My Diabolical Plan to Accelerate Early Retirement

Accelerate Early RetirementWhile all my personal finance blogging friends are gearing up to go to Fincon2017, I figured I’d distract myself from getting too sad by writing. One day I’ll get there. And when I do, I’m positive I’ll be starstruck by all the fabulous people I’ve come to know through their outstanding content. Have a toast for me, peeps!

Now then, let’s vamos on early retirement acceleration, mis amigos!

Ever since late 2014, when I started to formulate a plan to retire early, I pegged February 2020 as my exit stage-left. Until today, the little countdown widget on the blog’s right nav-bar showed “28 months to go.” That felt too long. What a whiner, right?!?

But I think it’s time to challenge myself. If I’m serious about all the stuff I’ve written about how much value you can add after leaving a cube job, I should walk the walk and trim off some months. Maybe even half a year or more?

The Simple Math Behind My Early Retirement

Some basic things I need to prepare on the magic spreadsheet for this analysis:

  1. Expenses: Are there recurring payments that will increase over time, like student loans, or grocery bills (as the kids’ appetites grow?)
  2. Cash flow situation: Where is the money going to come from to support and sustain us?
  3. Insurance: Can I predict the monthly premiums we’ll have to pay for healthcare? And do I need to consider term life insurance policies?

There’s a bit of risk involved in accelerating your early retirement goal. But that risk is mitigated if you carefully look over your assumptions and leave a healthy enough safety margin. Let’s take a look at what I’ve forecast for monthly expenses, as of early retirement in 2020:

Monthly Expenses
Annual and Discretionary  $          2,025
Grocery, Sundries (Target), Beer/Wine  $            974
Dining Out Allowance  $            433
Cell Phones – Ting  $              42
Fuel, Car Wash  $              60
Family Clothes/Hair  $              75
City Water / Recycling / Trash  $              72
Natural Gas Bill  $              52
Electric Bill (Damn HRV I love)  $              50
Internet  $              35
Medical / Dental Insurance  $            500
Babysitting  $              75
Student Loans at 2%  $            214
Netflix  $              11
Total  $         4,593
Total – Annual  $       55,117
Weekly Dining-out Allowance  $            100

For a little more detail, let’s see what goes into the “Annual and Discretionary” monthly bucket:

Annual and Discretionary Expenses
Travel  $       4,000
Home and Landscape  $       2,000
Property Taxes (May/Oct)  $       4,200
Discretionary, inc. Kids’ Programs  $       2,000
All Gifts  $       1,910
Charitable Donations (see *comment)
Car Maintenance/Tabs  $          500
Medical/Dental Out of Pocket  $       3,000
Credit Card and HELOC Fees  $          300
Auto Insurance  $          380
Umbrella Insurance  $          184
Homeowners Insurance  $          828
Rental Maintenance and Business Cost  $       5,000

Let’s start with the first two bold, red expenses in the first table.

Grocery, Sundries (Target), Beer/Wine: $974 per month. That’s a LOT of food! What the hell! But in fact, this line item does include the Target-like stuff, as well as our booze expense, and we don’t imbibe that much. Honestly. We are very disciplined about eating-in and how could you not be, with a wife who can cook as well as Mrs. Cubert?

As a result, the trade-off is higher grocery bills vs. dining-out expense. Throw in your monthly Kleenex, toothpaste, pull-up diapers, and boxed pinot noir, and shit starts to get expensive. To try to contain this, we get as much of our sundries as possible from Costco.

I want to say we get like $400 back throughout the year with their rewards system. That’s not factored in here. Neither is the Amex Blue card we use to get 6% back at all other grocery stores. That returns $25 every three months. Better than a stick in your eye, I always say…

Could we knock this down at all, to help accelerate our early retirement goal? My verdict is “mebbe?” We might try to plant a better garden, but we don’t live in the woods with acreage like some of my heroes out east. Nope. Our backyard is big enough for one little sandbox, a big ol’ deck for entertaining, and a few trees I’ve planted.

