers actually worked and I could show my partner that I’m not crazy! As a lawyer numbers are not my strong suit! I can’t say that I go to work burning with a passion for what I do so the more money I save the more options I create for myself. I have never been one to just sit around so I would no doubt start some sort of side gig or even volunteer. I would love to stay home with kids if I’m lucky enough to have them but then it could be difficult to return to work, so it would throw the entire calculation off. All things I will have to consider in a few years.

      3. Or he could. Why does everyone assume that it would be her? He’s a Canadian working a full time permanent job, so he’s got the ability to take up to 6 months leave. Given he’s a cop, chances are reasonably good that he’s got the option of a paternity leave top up through his collective agreement. I know my husband (who’s a consultant) would have fought me for some of the leave time had he had that opportunity.

  9. I know it complicates matters, but you should take inflation into account when calculcating these retirement dates.

    Given an average inflation of 2%, in 9 years time you would need $34,419 to buy what $28,800 buys today. This means that if she wants to retire in 9 years time, she actually needs $860,467 (given a 4% withdrawal rate) instead of $720,000.

      1. True enough, but the 4% rule only starts taking into account inflation once you start withdrawing – you still need to adjust today’s required income to inflation between now and the date of retirement, no?

        1. No, because she’s still working when she’s building up the portfolio. While you are working, your salary goes up 2% a year to account for inflation. So the money she’s putting into the portfolio is already inflation adjusted.

          1. Regardless of the income she earns now (inflation-adjusted or not), your calculation of the amount of money she needs to retire is still based on today’s living expenses, which you need to adjust for inflation.

            1. No. The $28,800 is future dollars because, as a I said the $720k portfolio she’s building up is future dollars since her salary is increasing at the rate of inflation. So once she reaches retirement in 9-11 years, the $720k portfolio (in future dollars), will be generating $28,800 in future dollars.

              Yeah, I know, it’s confusing.

              1. I think he’s referring not to salary which will be rising with inflation to cover future contributions, but the existing and near term investments which will grow by an estimated 6% and increase just to today’s goal numbers– not tomorrow’s future inflation adjusted numbers. And I think the answer to that is that our “conservative” 6% targeted investment return is an inflation adjusted percentage with the real nominal return something like 8% (feel free to correct me if I’m wrong).

  10. This is the second reader case that involves a reader who plans on having kids on the way to FI. Those are admittedly hard cases to analyze as there are too many unknowns on the way that can throw the math off course. Firecracker was also very specific about how the question the blog is trying to answer is never “should we have kids or not?”, but rather “should we buy a house?” (last weeks case) or “am I on track to FIRE?”, so taking kids into account is beyond the scope of the analysis.

    Here are a few words for CL to take into consideration when making her plans. CL sounds like she feels she is playing financial catch-up (“It’s too bad I realized this after 7 years of mind-numbing, bank account ruining university”). I am feeling the same, but in my case I realized those things after 7 years of university, 2 years of college and 2 kids. So, here are a few words of what I would suggest you do in order to realize your FIRE dream, based on what I see from where I am (already having the 2 kids and struggling to save enough).

    1) Plan whether you are going to stay home with the kids and for how long. That will depend on your employer top-up (if at all) and your income needs. Factor the lost income (and lost RRSP contribution and employer matching) into your calculations. How long you plan on staying home will lead you to the next point:

    2) Talk to your friends who already have kids and live in your area and find out the following:

    a) how much do they pay for daycare and before/after care (both in the daycare years and in school years)? If they are not having before/after care, how do they manage (Stay home parent? working half days? Working from home? Grandparents?) See if there are parent groups in your area that share this load (one parent taking a few kids after school).
    b) how much do they pay for summer camps (with before and after care)? Or, same as a above, what are the alternative options?

    Those two (daycare/before/after care and summer camps) are the bare minimum you need in order to keep working full time when you have kids. In my area, full time day care with before/aftercare is about 1300$/month per kid. (that’s increasing your current monthly spending by over 50%). Before/aftercare at school years by the YMCA is about 450$/month. If you have your kids close together you can have the first one home with you while on mat-leave with the second, but keep in mind it is hard to plan when exactly you get pregnant… (and for FIRE purposes, having twins will be best. Seriously. One mat leave and you’re done, 4 years only till both kids are at public school).

