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A frequent question asked by readers is: “What would you do if 2008 happened again?”
Would we cry? Whine to our mommies? Admit defeat and run back to work with our tails between our legs?
If you want to see what would happen if I whined to my mommy, read the book “Battle Hymn of the Tiger Mother”, and since I’d rather put a bullet through my head than go back to my previous employer, those 2 options are out.
Which is why we put multiple backup plans in place, like the Yield Shield, Cash Cushion, and Geographic Arbitrage.
But as much as I love touting the merits of thinking like an Engineer and having backups, sometimes you need a real life example.
Which is why I’m ecstatic to introduce you to Rob and Robin Charlton, an American couple who retired 12 years ago at the age of 43!
We met Rob and Robin in Iceland recently. I had been stalking–er I mean, reading– their blog and found out they’d be there during the same week as us, so I reached out and scheduled a coffee date. And as soon as we sat down and started talking time flew by! We could’ve easily chatted for a good 3-4 hours if we didn’t have plans afterwards. This always happens when meeting other FIRE people. We can’t even talk to our own parents for 3 hours straight, and yet, whenever we meet FIRE enthusiasts from all the world, even though we’re strangers at first, a few hours later it’s like we’ve known each other forever!.
Anyway, during our chat, we found 2 interesting facts about Robin and Rob:
1) They had regular salaries as a nurse and technical writer/coordinator, never making more than $89K combined.
2) They retired just 1 year before the 2008 financial crisis and managed to come out unscathed!
Of course, we had to invite them here to pick their brains. So without further ado, let’s find out how they did it!
Welcome to the blog, Rob and Robin!
First let us say it was great getting to meet the two of you in Iceland. We love serendipitous meetings of this sort in remote corners of the world!
Feel the same way! Okay, so what made you want to become FI and retire early?
I keep a journal and came across this interesting entry from way back in July 1995.
“It struck me the other day that if I did some easy kind of work for less money than what I earn now, I might very well have to work for the rest of my life. On the other hand, working hard now, I can save up enough to fund an early retirement and be done with it once and for all. If I’m lucky and live to a ripe old age, then 15 years of work and saving now could lead to 45 or 50 years of work-free living later.”
This was the first entry where I contemplated ultra-early retirement as a solution to my fundamental problem of having to work for a living at a job I was only okay with. I shared these ideas with Robin early on, got buy-in, and we were off and running.
I guess you could say I was never built to be a corporate drone! From a young age I always wanted to be a writer. Read: impractical. It took me nearly a decade just to get my bearings and find a career I could stand, and even longer to realize that making money could actually be a part of my escape plan from corporate America. I was past 30 before the gears began to click into place and I realized what I had to do. I had to “get in” before I could “get out,” working hard for a period of time to permanently put myself out of a job.
It’s not that I was lazy, exactly, it’s just that the kind of work I wanted to do didn’t pay anything. And since I wasn’t willing to subject my wife (and possibly kids) to a lifetime of poverty while I struggled to find myself as a writer, I felt I had to find another way. That way was investing. Back then there was no FIRE movement so we had to figure it out on our own. We made some mistakes along the way but in the end we got there.
Word! I totally agree with you on the impracticality of becoming a writer. We didn’t realize how little writers were paid until we started writing children’s novels on the side. Glad we didn’t quit our day jobs.
Okay, so you retired in Dec 2006, at the age of 43, from your jobs. What was it like living through the 2008 stock market crash as early retirees? Since this crash happened during the first 3 years of your retirement, how did you mitigate the sequence of returns risk?
The crash was pretty painful coming as it did right on the heels of our early retirement. We had one good year and then, Boom! We were in the midst of an expensive trip when the bottom fell out, so it felt a little crazy to be spending money on fun stuff at a time when our stock investments had dropped by 40%.
Luckily we had a strong bond position and that was a comfort. Bonds went up even as the markets went down, so we could withdraw money from there without feeling too bad. It’s for this reason we recommend investing in a bond index fund as your target retirement date approaches: it’s a safe haven during a storm. Bonds may return comparatively little during good market times but they’re a blessing in bad market times.
As to how we weathered the storm, the short answer is that I went back to work for a brief period of time so we could “tread water” in terms of our investments and take as little money off the table as possible until the markets could heal. A consulting job more or less fell into my lap and I jumped at it. A three-month proposal assignment turned into six months, and that more than covered our needs. In fact we ended up taking an expensive trip to Italy and Switzerland and a cruise to Greece and Turkey because of the extra cash the job brought in.
