There is considerable polite argument in retirement and financial planning circles about just how much is “enough” to retire. Can you live on 4% of your accumulated assets? Would you feel safer leaving the workforce living on only 3%?

Today’s FIRE Crossroads interviewee is already FI if your threshold is 25 times expenses, but a hectic and odd work schedule and young children make for a difficult decision on just when to pull that trigger.

With a little market wind at their back and their 65% savings rate, in our view, it’s just a matter of time.

If you’re interested in participating in one of three interview series, please download the most appropriate form for your life situation: FIRE Starter, FIRE Crossroads, or Post-FI Notes. To see other posts in the series, visit our Q&A archive.

 

 

 

Getting to Know You

 

Where are you on your financial independence journey? Have you crossed the halfway point in terms of net worth and/or passive income?

We currently have a net worth of $2.5 million.  Prior to 2019, we tracked neither our expenses nor our net worth.  In the last three years, we have begun to track both in earnest.  Turns out our expenses have been between $75,000 to $85,000.  We have just over $2.25 million in investments as we sit today, which is between 26 and 30 times our expenses.

 

Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?

My wife and I are both in our late 30s with two daughters (5 and 2).  We do not support anyone outside our home.  We live in the Pacific Northwest.

 

In what field are you working? How is your career going? What do you like best and least about your chosen profession?

I have worked in the oil and gas industry since I graduated college in 2005.  My career has been great and I do enjoy my job.

However, now that we are essentially “FI,” I feel senioritis setting in to some degree, and find myself at times wanting to downshift to a part-time gig that has me home more to spend more time with our young daughters.

This brings me to what I like best and least about my chosen profession, the schedule.  I work 14 days straight in a remote oilfield followed by 14 days off.

This allows us to take vacations and extended trips without burning vacation time.  That said, now that we have two little ones at home it is becoming harder and harder to head off for those two weeks away.  My annual earnings are roughly $225,000

My wife has been a registered nurse since getting her degree in 2006.  Currently, she is working just enough as a PRN to maintain her license which works out to two days per month.  This flexibility in her schedule is great and something we really value.

She enjoys her work very much especially as the pandemic has subsided to some degree.  She is glad to spend much of her time raising our daughters as opposed to working three 12-hour shifts a week.  She earns about $25,000 annually given the number of days she works currently.

 

Do you feel you’ve come to a crossroads of sorts? If so, tell us about it. What options are you contemplating?

We certainly feel like we are at a crossroads.  Our goal was to get to 33 times our annual expenses (for a 3% safe withdrawal rate) using the higher end of our annual spending of $85,000 per year, which means we still are over $500,000 shy of reaching FI.

Realistically, given our savings rate and a decent 5% return on our current investments, we will satisfy that mark if I continue working for two more years.  We also know that with what we have now accumulated, coupled with my wife working 4 days per month, if I stopped working, we would have less than a 2% withdrawal rate.

This would allow us to spend 24 days together in a four week period rather than the current 13 to 14 days.  That said, I plan to work seasonal or flexible jobs, as I don’t desire to retire permanently and never work again.

We certainly can see how easy it is to get sucked into the “one more year” syndrome to “pad the stats”.  At the same time, we realize that we have put ourselves in a unique position to be able to choose how much we want to work (or not) and instead spend more time with our kids while they are still very young.

 

Investing

 

How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?

We currently have a conservative 60/30/10 stock/bond/cash portfolio.  We don’t own any real estate aside from our primary home and our recreational property, a cabin.

Our nest egg is in the following accounts:

• My 401(k)
• Her 401(k)
• My IRA
• Her ROTH IRA
• Shared Taxable Brokerage account
• Hard Money Loans
• High Yield Savings Accounts earning 3-6%
• Health Savings Account

 

Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?

60% of our nest egg is in our tax-deferred accounts (401(k)s/IRA). 30% of our nest egg is in taxable accounts, and the remaining 10% of our nest egg is in Roth and HSA vehicles.

 

Do you have investments in an HSA? How about 529 Plans?

We have roughly $65,000 invested in an HSA.  We plan to continue to pay for medical expenses out of pocket while keeping records and receipts of what we have paid for so that we can access those funds if and when we should need to do so.

We also have a 529 plan set up for each of our daughters but do not factor that into our net worth or investments.
 

What has been your best investment?

Our best investment was that even without much personal interest in our finances until three years ago, we both began maxing out our 401(k)s essentially as soon as we started our careers out of college.  Aside from that, we invested a small amount into after-tax investments.

All those dollars invested despite a lack of actual interest have really helped us.  We were lucky enough that most of our investing occurred after the great recession and we were able to invest most of our nest egg during this record-long bull run.

We always have lived well below our means.  Our only debt is our mortgage of $245,000 on a 15-year term at 2.75%  Now that we can give ourselves an actual plan, we have found a comfortable living while managing to save and invest 60-65% of our income.
 