    3) I didn’t really understand FIREcracker take on contributing to your kids RESP, but they way I see it is you are going to put away 5,000$ a year for their RESP (2,500$ per kid in order to maximize government free money). That will add 415$ to your monthly budget. Just factor it in when you do your budget.

    4) FIREcracker mentioned that some parents manage to raise kids on CCB alone while other spend significantly more. I can’t think of one person who is able to do it on CCB. You can use the CRA online calculator to estimate your amount ( A quick lookup assuming 2 kids, an income of 10k for one partner (during your FI years) and 60k for the other gives about 650$ per month. Unless one of the parents stays home, care alone is more than that, not to mention diapers, cloths, etc. Oh, and if the first parent actually goes back to work (so those 10k for first parent becomes 60k) than CCB goes down significantly just when you need more help for more childcare. I’m really not sure how anyone in southern Ontario can have 2 kids expenses amount to 650$/month.

    I sound like I am completely shooting down FIREcracker and her plan but I really don’t mean to. I just think that every financial/math model needs really good input in order to give realistic answers. The cases of people planning on having kids have very fuzzy inputs in the projected expenses and I strongly suggest researching the projected expenses.

    I can’t think of how people with kids living in the GTA (with normal salaries) can save enough for FIRE *after* having kids. Most of the examples I see in FI blogs are either of couples who achieved FI before having kids (like GCC, or Mad Fientist) or that kept on working in some capacity. And this is the best and brightest point for CL: she is not actually planning to completely retire. She is really planning on a career change from law to yoga instructor (plus law consulting), which will allow her to ramp up her income if she finds that she needs it, and probably reap some self-employment benefits to reduce her tax load.

    As a struggling parent, I really hope you will go with the career change and wish you the best with it. Raising kids with a lawyers’ schedule is very hard on family life (I have a few friends in the profession and it is tough, especially for the ladies), so you are certainly on your way for a better plan by being a yoga instructor who can control her schedule. Do the right math and go get it!

    1. “I can’t think of how people with kids living in the GTA (with normal salaries) can save enough for FIRE *after* having kids.”

      We did, but admittedly, we’ve only got 1 (9 yrs), and while hubby is retired, I’m officially going p/t next month (staged exit). 🙂

      I agree daycare is atrocious in S. Ontario, but luckily our daughter hit JK just as full-day schooling kicked in & we lucked out in finding an aftercare only option in SK (lowered costs to the middling extortionist level). After SK we were able to move our work schedules so one of us could do drop off and the other pick-up.

      I also agree that summer camps can be ridiculous…but again, pricing can be all over the map (and not always an indication of quality), so doing some digging can be worthwhile.

  11. First thing I would say is mix your finances. You’re either a couple or you aren’t. It’s like swimming. Your foot in the water doesn’t count. Jump in or go home. There are a lot of tax advantages that come from cohabitation. Use them.

    Secondly employment. A law degree is a money machine. One of the most valuable tickets in existence. Don’t work for someone. Work for yourself.

    Lastly what are you doing with advisors and safe investments? You need more risk. Risk is money. You need to dive in.

  12. Great case study FireCracker! I think it’s also important to mention that she might want to save a bit extra before FIREing with kids.

    Kids are definitely an added expense, but a controllable one. They usually aren’t as expensive as the horror stories suggest.

    The costs will be unique to each family. This doesn’t mean you have to be locked into working until age 65, you just have to do a little more planning/saving when you have kids.

    1. Thanks for your take, Mr.Tako! It’s always good to hear from parents about what the real costs of raising kids are. As you said, it varies from family to family.

  13. Newbie question..
    If you factor in part time work (in an effort to retire from 9-5, which reduces overall FI number, in this case: $720k portfolio reduced down to $470k if earning $10k per year)… doesn’t this now assume that you’ll need to continue earning $10k per year forever? Or how should it be calculated if you want to work part time for say, 10 years… then fully retire?

  14. Great case! For all of these cases, I’m wondering about one thing — inflation.

    Do all reader cases assume there will be no inflation from the time one is starting retirement saving to the time one reaches FI? (Example – in this case it’s assumed CanadianLawyer needs $720k based on her 2017 spending level of $28k.) Wouldn’t she need a lot more than $28k to live off ten years from now when she retires?

    I too am a high earning lawyer-policy type with shameful, shameful math skills, so I am likely missing something. 🙂

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