The worst of the Great Recession only lasted about two years. After that the markets mostly recovered, although it took five years before our stock funds finally started hitting new highs. Since then it has been relatively smooth sailing. Our nest egg has grown from around $925,000 when we first retired to $1.2 million today, despite withdrawing 3% to 4% per year for living expenses.
If the consulting job hadn’t conveniently appeared, our Plan B was to move temporarily to an inexpensive country overseas and live as cheaply as possible while we rode out the storm. Some place like Thailand or Mexico. We figured we could get by on $25,000 per year in a place where our dollar stretched further – and the travel we’ve done since then has borne this out. So remember, if the worst should happen, move to Thailand! Or Cambodia or Guatemala or Eastern Europe or a whole host of other countries or regions where your dollar stretches further. The move doesn’t have to be permanent, but what a fun temporary answer! And since you’re overseas anyway, you may as well consider renting out your home or condo if you have one, giving you another passive income stream to draw upon, one that’s not tied to the stock market.
Great minds think alike! That’s why we like to say: “If shit hits the fan, we’re going to Thailand”!
Speaking of Thailand, you’ve been traveling since retiring, but unlike us nomads, you have a home base ( a condo in Colorado). Tell me about your decision to have a home base. Have you ever considered being nomadic?
Well, this takes a little explaining. We actually have been nomads for about half of our early retirement years. When we first retired we sold our home for around $300,000 and invested the money in a bond index fund, then spent the next two years traveling around the U.S. and abroad with no home at all. Our expectation at that point was to stay nomads forever. But in the end we missed having a home, so during the depths of the Great Recession we bought a small condo in Boulder, Colorado, our old stomping grounds where many of our friends are based.
We’re probably the only people in Boulder who paid just $95,000 for a home in the downtown area, which is unheard-of low in Boulder. We bought the condo outright using proceeds from our bond fund. Mind you, it’s only 380 square feet but it gives us a nice place to call home when we’re not traveling. The condo has since appreciated to $230,000 per Zillow. The takeaway message is to keep your eyes open for opportunities even once you’re retired and to “think contrarian” – buying when others are selling and vice versa.
To carry on with our story, we happily lived in our condo from 2009 to 2015 in between travels, but eventually we came to realize the condo was just sitting empty for long periods of time so we decided to rent it out. We found a great renter and have since been on the road nonstop. It’s been three years so far and we expect to add a fourth year before settling down again. So I guess you could say we’re periodic nomads.
We’ve discovered renting out the condo makes for an excellent secondary passive income stream. It rents for $1,500 per month, which we can put towards other lodgings around the world. The income has helped us ride out the winter in a beachfront condo in Florida, hike the 500-mile route known as the Camino de Santiago in Spain, and rent Airbnb lodgings by the month in places like Ireland and Quebec.
Wow, $95K for a condo in Boulder is a fantastic deal! With the rent at $1500, you’ve even managed to get a place that follows the 1% rule of real-estate investing. Well done!
And I can see why you’d want to go back on the road again. The travel itchy never goes away–it ebbs and flows. Meeting in Iceland was so much fun and it made me realize that we all have the travel bug. Tell me about 3 of your most memorable travel experiences.
Same here! It’s usually when we’re traveling that we meet people who we think of as kindred spirits – people who love to travel and have a zest for life, and who like collecting memories and experiences more than stuff.
1) Our first trip immediately after retiring was to New Zealand and Fiji, a five-month trip altogether. After 15 years of full-time work and limited two-week trips, we were bursting at the seams to get started with “real travel” and couldn’t have picked a better first destination. We purchased a used car in New Zealand (selling it back again at the end) and started exploring. A definite highlight was “Adrenaline Week” in Queenstown when we went bungee jumping, skydiving, tandem hang gliding, jetboating, and aerobatic flying all in one crazy week. One adventure just seemed to lead naturally into the next. Over the course of our trip we also went zorbing, swam with dolphins and seals, kayaked in Doubtful Sound, and hiked more than half of the Great Walks in New Zealand, logging some 300 miles on foot. Three weeks in Fiji relaxing on three different islands afterwards made for the perfect reward.