Your worst investment?

Likely our worst investment was getting involved with a financial advising company (rhymes with Nedward Bones) with extremely high assets-under-management (AUM) fees in addition to fund fees.

We were with this company from approximately 2015 thru 2018, after which time we became more serious and focused on our financial plan and goals.

As such, we educated ourselves through reading sites such as Physician on Fire, White Coat Investor, the Bogleheads forum, and listening to podcasts to feel we had learned enough to leave that high-fee company and transfer our money out and simply invest in broad market index funds on our own with an asset allocation to match our risk tolerance.
 

Into the FIRE

 

Numerically, what is your FI goal?

Given that our annual expenses are $75,000 to $85,000, we are already FI if we were to use the 4% SWR (25X expenses) rule of thumb. However, our goal has been to get to 3% SWR (33X expenses) or $2,800,000.

 

When do you suspect you will achieve financial independence? Will you retire from your career once you’re comfortably FI?

We should reach our goal of $2,800,000 in two more years at our current savings rate.  I will almost certainly retire from my current career to be home more with the family once we decide we are comfortably FI.  My wife plans to continue to work in her current career as she still enjoys the work, plus the schedule is extremely flexible.
 

What are your post-FI plans? How will your life change? What do you look forward to the most?

Post FI, we certainly plan to have more time to do the things we want to pursue. We could try various jobs just for fun, volunteer, vacation and explore more of what this world has to offer, and of course, spend more time with our daughters.

What we both look forward to the most is not living our lifestyle in a two-week on/two-week off fashion; instead, we will be in control of how we spend our time.
 

Have you made any major changes in your lifestyle or investments to accelerate your FI path?

Since my wife and I have been married we had always lived well below our means and always had more than “enough”.  However, aside from maxing out our 401(k)s, we didn’t really have a plan or focus on what could do with our extra money.

When we finally decided to get more focused on our path to FI in 2019 there was plenty of fat to cut from our budget.  It turns out most of those places we cut didn’t hurt at all.  It was just a matter of being more intentional about our spending and questioning expenses such as insurance, phone bills, cutting the cable cord, and the like.

As a result of those cuts and continuing to be deliberate about our spending, we now have managed a savings rate that has hovered between 60-65% over the past 3 years.
 

Are you facing any unique challenges making FI or RE more difficult?

I feel blessed that we haven’t experienced any unusual challenges.  We both graduated college with zero debt thanks to scholarships and working our way through college.  That, coupled with landing jobs in good-paying careers, has certainly made our path less difficult than many, but I would not say it was easy.

Given where most of our peers at work are, it’s evident that we were doing things differently without knowing it really.  We both are frugal by nature and never really felt compelled to keep up with the Joneses.
 

What advice do you have for others who are seeking financial independence?

-Develop a plan as soon as possible.  Had we started a plan and established financial goals when we got married, and had we been intentional about what to do with our money to reach these goals, we would have been FI years ago.

-Don’t beat yourself up over past mistakes.  Just learn and grow from them and move forward.

-Lastly, don’t purposely overcomplicate your path; chances are, as you work your way towards FI, the complications will find you. 😉

 

Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.

I would like to hear from the hive mind on two questions.

#1: We recently refinanced our mortgage of $245,000 (home is appraised at $440,000) to a 15-year mortgage at 2.75%.  We have the cash to pay it off currently.  This would take our annual expenses down to $55,000 to 65,000, so even after taking the $248,000 out of the nest egg, that would leave us with 31X to 36X times our annual expenses.

We have instead decided to keep the cash in I bonds and high-yield savings accounts which is earning us 4.25% pre-tax (3.25% post tax).  We are earning more in interest from the cash “invested” in these accounts than we pay in interest on the mortgage.

Obviously, we will continue to earn even more money from these accounts as they grow and continue to pay less interest to the mortgage as we work our way through the amortization table.

We are of the mind that while we are still working toward FI and fully employed, there is no real reason to pay off the mortgage. Our question: should we just pay off the mortgage even though we are getting risk-free government/FDIC rates higher than our mortgage rate?  Thanks for your input.

#2: Given our situation, would you choose to “retire” from a profession that has you away from your family 180 days a year to spend more time with them to a job where you can choose to work as much or as little as you wanted?

 

PoF: Catch all the future interviews from those just getting started, at a crossroads, or at the end of their FI journey with a free subscription to Physician on FIRE.

 

 

I thank today’s interviewee for sharing their story, and I’ve shared my feedback privately with them. I wouldn’t want my opinions to influence yours. Please give your take and answer any questions they have had in the space below!

Again, if you’d like to partake in a future Q&A, please download a FIRE Starter, FIRE Crossroads, or Post-FI Notes interview form.