Here’s our latest interview with a retiree as we seek to learn from those who have actually taken the retirement plunge.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
This interview was conducted in September.
This is a long one (which I love!) so I’ll break it into two parts.
My questions are in bold italics and their responses follow in black.
Let’s get started…
GENERAL OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 57 and my wife is 56.
We’ve been married for 37 years.
Do you have kids/family (if so, how old are they)?
We have two beautiful independent daughters (ages 32 and 29 years old).
Our oldest daughter graduated from a military college and is a very successful career military officer. She has spent 10 years in service and has visited nearly forty countries.
Our youngest daughter graduated from college, and is now employed with a large Insurance MegaCorp. Our youngest daughter has been married five years. Our awesome son-in-law owns his own custom home construction company. They have a beautiful two year old daughter, so we are fully immersed in being new grandparents and loving every minute of it!
What area of the country do you live in (and urban or rural)?
We live in a very rural area in the Mid-Atlantic region of the country. My wife and I live within an hour of our childhood hometown, and still absolutely love it here.
We have traveled to other areas of the world, but still believe this area is one of the best places on Earth. We enjoy a relatively low cost of living and incredible natural beauty in every direction. We built our dream home in close proximity to the mountains on a large track of land that we purchased nearly twenty years ago.
Our home is located on a small lake surrounded by large farm tracts, and we cannot see a neighbor’s house from our property in any direction. Our closest neighbor is well over a half mile away. We are also within a couple hours drive of beautiful beaches, so we absolutely believe that we live in the perfect area of the country.
Is there anything else we should know about you?
I am Millionaire Interview 226.
My wife isn’t really interested in financial planning, but she loves the results! She is amazing at the “soft skills” in life. She is the one who always reminds me to live more in the moment, and that it’s ok not to have a plan for everything. She also has amazing instincts and is a wonderful wife, mom, and grandmother.
I am the planner in the family, and I manage our income/expenses and related investments. I’m somewhat anal retentive and very fiscally conservative. I love contingency planning. It’s why I was great at M&A’s in my former corporate career. I tend to plan everything in excruciating detail, and I often “overkill” project contingencies to ensure a particular result. Early retirement planning was certainly no different.
My wife and I have very different personalities, but we balance each other extremely well. We both love to spend time with family and travel. I love to exercise, but my wife not as quite as much. However, she is naturally more athletically gifted. Exercise has always been a focus for me, but even more so since retiring. My wife loves water color painting, and is much better at it than she will ever admit.
RETIREMENT OVERVIEW
How do you define retirement?
Retirement can be many things to many people, and I’m fine with everyone defining their own retirement per their unique circumstances and interests.
For us, it was the desire to leave work entirely, while still young enough to physically enjoy life.
We definitely migrated more toward Fat FIRE versus “just getting” by in retirement. Retirement was the ability to have financial freedom to spend our time on our own terms. We both aspire to be retired longer than we worked.
How long have you been retired?
I fully retired in May 2017 at the age of 51.
However, I actually left my long term MegaCorp career (for the second time) 17 months earlier (in late 2015) with every intention of retiring at 50 years old, but I allowed myself to be talked into one more year (OMY) by a former colleague (more on that below).
Is your spouse also retired?
My wife fully retired in December of 2016 at the age of 50 (approximately six months before me).
What was your career and income before retirement?
My wife was in the medical industry her entire career. She had Bio/Chemistry and MLT degrees and worked as a Medical Laboratory Technician. She never had an interest in management and preferred individual contributor roles. She took off nine years to be a stay at home mom, while our girls were young, but decided to return to work for six more years, once they were through high school. She became bored staying home alone once the girls were hitting their college years. Her final annual salary was $34K per year.
I had a Computer Science degree, but crossed over from IT into Operations early in my career. I spent over twenty years in the pharmaceutical and medical device industry. Most of my career was spent working for a mid-sized pharmaceutical company. Initially, I worked as an operations manager making a base salary of $65,000 plus an annual bonus of $13,000. I promoted roughly every two years throughout my career, culminating in a Vice President role making a base salary of $190,000, plus a annual bonus of $84,000, a car allowance of $15,000 per year, and annual company stock option grants.