2) The Galapagos was a dream destination for us and it lived up to our dreams. We spent a week on a yacht (half price if you purchase it last-minute in Quito) and another week island-hopping. We knew about all the unusual land animals in the Galapagos but were surprised at all the underwater fun – like getting to snorkel with penguins! Watching them zip around at what felt like light speed chasing fish was something we’ll never forget. Equally memorable was diving into the water and immediately being confronted by an enormous manta ray with a 20-foot-long wingspan – every bit as big as the dive boat we were on.
3) We were also surprised at just how much we enjoyed the Camino de Santiago, a 500-mile trek through northern Spain. It mixes history, spirituality, camaraderie, and nature in roughly equal parts. (And wine: don’t forget the wine.) You hike from one town to the next and sort of fall into a rhythm that’s deeply relaxing. You take your meals together at “pilgrim dinners” most nights. We chose to sleep in private rooms as dorm sleeping isn’t really our thing, but that’s the beauty of the Camino: you can tailor it to your own needs. You can also go as fast or as slow as you want, it’s all up to you. We made great friends along the way and felt uplifted by the whole experience.
We’ll honor your three-trip limit and stop there! But for those interested, we detail all of our travels on our webpage, Where We Be.
Sounds like a blast!
During our chat in Iceland, you mentioned that both of you had to take some time off traveling to take care of elderly parents. What was that like? Did it change your perspective about early retirement or travel? Did it change any financial goals?
When Robin’s mother had a stroke, Robin became her primary caregiver. She spent close to four years caring for her, and having the time to do that was precious to her. If Robin had still had her full-time job in Colorado this would have been impossible for her, since her mom lived in Maine. Of course our traveling was limited to shorter trips during this period of time, but this is where the perspective comes in and you realize there are other things more important than travel when it comes right down to it.
Being financially independent let us do what we needed to do without worry. We could follow our hearts and be where we needed to be without concern for money. When my dad passed away around this same time, I was able to spend time with my mom helping her through that transition. And more recently, when my mom’s home flooded during Hurricane Harvey, we were able to devote several months to getting her back on her feet again. The point is, when the unexpected happens, financial independence makes it so much easier to be where you need to be and do what you need to do. If anything we spent less during these periods than usual since we weren’t traveling as much. We find life can be pretty inexpensive when you’re mostly cooking in and staying put.
While Robin was caring for her mom, I found I had more time on my hands than usual, so this was when I ended up writing the book on How to Retire Early. The lesson here is that even when life takes you in a different direction than you expected, you can make the most of it and achieve life goals that are important to you.
Of course elder care becomes more likely as you and your parents age, so if you have no kids, then there can be a nice little window in your thirties and early forties when it’s easier to be footloose and fancy free. If you happen to retire extra early, this could be one of your best chances for carefree world travel.
Great point. We’ve also found that after FI, we’ve had more time to spend with our family and friends, despite all the travelling. And eventually when we’re needed, we’ll settle down and help out with parents, as you did, but it makes sense to get as much travelling under our belt as possible before then.
Let’s talk about your book. You co-wrote “How to Retire Early: Your Guide to Getting Rich Slowly and Retiring on Less” and it’s getting great buzz through word of mouth in the FIRE community (the book is what led me to your blog). What inspired you to write it?
A year or two before our book came out we were just living our retired lives and traveling around the world and loving it. We had no thoughts of writing a book, but we did have a bulleted list of twenty tips on Where We Be about how to retire early for others who might want to do the same. A journalist happened upon this page and asked to interview us. Her article ended up getting featured on Yahoo, so one day we woke up to our own mugs smiling back at us from Yahoo’s homepage:
The result of our fifteen minutes of fame was a flood of emails in our inbox and 130,000 hits on Where We Be, which up until then had received so little traffic we thought of it mostly as a travel sharing site for family and friends. The flood of questions we received was the impetus for the book. We came to realize we had a story to tell, and that a fair number of people were starving for the kind of information we had right at our fingertips from having just lived it – information on the practical aspects of how to retire early.
The emails we received were filled with specific questions, many of them about health care, but also about how much money we retired on. Others asked how much of a nest egg was enough, where did we invest our money, how much did we withdraw each year, and oh, by the way, didn’t we worry about running out of money?