Dining Out Allowance: $433 per month. Here’s the category I’ll get flack on. “Obscene! How can he possibly be serious about saving money when he dines out that much?” Here’s the thing. We live in Minneapolis. The restaurant scene is AMAZING. We enjoy the occasional break from kitchen duties. All things in moderation.

We try our best to use deals and coupons, and limit ourselves to one drink each when we go out on date nights. This helps a lot, because when the kids come with us, the bill is a lot more these days. They grow up so fast.

Accelerate Early Retirement
“Umm… And another milkshake please. With extra shake.”

The other big variables: Dreaded healthcare premiums and student loans.

Medical / Dental Insurance??? $500. Insane. I’m probably low-balling this big time. As much as I try to figure out what our healthcare costs will be, it’s a hard one. With all the craziness happening in D.C. these days, we might as well move to Canada (just kidding, Mom!) We might still have access to affordable health coverage that’s meaningful, or, we may have to settle for a “take a few aspirin and good luck to you if you get REALLY sick” plan.

I do expect we’ll choose a plan with as high a deductible as possible, yet still eligible for some subsidies (assuming those subsidies still exist in a year and a half.) Now to be fair, I did forecast out-of-pocket costs of $3,000 per year in the subsequent “Annual and Discretionary Expenses” table. It’s a bit on the high side, but I hear braces are still expensive these days.

A couple of things we have going for us: We’re very healthy and take good care of ourselves. It’s a conscious effort too. Also, there’s favorable tax treatment by getting our coverage through one of our businesses. We can claim a deduction on the premiums.

Student Loans at 2%: $214. The good thing here is that 2% interest part. No way you want to pay a cent more than the minimum monthly payment, unless you’re swimming in buckets of cash. We aren’t cash flush now, and don’t expect to be later on. However, the way these loans are structured, the monthly payments will increase 10% every two years.

By the time the loan matures (24 years from now), the monthly payment will be $526. That seems like a lot now, but discounted for inflation, it’s not terrible by year 24. After a few years of getting established in our early retirement rhythm, we may just try to chip away at that $65,000 rock.

Bottom-line on the expense side of the equation

There’s a healthy amount of outflows we need to cover each year in early retirement: $55,117 to be precise. And this is after we’ve killed off the mortgage too. This figure is not anywhere near the highly efficient, spartan existence some are able to pull off. Mr. Money Mustache’s family gets by on less than half of our forecast needs.

We could cut back a bit on our travel allowance, maybe even cut it in half if I keep on credit card hacking. Rental maintenance costs can be reduced, since I’ll be able to work on the properties more myself, not having to hire out as many jobs. For now though, let’s assume $55K is what we’ll need, year over year.

As for college savings, the strategy here is to front-load the twins’ 529 accounts before I retire. Our plan is to load up about $15K per kiddo by age six. This should get them to about $35,000 each by the time they’re ready for college. We expect some good eggs in the house; scholarships plus work to pay the rest of their way.

Accelerated Early Retirement
“I wore this clown suit on the understanding I’d get a front-loaded 529 college savings plan in return for my superior cuteness.”

The Bacon

One thing that throws a wrench in the plan is the Airbnb experiment. I have to take out about $30,000 from our HELOC for the down payment and upfront repairs and furnishing. That puts a big dent in the mortgage pay off strategy, setting it back by about four months.

Paying off the HELOC, plus the strategy of front-loading the 529s, AND committing to paying off the mortgage means I’ll have to stay cube-bound at least into 2019.

Oh yeah, I mentioned bacon, didn’t I? Cash flow to cover the $55,117 every year with at least a $10,000 cushion requires us to churn $65,000 from our businesses and side gigs. I didn’t say we wouldn’t be busy, just cube-free.