Our mid-sized company was acquired by a larger competitor in 2008, and as a result, I executed an exit clause in my VP contract to leave voluntarily in early 2009. I was not happy with the new company’s business model, and I quickly became frustrated by the apathy and complacency of their senior management. Nearly every leader in our (acquired) company chose to leave MegaCorp within the first two years of the acquisition.
My contract included a generous 18 month severance package allowing me an opportunity to try something new at the age of 44. So, I decided to leave MegaCorp in early 2009 (the first time) to pursue my own start-up business (more on this below). However, I subsequently returned to MegaCorp just 18 months later in a designed, smaller, less stressful role (making $150k per year, plus an annual bonus of up to 40%), and I stayed on with MegaCorp for five more years (until 2015).
This was a much more tolerable role initially, with significantly less responsibility, stress, and travel, however, repeated senior management turn-over caused a rapid deterioration in that initial stability. I must also admit, I was also becoming less tolerant of typical corporate politics. I assume FI contributed to this rebellious tendency. 🙂
Why did you retire?
We both voluntarily retired early after planning and executing a successful exit strategy.
I enjoyed the mid-sized Pharma company that I had worked for for 75% of my career. It was a great smaller niche Pharma company. I was able to grow my career extensively as the company grew.
However, once this mid-sized company was acquired by a larger competitor (MegaCorp) in 2008/2009, my home and work life rapidly became extremely unbalanced. Company moral plummeted under the new acquiring MegaCorp company, and I quickly knew that I would need to make a change.
I mentioned it earlier, but as a Vice President in the smaller (acquired) MegaCorp, I was able to trigger my contractual clause to exit the company (my choice) once the acquisition was finalized. My contractual severance package enabled me to leave MegaCorp in early 2009 with a guaranteed 18 month salary ($190k x 1.5 yrs). It immediately vested my company options, plus a guaranteed bonus ($84k), and provided fully paid health insurance for 18 months (valued at just over $33k).
I used that cushion to start my own rental real estate company, that I’d been discreetly planning for more than two years. During the next 18 months (after first leaving MegaCorp), I acquired sixteen rental units, which I self managed.
In the 17th month of my 18 month MegaCorp severance period, a former colleague called and asked me to come back to MegaCorp. I didn’t want to jump back into the same high stress level role, and my rental business was just now beginning to expand more rapidly. Initially, I said no, so I could continue growing the rental business, but I also knew that I’d be limited by the number of mortgages that I could obtain without a W2.
MegaCorp continued to pursue my return, and offered me the latitude of designing my own management role to come back. I was given a wide berth to create my own team with limited travel requirements. Ultimately, I decided to give MegaCorp another try, but only in a limited stress role.
I was able to quickly “black box” my newly established rental real estate company with the strong team, that we’d built over the previous 18 months. I quickly hired a property management company to handle the day-to-day activities. Once the rental business was black boxed, I went back to MegaCorp full-time again in late 2010. My plan was to only stay long enough to set up and acquire a few more mortgages to further expand my rental acquisitions (because banks tend to prefer W2 income on applications). However, I ended up staying for five more years, until I became very disenfranchised with the revolving senior management team and continued poor strategic decisions within the company.
After five more years at MegaCorp, our stealthy retirement plan was now fully ready to execute and our little rental business had grown to more than fifty rental units. My wife and I decided, that I would leave MegaCorp in late 2015, and my wife would retire about a year later.
Around that same time, I received a call from yet another former colleague, who was now running another small Personal Products manufacturing company in a nearby town. The colleague asked me to come onboard with his small company to assist in getting it sold (it had been acquired by an equity firm a few months earlier, and they intended to flip it within two years).
So I left MegaCorp (for the second time) in late 2015 as planned, but immediately went to work for this smaller Personal Products manufacturing company. Once again…I initially only committed to one year with the new smaller company, but stayed on for 17 months to help finalize the sale of the company. I then officially retired in May of 2017, a few weeks after the company’s sale had finalized.
PREPARATION FOR RETIREMENT
When did you first start thinking seriously about retirement and when did that turn into a decision to do it?