As we responded to these emails we began to realize we had the initial building blocks for a book. We decided to provide the kind of book we would have liked ourselves: one that was heavy on details and provided hard numbers that could be used as a sort of yardstick to measure one’s own progress on the road to early retirement. I had searched for exactly this kind of book as we were planning our own early retirement and hadn’t been able to find one.
Keep in mind we started investing in earnest back in 1995 and retired in 2006. There was no FIRE movement during our investing years and virtually no books about retiring early that you could put your hands on. None provided the kind of concrete details we were looking for about exactly how to retire early. Your Money or Your Life influenced us on the frugal living side but not so much on the investment side, focusing as it did on laddered bonds back in a day when bonds had provided substantial returns. What I mostly relied on was Kiplingers articles about how to save for a typical retirement at age 65. As our savings grew I created an Excel spreadsheet to track our investments and carefully noted our financial totals at the end of each year. All of these details came in handy when writing the book.
“So you were more or less flying blind towards your goal,” is the way you put it to us in Reykjavik, and that’s about right. We tried to make what seemed like wise financial decisions and hoped for the best, but we had no real role model to follow when it came to the specifics of retiring early. You might say we served as human guinea pigs for what does and doesn’t work.
The FIRE movement that has since blossomed has been wonderful to watch, and we’re excited to see so many young people getting off on the right foot from the very beginning. There’s a lot of great information out there now, and people like you are achieving financial independence much earlier than we did. Retiring at 43 is starting to look a little mundane by comparison!
Okay, I’m pretty sure the Internet Retirement Police is going to be all up in arms now that I’ve mentioned you’ve written a book. Did you ever expect to make income in retirement? Has that changed your finances at all?
Well, I’ll go ahead and state the obvious: Financial independence simply means you get to determine your life goals without particular concern for money. Money is no longer the primary driver. It doesn’t mean you can’t work or can’t make money, but since you presumably already have enough to live on happily, it’s typically a secondary or tertiary consideration at best.
For instance, I like to write and have always dreamed of being an author, so for me it’s a fulfillment of a dream to write and publish a book. This is very different from having to work a 9 to 5 job, one that I may not be all that thrilled with in the first place, just to make ends meet. Some people love their jobs and I say great, more power to them, but for me a job was always something I had to do, whereas writing a book was something I wanted to do. There’s a big difference.
The book has provided us with a small amount of income, typically about $4,000 per year, and we even document and include this income in the second edition of our book (which just came out in July 2018). The $4,000 is nice but not life-changing, nor is it enough to retire on. Far nicer in our opinion is receiving an email from someone whose life has changed as a result of reading the book. Now that’s satisfying.
Nice! Screw the IRP and hooray for changing people’s lives!
Okay, so how much per year do you live on now in retirement? Has that changed from how much you spent while you were working?
We live on an average of $42,000 per year in retirement. We started at $40,000 and have allowed that number to trend slightly higher in recent years as inflation has begun to take a toll after more than a decade of retirement. Some years we’ve lived on $45,000 or $50,000 but we’ve done the math and it averages out to $42,000 from all sources, including investment income, condo rental, and book income.
The $42,000 per year represents perhaps a little more than we were living on during our working years. Back then a big part of our income was going towards investments (not to mention a mortgage). What has changed isn’t so much the amount of money as how it is being divvied up. Now a significant chunk of our income is being spent on travel – which is to say, on fun! We tend to live frugally when not traveling and a little more expansively when traveling, and that works well for us.
Now that you’ve been retired for 12 years, is there anything that surprised you? Anything you would change?
Well, first of all, we’re surprised it’s been 12 years already! It turns out time really does fly when you’re having fun.
We’re surprised at how inexpensive health care has been for us since the Affordable Care Act came into being – on the order of $120 per month in premiums for the two of us for a basic bronze-level plan in Colorado. Note that this only applies if you’re an early retiree on a budget and qualify for subsidies (e.g., income under $65,840 per year as a couple in 2018). We’re also surprised at how inexpensive medical and dental care can be overseas – and we’ve learned to take full advantage of it. For example, an extremely thorough “well man” and “well woman” exam in Malaysia only ran us about $200 each.
We’ve learned that too much intensive travel over too many months can become almost like work, especially with all the documenting we do. That was a surprise to us. So we’ve learned to pace ourselves and build in downtime, whether on trips or between them. We’ve come to savor our month-long stays in quiet places where our responsibilities are minimal and we can just relax and commune with nature – and maybe binge-watch our favorite TV shows in the evening!