Accelerate Early Retirement
Monthly Income Projections in Early Retirement

This income model assumes some fairly aggressive things. One, that we’ll continue to have the good fortune of renting our properties with no vacancies. This is offset by an assumption that there’s no further growth in Mrs. Cubert’s business. When in fact, her practice has grown leaps over the past few years. Also, yours truly might just fire up a property management business to keep busy. Or flips? More rentals? Sometimes, a blog just isn’t enough.

On Insurance

We’ve covered off on health insurance and to be fair, this topic alone will have us revisiting the acceleration plan often. Then there’s Life insurance. Today I get coverage for Mrs. Cubert and myself through the corporate gig. After early retirement, this little safety net goes “poof!”

Now in the event that I go “poof!”, Mrs. Cubert would need to hire a property manager and some part-time child care. It’s a bit grim to think about this stuff, but naive not to consider the unsavory variables of life. Since Mrs. C will be the primary bread-winner after I leave my cubicle job, I’d be in worse shape if she got hit by the beer truck. The plan will likely be to get term life policies for both of us.

In my case, I’m looking at about $33 a month for a $250,000 20-year policy. Mrs. Cubert’s would be about $15 a month. Age before beauty? At any rate, I’ll have to add ~$50 per month in the retirement plan now, as I hadn’t considered this expense before starting this post.

I’m hoping you’ll catch other misses for me so we don’t end up in a van down by the river. But don’t worry – I look at this stuff every day, practically.

Let the Hunger for Early Retirement Games Begin!!!

Image result for stephen colbert hunger games

Running all these numbers gives me a headache, but it’s sooooo much fun when you can smell the finish line. The result of the analysis is an acceleration of seven months. It could be that my new target of July 2019 morphs into an “F-You money” target date, and I keep at it for a few months more, until the next time the lights go out on me during a war room call after everyone else has gone home for the day.

OR, I keep maximizing opportunities, working hard, learning, and find myself well-positioned to walk away finally, on July 31, 2019. I like that idea best.

*We expect to continue to give to a select few charities in early retirement. But there may be better ways to maximize our contributions. I plan to read up on donor advised funds, having recently been made aware of them by my fellow Minnesotan, the Physician on Fire.

Comments 18

  1. 2019 ain’t too far away, pal! 🙂 Thanks for outlining your plan here for me to creep on. I’m always looking for new ideas. 🙂 Aw fiddlesticks, I’m sad to hear I won’t see you at FinCon! Next year fo’ sho. 🙂

    1. It’s so close! Who knows, by then, maybe I’ll love my job so much that I’d have to be pried out of my chair. Then again…
      Next year hopefully I’ll make it to FC. Would be nice if they held it in MPLS or even Chicago.

  2. Congrats of finding new ways to bring in that early retirement!

    “I’m probably low-balling this big time. As much as I try to figure out what our healthcare costs will be, it’s a hard one. With all the craziness happening in D.C. these days, I might as well move to Canada (just kidding, Mom!) We might still have access to affordable health coverage that’s meaningful, or, we may have to settle for a “take a few aspirin and good luck to you if you get REALLY sick” plan.”

    Yeah, who knows what’ll happen? I’m FIREd and I’ve been using Obamacare since it first came out. Every week, Congress or the President seems to come up with a new way to mess it up.

    We have a Bronze HDHP and we max out our HSA contributions. Because our taxable income is so low, we actually make money off the subsidy. It’s a crap shoot though because it only works out well if neither of us gets seriously sick. So far – knock on wood – it’s worked out well.

    1. Congrats on being DONE Mr. FF! I figured we would find ourselves on some sort of Bronze plan as well, with HSA ideally. I think we’ll get this stuff sorted out over the next few years. Our leaders need to grow up and get their act together sooner or later. (though likely never at this rate!)

  3. I won’t be at FinCon either, so I’ll keep you company!

    That’s quite a detailed spending list. My FI date seems so far away that I have trouble assigning a number to it. The closer you get, the better you know. #july2019 woohoo!