So from an early age, I wanted to retire as soon as possible. My wife never really enjoyed her career. I enjoyed my career, but jobs were always a means to an end for both of us.
We did a lot of things right early on without a clear plan. We had been building our investment portfolio (comprised primarily of IRA’s, a small brokerage fund, and company 401k’s) from a relatively young age. We started our 401k’s in our early 20’s fresh out of college. We maxed out our contributions to capture company matches from the very beginning. We started a brokerage fund by age 25, and we initiated college funds as each of our daughters were born.
We were millionaires just before my 40th birthday, but our loosely built plan just never seemed sufficient to be able to consider retiring early. We had bought and sold several primary homes, always rolling the capital over to the next home and making extra principal payments, so by age forty we could see our final mortgage payment in sight, and paid off our home soon after. We immediately began investing our former monthly mortgage payments into our small brokerage account after paying off our primary mortgage. We were certainly FI in our early 40’s, but it all still seemed insufficient to consider comfortably retiring any earlier than age 59.5.
I got serious about building an retirement strategy around the age of 41 after a very specific work related meeting…
I was very involved with company M&A’s (mergers and acquisitions) throughout my MegaCorp career. During one such meeting with other senior management, I realized that I was the guy that everyone was looking to for answers about a pending multi-billion dollar acquisition. I was also the youngest VP in the room, and it was humbling and exhilarating at the same time.
I left that conference room with somewhat of an epiphany, that if I could make the company billions of dollars in profits, I should also be able to make similar (scaled down) decisions in my own personal life. It was a major life triggering event, which culminated in a detailed plan to create my own rental real estate business. That initial business plan included a seven year detailed timeline to build enough income generating properties to exit MegaCorp by the age of 50.
We outlined a general retirement plan to continue maxing out our traditional investments along the way, but assumed we would not utilize them for additional income until after age 59.5. We would also prolong Social Security to maximize those benefits. This general outline would eventually expand to become a detailed investing plan and subsequent massive retirement planning spreadsheet.
What were the major steps you took from deciding to retire to developing a plan to do so?
So I had been interested in rental real estate from a young age (for more information see my original MI-226 interview). I voraciously read everything I could find on the subject for many years preceding the above company meeting. By the time I had my epiphany to actually start my own rental business, I had a very good foundational knowledge of how to put a rental property business together.
I spent the next two years laying out and documenting my business plan and arranging my start up capital. My business plan was very specific and created detailed guard rails to keep decisions and growth on track, while I continued to work full time for MegaCorp. I essentially setup a horse race to build a rental property portfolio to match (or surpass) my traditional investment assets.
My general plan was to begin utilizing rental income at the age of 50 to walk away from MegaCorp, leaving our traditional investments to grow until traditional retirement age. If successful, I figured it would be a win-win and ensure more than enough long term income to outpace inflation or sequence of returns risk.
It took some time, but over the subsequent seven years, we managed to acquire over fifty rental units, while also continuing to grow our traditional investments, all while still working full time careers. Our crazy little “horse race” plan worked like a charm, and we managed to build a rental portfolio of assets equal to our other traditional investments in a much shorter period of time. More importantly, we had built sufficient rental cash flow that could easily replace our corporate W2 salaries.
We set our target retirement dates about four year before retiring, based on modeling our projected rental income growth. We actually surpassed those initial target dates in the end. My wife retired about six months earlier than her targeted date, but I got the “One-More-Year” syndrome and worked another 17 months past my original target date (as mentioned earlier).
What did your pre-retirement financials look like?
As we approached our actual retirement our portfolio looked like this:
Assets
- Rental Property: $1.895M
- Personal Real Estate: $850K
- Other Real Estate: $100K
- Angle Investment: $44K
- IRA’s/401k’s: $1.085M
- Brokerage/Cash: $45K
- Insurance Cash Values: $16K
Total Invested Assets: $4.035M
Liabilities
- Rental Property Mortgages: $862K
Net Worth: $3.173M
What was your overall financial plan for retirement?
Any good retirement plan starts with understanding expenses. We had implemented a variation of a zero-dollar budget for many years prior to retiring.