We’ve discovered we don’t get bored easily and our days seem to fill up without really trying. Being retired is like having a delicious series of weekends strung together, and who gets bored with weekends? Weekends are fun! The surprise is how full our days seem to us, and we frankly don’t know how people with jobs manage to fit everything in. We suspect their stress levels are much higher than ours.
Is there anything we would change? Not really, we’re pretty happy! I suppose if we had to do it all over again we both would have picked practical careers that paid more straight out of college and retired even sooner. Kind of like you guys, come to think of it! Our path to early retirement was perhaps a little harder than it had to be, but hey, it’s our life story and we’re sticking with it.
Well, you still managed to retire early, even with a career change in the middle, so kudos for showing it’s possible to become FI without engineering salaries!
What advice would you give to those on their way to early retirement?
Simply this: Trust that from small beginnings great things can come.
LOVE it! Thanks so much, Rob and Robin, for sharing your inspirational bad-ass story with us!
If you want to find out more about Rob & Robin, check out their blog “Where We Be” and their 3 most popular articles:
Four Myths About Early Retirement
How Much Should You Invest Per Month to Retire Early?
Update: 10 Years Into Early Retirement
You can also check out their awesome book on early retirement: “How To Retire Early: Your Guide to Getting Rich Slowly and Retiring on Less
(Note: this is an affiliate link, so I may get a small commission if you choose to buy it)
***
UNRELATED UPDATE: We’ve recently been featured in the New York Times, along with Mr. Money Mustache, Carl from 1500days (who will be speaking at Chautauqua with us in Oct), Vicki Robin (bestselling author of Your Money or Your Life), Scott Rieckens–director of the documentary “Playing with FIRE“, Jason Long, and many other early retirees:
Looks like everyone’s getting FIRE’d up! Burn, baby BURN!
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Thanks for posting this! It’s great to hear from the perspective of folks who’ve weathered a significant storm and come out unscathed.
And this may be the post I needed to make El Camino de Santiago a thing for myself and my wife down the road. Private rooms = heck yes.
Been hearing a lot about the El Camino de Santiago from other blogging friends too. I’m pretty lazy so probably not in the cards for us but I hope you guys do it!
And don’t forget the part about starting your own online side hustle as a means of escaping the corporate 9-5 rat race.
Great interview. It sounds like Rob and Robin are doing very well in early retirement. They are doing it right. I’ll add their site to my list of blogs to read. It’s also nice to see that they survived the 2008 crash without too much trouble. They were flexible and handle things as they come. Nice job.
Yup. Being flexible helps a lot. They’re doing great and it shows! Enjoy reading WhereWeBe!
Very nice interview! My wife and I are looking at a somewhat early retirement starting in 2 years at 51 years old. It would not be surprising if this coincides with a market downturn/recession like R&R experienced. Reading what they went through was reassuring because we are positioned similarly.
Our investments for the first phase of ER is positioned in total bond index funds in 457b plans – can be accessed at age 50 without penalty. Our Roth-IRAs and 401k plans will remain 100% VTSAX since it cannot be accessed for over 8 years and can rebound from a downturn. We also will have a good sized after-tax Vanguard account and a moderate pension as a safety net.
Like R&R we plan on using the ACA Bronze plan (with HSA) and be sure to keep our income under the limit to receive the subsidy – shout out to Root of Good for this strategy. Dental work and non-urgent medical procedure will be done when traveling internationally. I’ve had great experiences with dentists in Thailand – good prices and no up-selling.
We sold our house recently and are happily renting (a large part due to Millennial Revolution) but wouldn’t mind picking up a $95k condo in Colorado (or elsewhere) if RE market tanks again.
Thanks for the wonderful website!
Nice work, Drater! So happy to hear that you’re just 2 years from early retirement. You’re doing great!
Maybe we’ll see each other in Thailand sometime 🙂 And yes, I love their medical services. We went to a doctor once for a mild rash and he didn’t even charge us. What a nice guy. Can’t wait to go back.
That’s because 2008 crises happened very fast and the recovery even faster. In the past decades that recovery wasn’t so fast and recession lasted for many years. IN that scenario maybe they wouldn’t come out untouched like in last financial crises. Careful there!
You are correct if you don’t factor in dividends. However, when factoring in dividends and deflation, the longest stock market correction happened during the 1929 crash, and it took less than 5 years to recover. Which is why we recommend having a 3-5 year cash cushion.
