Editor: Crass Cash
I've been mulling this over for a few years now and I had the "one more yearitis" disease of constantly putting it off. I heard a podcast with mrmoneymustache.com where his advice to those considering early retirement was to just go ahead and do it! Set a date and do it! So I did! Now the fun begins of trying to get everything done in time. What do I need to do? Well keep reading...
Leaving the work force forever isn't as simple as walking into your boss's office and telling him to fuck off. I prefer "piss up a rope" but you get the idea. It actually takes a lot of planning. All sorts of subjects such as cash flow, insurance, investments, expenses, debt, etc. have to be dealt with prior to the Jerry Maguire walk.
So why 6 months? Well I think it will give me enough time to do what I need to do...
1. Debt: I want all debt paid off, with the exception of real estate mortgages that are investment incomes. No credit card debt, no auto loans, no student loans, etc.
2. Expenses: how much are my expenses every month on average? How much do they vary over the course of a year? How were they over the last year? I've been tracking all of this for at least 3 years. You have to know your expenses in order to prepare for what is needed. It's the linchpin on which all else is held.
3. Cash/Cash flow: after you know your expenses you need to know how you're going to cover them. How much cash should you have on hand? Will the monthly cash flow routinely cover the monthly expenses? I'm going for 6-12 months of cash at hand with my monthly expenses being covered by investment cash flow. I'm not going to rely on the 4% or even the 3% rule of drawing down my assets. I don't ever want to have to touch my assets for living expenses. With some good fortune the assets will continue to grow, along with the cash flows that they generate. I've seen many people deplete their assets late in life and end up living on the kindness of strangers. No thank you!
4. Insurance: I will still need auto insurance, umbrella insurance, health insurance, property insurance, liability insurance, etc. Life insurance? Maybe, maybe not. Since somebody who is retired is also technically Financially Independent (FI) you don't really need any life insurance. I most likely will keep it for at least a few more years now that I have a family just in case.
5. Investments: this is probably the most difficult part. The part that makes it so difficult is the fact that I have retirement accounts that can't be tapped into until I'm 59.5 years old. I can't even get dividend income out of them. Back when I was loading them up year after year I never dreamed that I would need them prior to 60, but here I am. As a result I try to look at them as a bonus. If I make it to 60 I can get them, but in the mean time I have to rely on rental property income in order to supply my monthly cash flow.
6. Misc: What about social security? What about emergency funds? What about college savings plans for your children? What about this, what about that? There are a ton of "ifs" that can happen over the next hopefully 60 years. An absolute boatload of uncertainty! Quite simply you can't plan for all of it. Btw, I'm not planning on social security. If I get it, great. If not, no big deal.
I'll be interesting to see how the planning for all of this evolves over the next 6 months and then how it pans out over the decades.
Finally, I chose the end of March for a few reasons. I get 3 paychecks that month, I get a full reload of vacation time on 1/1/2017, 2016 bonus payout, and I want to make sure I get my employer contribution from the previous year. You never know what your employer's reaction will be when you give them that resignation letter...
So why 6 months? Well I think it will give me enough time to do what I need to do...
1. Debt: I want all debt paid off, with the exception of real estate mortgages that are investment incomes. No credit card debt, no auto loans, no student loans, etc.
2. Expenses: how much are my expenses every month on average? How much do they vary over the course of a year? How were they over the last year? I've been tracking all of this for at least 3 years. You have to know your expenses in order to prepare for what is needed. It's the linchpin on which all else is held.
3. Cash/Cash flow: after you know your expenses you need to know how you're going to cover them. How much cash should you have on hand? Will the monthly cash flow routinely cover the monthly expenses? I'm going for 6-12 months of cash at hand with my monthly expenses being covered by investment cash flow. I'm not going to rely on the 4% or even the 3% rule of drawing down my assets. I don't ever want to have to touch my assets for living expenses. With some good fortune the assets will continue to grow, along with the cash flows that they generate. I've seen many people deplete their assets late in life and end up living on the kindness of strangers. No thank you!
4. Insurance: I will still need auto insurance, umbrella insurance, health insurance, property insurance, liability insurance, etc. Life insurance? Maybe, maybe not. Since somebody who is retired is also technically Financially Independent (FI) you don't really need any life insurance. I most likely will keep it for at least a few more years now that I have a family just in case.
5. Investments: this is probably the most difficult part. The part that makes it so difficult is the fact that I have retirement accounts that can't be tapped into until I'm 59.5 years old. I can't even get dividend income out of them. Back when I was loading them up year after year I never dreamed that I would need them prior to 60, but here I am. As a result I try to look at them as a bonus. If I make it to 60 I can get them, but in the mean time I have to rely on rental property income in order to supply my monthly cash flow.
6. Misc: What about social security? What about emergency funds? What about college savings plans for your children? What about this, what about that? There are a ton of "ifs" that can happen over the next hopefully 60 years. An absolute boatload of uncertainty! Quite simply you can't plan for all of it. Btw, I'm not planning on social security. If I get it, great. If not, no big deal.
I'll be interesting to see how the planning for all of this evolves over the next 6 months and then how it pans out over the decades.
Finally, I chose the end of March for a few reasons. I get 3 paychecks that month, I get a full reload of vacation time on 1/1/2017, 2016 bonus payout, and I want to make sure I get my employer contribution from the previous year. You never know what your employer's reaction will be when you give them that resignation letter...
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