    1. Hey, thanks Dylan! Let’s try to get there next year, eh?
      As far as encouragement goes. Remember that I had no idea I’d be pursuing this until I turned 40. You’ve got a great head start, which could find you done in your 30s, cube-free and off doing some much more exciting things!

  4. My wife and I grocery bill gets close to $1k a month. We try what we can to keep it down but it’s always right around there. We eat very healthy, don’t buy packaged foods. Just about everything is made from scratch and we even have a decent size garden. Don’t know what to do but would be great to cut that in half. BTW, your idea of moving to Canada is not bad. Better hockey coverage there.

    1. Thanks, Steve. I don’t feel so bad now. To your point, if you try to eat healthy, you’re bound to spend more on fresh, organic produce and occasionally some meat. We do go through a lot of yogurt and homemade granola (more nuts than oats), and a shit ton of eggs. It all pays itself back later when you’re the healthy old guy and not the one about to have a cardiac arrest with a 40+ waist size.

  5. Good for you taking it up a notch! We are already so stripped down in our expenses, we have not much more to go. Unless we want to deprive our selves, which is never a good idea. Aiming for a net €25k per year FIRE amount (goes up a bit with taxes), this includes about €4-5k per year for travels.

    Go get it tiger 😉

    1. Cheesy! Great to see you stop by. Yeah, we could maybe do more to cut down some of our expenses. It’s a never ending battle. Can’t deprive yourself either, so it’s a tricky balance. We once thought giving up cable TV would be a deprivation, but that’s actually turned into addition by subtraction. That said, you can’t turn off the water or electricity and hope for similar results. 😉

  6. I’m definitely jealous of your options for dining in the big city! Our food costs would be a lot closer yours I have a feeling. RIght now we average about $100 for dining out. I would bet that when you reach the FIRE stage, you will probably naturally cut that back without even thinking about it. Or you could just move to a town with only a McDonalds and Applebees 🙂

  7. Good planning, but don’t neglect the life insurance. Term is the way to go. Still remember a friend when I was your age who got leukemia. We don’t like to think about it, but it happens. Be sure to protect your family. PS – Enjoyed our coffee time — now back in AZ.

    1. Great advice, Daryl! Appreciate that and you’re right – sometimes life throws you curve balls you can’t see coming, but you can prepare for unknowns nevertheless. And yes- had a really nice time connecting in old Nordeast over coffee!

  8. Hey! Great stuff as always. Two questions, internet and cell phone bill…. how the H3LL did you get them that cheap ?!?!?! haha. I am going to do a post on collegebacker soon – a newish company for college savings!

    – J Haste

    1. Thanks, Josh! Yeah, we are using Ting for our cell phones. We don’t use that much data, especially since we use WiFi whenever we can. I’d check out Ting – you might save a LOT. For Internet, we have a couple of cheap options – one is CenturyLink at 12MBPS. We negotiated a $36/mo. rate. And we plan to switch to USI Fiber later this year at $35/mo. for 50 mbps. Some times it pays to live in the big city (or a neighborhood within!)

  9. Hi Cubert,

    wow, your FIRE date is fast and approaching. So jealous. But somehow, I have already kind of abandoned the cubicle. Nowdays, we don’t even get cubicles, we get tables that we share with our colleagues and a locker to keep our stuff in, just like high school :-). But it’s not all bad, if we want we can work on those treadmill work stations, work from the patio, the lounge, the quiet rooms,…

    99to1percent recently posted…How we plan to pay off our mortgage in 5 years
    https://99to1percent.com/pay-off-mortgage-5-years/

    1. Haha! Just like high school – I sense a little cynicism there… We have some campuses converted to the shared work environments as well. Everyone hates it. And people wonder how germs and viruses spread? Oh, and getting through a conference call without umpteen distractions all around you? Bad enough in a cube, pretty rotten in the shared setting, IMHO.
      And no need to be jealous! Stick with your plan and pull out all the stops to enjoy life even while working that corporate gig. You’ll find your accelerated path soon enough!

Please Share Your Thoughts!