Wow, great post! I’d never heard of these guys before, but it’s nice to hear about early retirees who were retired through the great recession (OK, so technically they weren’t retired if they were working).
I also like how they address the advantages of being FI when it comes to elder care. Sooner or later all of our parents are going to degrade to a point where they need help. Not needing to work all the time makes it more feasible.
Good stuff FireCracker!
Yup, the elderly care point bring to mind a friend’s story. Her mother was dying of cancer and when she was on short-term leave to care for her, her employer kept harassing her to get back to work. Needless to say, she left that company soon afterwards. Becoming FI gives us the freedom to not have to worry about bullshit like that.
yet another interesting post guys…Are you guys still in Iceland, i just bought the tickets for thanksgiving weekend and would love to hear about ur trip report.
Especially the car rental and accommodation is my primary concern.
We left recently, but I’ll be doing a write-up on Friday so stay tuned!
As for the car rental and accommodation, I recommend “Blue Car Rental”. Great service, convenient (just pick it up from the airport), unlimited mileage, and good insurance coverage. You can even add an extra driver for less than 50 USD for a week. For accommodation, I would look at Airbnb.
Thanks FC,
Will eagerly look forward as i have gone thru several TR’s still could not make up on SUV vs. small car and buy extra insurance other than my AMEX Biz Plat credit card (LDW) coverage.
I am going with my son(minor), so no need for extra driver allowance is not needed for me.
For sure use AirBnB and will use your link for referral bonus, but booking ahead is kind of nervous what if i don’t reach there due to weather conditions etc.,..
Well, i have some points of AMEX MR and CIBC Aventura, might use them if AirBnb prices are in the same price range.
Once again, thank you for your quick responses.
Love that you met up with them and in Iceland for that matter. I’m sure the interview took place overlooking a waterfall or simmering in the Blue Lagoon, right? Thanks for sharing their story. I think they have an important side to tell since they rode out the storm of 2008. Looks like I have another blog to make me jealous of all the places we still have yet to get to.
Ha ha, would’ve loved to do the interview IN an Icelandic waterfall:
“when did you retire?”
“WHAT?!?”
“I SAID, when did you–” SPLASH! *splutter splutter splutter*
But no, we were in a coffee shop. Next time, we’ll schedule a meet up in a hot river 🙂
I was one of those people who got pushed out of my job in 2008 when Bush was in office and the recession hit us hard in December the good news is, I did get my full unemployment at the time and severance package because my employment ended at the time at no fault of my own. being that I was already pretty good at selling and closing deals, I decided to try my hand at marketing and thought it too transition into making an online business a full-time business. It’s been a pretty rough road on the way up the ladder to success but it’s been all worth the struggle because internet marketing is a beautiful labor of love! 🙂
Glad it worked out for you, DNN!
Thank you 🙂
Great story … just think if they had bought 7 or 8 houses in Boulder at that time … ? will have try the book …
Yeah, just the book a read! It’s great 🙂
Great story and good write up! Flexibility is really key during FI to stay FI.
Thanks for the fun read.
Always good to flex your flexibility muscle every now and then in early retirement 🙂 Travel helps you become more adaptable –at least that’s what I found.
This is awesome! what a great article to illustrate how being flexible in ER is probably the most important safety margin that there is. Being only about 2 years away from reaching FI, I found this article very encouraging. Keep em coming!
Wow, another reader who’s only 2 years from FI! You guys rock! I’m so proud 🙂
This was a really inspirational article; I loved it! Especially the parts about the website and being able to do what you always wanted even if it doesn’t pay anything. It came at the right time too because I recently just ended a sort of toxic friendship that was sucking a lot of my time and that came on the heels of an almost year long video gaming binge. My spouse and I spent our first year of FI slacking off and it’s time to get to work. He has flung himself into his art full force and has started interacting with an online artist community that is really inspiring him. I’m realizing that it’s time for me to stop just focusing on helping my spouse achieve his dreams of becoming an artist and start doing all of that stuff I always *wanted* to do but couldn’t when I *had* to work full time.
Similar to how this couple had a travel blog that started out as just something to share with friends and family, I have been planning to start a creativity blog to document my creations and my progress as an artist in the many mediums I dabble in. I feel like if I have to commit to updating the site with something new every week then I will have to keep myself busy so I have something to post. If I have friends and family (and possibly others) expecting updates each week then it will be a good way to hold myself accountable and stay on track.