For anyone not familiar with the concept, essentially you account for every incoming dollar and assign it to a “bucket” or an accrual. An overly simplistic example:
Let’s say your income is $1000 per month. Your expenses are Groceries ($250), Rent ($500), Auto ($100), Misc ($50). You assign your income to those expense buckets and any remaining income might go to a savings bucket or to pay down existing debt. In this case, $100 remains after expenses, so it might be assigned as Debt Payoff ($50) and Savings ($50) for example.
Again, this in an over simplification, but you get the idea. This methodology allows you to identify and earmark monies available to pay down debt and/or create savings. It holds you accountable to stay within your bucket amounts each month and not overspend.
In our example, let’s say you eventually payoff the debt, so you can now put the extra $50 into Savings each month. It helps control lifestyle inflation by assigning those newly freed up dollars before you spend them on something of less value. It also forces the accrual of dollars (instead of borrowing) to purchase things like automobiles, furniture, new roofs, etc. It’s very similar to the infamous “Envelope Budget” espoused by Dave Ramsey, but electronically maintained.
I stumbled onto this simple concept via running various budgets throughout my career. Accruals just made sense to me, and it made sense to run our home budget in a similar manner. So we have always had a very accurate knowledge of our outgoing expenses as a result. It also kept us from borrowing money for lifestyle consumption.
Fortunately, my wife has a very frugal mentality, and we’ve always been able to manage our monthly expenses well below our means. Our pre-retirement expenses were about $4100 per month. We had already put our two daughters through college by this point, and they were both fully independent. Our home was paid off, and it was just the two of us living at home again. So we knew that we would only need a baseline income of about $50K to meet our basic expenses in retirement.
During the final years of our W2 life, we were easily investing over 70% of our W2 income in our traditional investments and our rental portfolio. Our basic plan was to build rental income cash flow to supply an income stream of $10,000 per month (effectively double our baseline expense needs), allowing ample room for error and new discretionary expenses like travel, that we could dial back if ever necessary.
I mentioned it above, but our general idea was to retire early (entirely) on rental income by age 50. We would later begin utilizing traditional investments (401k’s. IRA’s, etc.) at age 59 1/2.
Expanding on this concept, our plan was to draw an inflation adjusted $120,000 annual salary from the rental portfolio from age 50 to age 59.5 years old. This would allow us to delay drawing from our traditional assets until age 59.5 years old, so those traditional assets could compound longer. This would enable us to also delay SS until age 70 (for me) to maximize my larger SS benefit, and allow us to do Roth conversions on our large traditional tax deferred portfolio before RMDs, in order to minimize taxes.
I developed a spreadsheet detailing our expenses and income projections from age 50 through age 100. The spreadsheet included all income streams, expenses, assets and liabilities, federal and state tax estimations, inflation adjustments, and projected ROI calculations, enabling me to more accurately model our projected future expenses, incomes, and the tax liabilities moving forward. We still utilize this massive spreadsheet each year to ensure we are tracking as planned. I adjust inflation and ROI estimates annually based on how things are progressing (and taking into account my “best guesses”) to identify any longer term impacts that may occur within the plan.
For example, we never imagined the massive stock market growth over the first five years, so adjustments were made to raise the originally projected balances along the way. We never imagined COVID and it’s effects. COVID effectively reduced our expected travel spend, so we quickly built up some cash reserves by default, so this was also adjusted in the plan. Over time, it has highlighted several potential issues to our original FIRE plan. (I’ll get into those in more detail below.)
Did you make any specific moves to prepare your finances for retirement?
We had built our retirement dream home and paid off our primary mortgage years before retiring early, so there was really no plan for downsizing. We did sell our small mountain cabin and associated acreage, and redeployed that as an additional cash reserve. We weren’t using it as much, and this would have likely happened even if not retiring.
One adjustment that we made was after modeling sequence of returns risk, I shifted three years of investments into a cash buffer to provide an available backup smoothing option, should our rental income suddenly become lumpy. A further contingency plan was to consider shifting into a 72T dispersal of 401k investments prior to age 59.5, if necessary.