You can do it, Liz! Even though it may take some time for a passion projects to build up momentum, if you have friends/family holding you accountable, it will encourage you to work on it regularly. Consistency is key. Wish you the best of luck in your creativity blog!
Wow! My two favorite FI worlds just collided! Robin and Robert’s book was the first we read about three years ago when we decided to become FI. It has been like a bible for us as we do this! So glad you profiled them and so glad you guys are doing what you do and always crafting awesome articles and content. I appreciate those who have gone before us so much for shining a light on the path. We are still about 5 years away from FI, but I am completely dumbfounded by how quickly our stash is growing and how relatively easy it has been. No doubt thanks to you guys and Robin and Robert! See you on the road in a few 🙂
Thank you GWL! What a lovely comment!
I early retired just months after Robert and Robin, so had some of the same experiences although from a very different circumstance. Those years were not easy ones to be early retired, so congratulations on making it through. There’s a reason why there are very few early retirement bloggers left from that time period. I believe Robert and Robin made it through that period and are still retired because:
1. They made great investment decisions, including selling real estate at the top and buying at the bottom.
2. They didn’t have to worry about child expenses during that time, and didn’t need to plan for future child expenses.
3. They are almost fully subsidized by Obamacare. Obamacare has only been around for a few years, so I’m curious what they did for health insurance before 2014, and what they plan on doing once the subsidies stop. I’ve been paying unsubsidized insurance for 11 years, and it’s cost about $20,000 per year for a family of 3, plus some additional out of pocket costs.
4. They are young and healthy, and so far can pay the health deductibles for the bronze plan. Some of my health costs that added tens of thousands to expenses were for: wife’s pregnancy, child birth, appendectomy, sports injuries, endoscopy + colonoscopy, other minor surgeries – these are all typical things that occur over a long retirement.
5. The market bounce back since the bottom has been record-breaking.
6. They had time to help ageing parents, but not sure if they helped with cost of care or cost of rebuilding?
They currently have a nest egg considerably higher than when they retired, but factoring in inflation over the past 12 years, they’ve actually lost ground despite record-breaking market returns, some great investment moves, and a little bit of side income. As a guy with family depending on me, that would make me kind of nervous. Any thoughts?
Hey Joe, Robert and Robin here, we’ll try to address some of your questions. You suggest that factoring for inflation we’ve “actually lost ground despite record-breaking market returns, some great investment moves, and a little bit of side income.” But we don’t think we’ve lost ground and here’s why:
Accounting for inflation, $926,000 in 2007 is equivalent to $1,125,000 in 2018, a difference of about $200,000 or 21.5% (per usinflationcalculator.com). By comparison our nest egg of $1.2 million is 30% higher and our net worth of $1.4 million (including the condo) is 51% higher than when we first retired, so even with inflation factored in we’ve gained ground, not lost it. And that’s in spite of withdrawing $360,000 total from our investments over the past 12 years, or $30,000 per year on average.
The compound annual growth rate (CAGR) of the S&P 500 from 2009 to 2017 (per moneychimp.com) was 15.29%. However, during the full period we’ve been retired from 2007 to 2017 the CAGR was 8.82%, which is less than the 9.15% average CAGR of the S&P 500 over the longest possible window (1871 to 2017). The fact that we’ve gained ground despite slightly lower than normal market returns should lend encouragement, not discouragement, to those thinking of following a similar path. We believe we survived the Great Recession not based on lucky timing or abnormal market returns but on common sense and flexibility – which included not withdrawing from stock funds until the markets had sufficient time to heal.
Of course each retiree has to find a nest egg amount he or she feels comfortable with. We find we can live quite happily on 3% to 4% of our nest egg, so we see no cause for concern – and in fact feel freer than ever about our financial situation.
With regard to health care, it is frankly far from certain subsidies from the Affordable Care Act will stop as you assume. Of course no one has a crystal ball so we’ll have to wait and see – and roll with the punches if necessary. For the first six years of our retirement we paid for a catastrophic health care plan at a cost of about $400 per month. Because we’re in good health (and out of state most of the time) we’ve chosen a Bronze plan (the cheapest) under the ACA. However, those qualifying for subsidies can also purchase a Silver plan with respectable medical benefits at reasonable cost. If you don’t qualify for subsidies then the cost can be significantly higher, as you’ve noted from your own experience.
We recommend going into retirement knowing whether you’re likely to qualify for subsidies or not based on your AGI. Those who don’t expect to qualify should set aside more money in anticipation of higher costs or else plan on obtaining most of their health care overseas where it can be significantly cheaper. Our book is primarily aimed at early retirees on a budget, so that would mean keeping income below $48,560 / $65,840 / $83,120 per year as an individual / couple / family of three in order to qualify for subsidies in 2018. Of course by age 65 Medicare kicks in, so the ACA no longer applies at that point even for a longer retirement.
As to your other points, we’ve always acknowledged not having kids made it easier for us to retire early and that we wouldn’t have been able to retire at 43 with kids given our salaries. (We do believe we still could have retired by 50.) As to caring for aging parents, Robin is a registered nurse so she was able to provide nursing care for her mom for four years at no cost, which was a significant help to her family, financial and otherwise. Early retirement helped her fulfill a promise to her mother never to have to be in a nursing home. Financial independence has also made it possible for us to help family members with money in times of need, all with no stress or worry.
In short, we highly recommend FIRE, especially compared to the alternatives!
Thanks for the detailed reply. It cleared up a lot of things. I can see why you have been successful in early retirement.
Honestly, for me the financial crisis affected my views on early retiring. I retired with a relatively large nest egg, but watched it shrink by over 40% before tripling over the past 11 years. I was never in danger of being forced to go back to a 9 to 5 working for someone else due to my starting point, but I suggest that someone who is borderline FI should think about having a larger safety margin. You never know how you will react to a 40+% decline until you’ve been through it. Also an early retiree should be prepared that their peers who didn’t early retire will eventually be living a much more extravagant (but perhaps more time-limited) lifestyle.
Thanks especially for the detail regarding healthcare. It’s important for the prospective early retiree to note that making a dollar over the $48,560 / $65,840 / $83,120 income limits you’ve noted means zero dollars in subsidy. So for me, making a dollar over $83,120 means I have to pay the $20,000 in health premiums entirely out of pocket. That is a very large chunk of the $83,120 income.
When I referred to inflation, I wasn’t referencing officially published government numbers which is probably the only way to go if we’re approaching the problem objectively. I just know that in my area, university tuition, daycare, healthcare costs, housing costs, movie tickets, restaurant meals, and farmers market vegetables have gone up much much more than the official inflation rate. All of these costs have easily gone up 50+% since I retired 11 years ago. The rents I am charging on my apartments have gone up 50% in just 6 years…
You’re right, Joe, a 40% drop in stocks can be a scary thing! Which is why we recommend a second passive income stream in retirement other than stocks, whether it be a bond index fund or real estate rental or some other side hustle (in FIRE lingo). That and some flexibility can carry an early retiree through tough market times. As long as the retiree doesn’t panic and sell stocks at the bottom, then the 40% losses are paper losses only, and stocks tend to climb back out of the deep trough with just a little time and patience.
We agree it’s good to go into early retirement armed with knowledge. Knowing the income limits for health care subsidies, for example, can make a real difference, and if a prospective early retiree is anywhere near a cutoff point, they may want to adjust their income accordingly to stay below it. Likewise, it’s good to know that inflation can eat away at your buying power as an early retiree unless you do something to stay ahead of it – which is why stock investing remains so important even after retiring early.
Our point is that these things are manageable. Yes, health care and inflation and market drops can all be intimidating when one is thinking about a future as an early retiree, and they all bear thinking about, but with good preparation they can be managed successfully. We would hate to see people discouraged from FIRE because of things that can be coped with. Because frankly we both know financial independence is a wonderful thing! It puts you in the driver’s seat of your own life, and it certainly beats staying employed at a job you’re only okay with out of a vague fear of the unknown. The unknown can easily become the known and manageable with just a little reading and advance planning.
1% rule, so my house is worth $700,000, there is no way I can rent it for $7000 a month, more like $2500, so that means that investment property will have to drop 64% for the rule to apply… and I don’t think that is going to happen.
But I didn’t pay that much for it, so if I wait, in 10 years, can I get $4000 a month rent? Maybe… still doesn’t make sense to me. Maybe Paula can explain one day. I like the idea of a home base, regardless of any rule.
cheers