As a result of our retirement modeling, we also gradually shifted from a 100% stock portfolio down to a more traditional retirement age portfolio of 60/40 (stocks/bonds) in the event our traditional investments became necessary for income. I know what you’re thinking…If you had a rental income portfolio that is more than double your expenses, and a cash reserve buffer of three more years of expenses, you should be more aggressively invested with your traditional portfolio! (Did I mention I’m very conservative and have a tendency to over plan?) I like “sure things” (or at least as “sure as possible”)!
Yes, I’m probably overly conservatively invested and likely leaving some long term growth on the table as a result of this conservative diversification. (I am a firm believer that… ”A wealthy man knows when he has enough.”- Ben Franklin). We have already won the game. We are going to have more than sufficient means for our lifestyle design through 100 years of age, and my kids (and grand kids) will likely also be fine, so I’m happy with that. I do plan to shift into a smile glide path longer term (post SORR), but I’m very comfortable with our more conservative plan.
Five years into retirement and it’s worked exactly as designed. We’ve actually grown our assets significantly since retiring (over five years ago), thanks to a generous stock market and rent inflation. After five years, we now know that we won’t need any 72T withdrawals prior to 59.5, and we have not needed our cash reserves as our rental income has been very consistent. So we have (recently) gradually begun increasing our traditional equity positions back towards a 70/30 (stock/bond) position.
Who helped you develop this plan?
I have always been financially motivated. I was raised in a lower middle income home. I knew from an early age that I was motivated for more. I read everything I could get my hands on about investing in my twenties and thirties.
I was fortunate to have a couple of key mentors early in my life (if interested, you can read about them in my original MI-226 interview).
Later in life, I stumbled onto several FIRE blogs, but we were already well into building our rental business and executing our personal life-style design by that point. Those blogs definitely provided great reinforcement to my ideologies and helped me to taper specific details of our traditional investment plan. I also tried several “professionals” early in my investing career (but only for a couple of years in our mid-twenties).
Fortunately, I intuitively understood that their fees were detrimental to our long term compound growth. So we cut them loose very early, and I have avoided professional advisors ever since. We (inadvertently) became index investing long before it was popular.
What plans did you make in advance to leave your job?
I’ve described our financial plans and rental business towards this means above. We did this over the course of roughly seven years, while still working.
It was difficult to remain stealthy during this period. The excitement culminated as we got into the final two years, as we realized things were actually working out as planned. I had a small countdown (number of days) on my office white board. Just a small obscure number, that I quietly changed daily.
A close co-worker finally noticed the number, and asked me what I was counting down. I passed it off as a project counter for several more months. Finally at lunch one day, he asked again what the number really represented. I confided that it was my final day count down. He was dismayed that I could consider retiring so early, but was very happy for me.
He was older and naturally intrigued. I offered to assist him in building his own exit strategy, if interested. That conversation was over eight years ago, and he’s still working at MegaCorp today, and has never approached me for assistance. We still have lunch about every other month, and he always complains about MegaCorp and still needing to work. (He is now past traditional retirement age.) I’ve offered several more times to assist with planning, but I’ve learned many people just don’t want to put the effort into actually make retirement happen.
FIRE isn’t for everyone. It’s hard to delay gratification. I still offer assistance to anyone willing to venture down this track, but I have found very few have the fortitude to follow up for more than a couple of quick discussions. Everyone wants a get-rich-quick solution to solve their over consumption lifestyle problems. Sadly, very few are willing to put in years of planning and work to actually make it happen. (So kudos if you’re still reading this post! You are among a rare breed!) 😉
I stayed relatively stealthy until my final month at work, at which time, I announced my plan to retire from MegaCorp. Most were astonished that I was leaving at such an early age (50). Some asked questions over the following weeks, but none followed up on those discussions. The company leadership was shocked.
Our local HR person had a few questions about how I’d purchased my rentals so discreetly, while traveling and working so many hours at MegaCorp. I think he was secretively wondering if he could pull it off himself!
My immediate boss (of less than a year) never asked a single question. She was clearly upset that I was leaving, and was scrambling with how to replace me. She had never bothered with any retention or succession planning. She had ignored every subtle hint that I had given her over that last year, so I was only marginally inspired to feel sorry or help her beyond my four week notice. I also offered my final four weeks to train someone internally. Unfortunately, I left an empty office because she hadn’t decided on a replacement by my final day.
As mentioned above, I didn’t immediately retire when I left my career of +20 years. I went on to assist my former colleague with the sale of his small Personal Products company. I committed to 12 months of assistance, but I actually stayed through 17 months until the sale was finalized.
It was an easy gig, and my stress level had subsided greatly by taking this MiniCorp role after leaving MegaCorp. It also soothed my “One-More-Year” itch by providing a year and a half trial run of living solely on our rental income, while saving nearly our entire working salaries and final bonuses.
That small company provided an additional six months of additional severance pay (and bonus) as well as health coverage costs after just 17 months of employment! What a great deal to ease into full time retirement! This little extra windfall allowed my wife to move her date up six months earlier. It was an easy way for both of us to softly exit! In retrospect, we didn’t need my one-more-year, but it was a soft mental cushion to land on, at the time.
What were your pre-retirement concerns (financial or non-financial)?
I had spent so many years building our plan, that most financial pre-retirement concerns were resolved two or three years prior to retiring.
By the time we actually pulled the trigger, I had years of rental income history and the confidence we would not starve.
Health insurance was the biggest moving target for us.
How did you handle deciding on and paying for healthcare?
We had used Cobra during my first severance from MegaCorp (five years earlier), so we were very familiar with the Cobra process. My OMY gig was providing six months of Cobra paid by my windfall severance package. We also researched Obamacare, and knew that an Obamacare Bronze HSA compliant plan would be our best option longer term.
The timing was such, that I only had to pay for Cobra out of pocket for the final two months of 2017. The MiniCorp severance paid the first six months on my behalf. We then went onto an Obamacare Bronze plan (and HSA) starting in January of 2018 as planned.
To this day, we manage our MAGI to stay within the subsidy cliff, and max out our HSA(s) contributions. (We can argue the morality of taking the subsidies, but I addressed my opinions during comments in my original interview. I’ll gladly provide additional support for our position, but please take the time to read the earlier post before attacking.) Obamacare has worked well for us in early retirement, even given my wife’s health situation.
How did you tell your family and friends of your plans?
We told our daughters and close family about our plans very early on as we were building our rental portfolio, so they knew our general plan years in advance.
Extended family was initially skeptical, but our girls were 100% onboard and happy for us.
They have since become fantastic investors in their own rights. Both have exceeded their own six figure investment portfolios before their 30th birthdays! Both are also very interested in investing in REI too. (…yes, I’m a very proud dad!) 🙂
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I am LOVING this interview!
To read the rest of this interview, check out part 2.
MI 160 says
Awesome work and congrats! I definitely need to go back and read your original interview.
RI-43 says
Thank you so much MI-160!
MJ says
wow. 50 doors in such a relatively short period of time. Very good planning, execution, risk and asset management. You’re not retired. I see “consultant” in your future on a variety of subjects, if u choose. Sounds like you still have the gumption and energy to do something like that.
In some ways , your story reads like esi’s story. In some ways. esi’s charitable giving is off the chain. but as u said, yours is a work in progress. btw, I don’t have no issue w your ACA strategy, since we ALL have the right to do the same. Best of luck for a lenghty and well deserved retirement. Thank you for doing the write up. It helps a lot.
RI-43 says
MJ,
Thank you for the kind words. I have no desire to consult these days. I’ve become too accustomed to my new “free” time and have plenty of (i.e. too many! 😜) hobbies that fill my attention! I have enjoyed helping a few others who have been truly willing to put in the effort to venture down this rabbit hole, but have zero interest in structuring my time to make that a consistent effort. It’s simply time for us to enjoy life!
M-124 says
I really enjoyed this retirement interview. It’s super relatable for me as im the same age and have followed a similar path with main 1099 business used to fund and build a real estate business. My 1099 is largely passive so no need to retire. But anyway –
You mention trying to help others who were interested in what you’ve done but never did anything – or don’t get it. You mentioned something I see as a sort of “resentment “ from co-workers.
I was wondering how often you were told “well you can’t do that “ or “are you crazy to leave your job ?”
I’ve literally had to avoid discussing what I’m doing with certain friends because I don’t want to be around that energy. I got into my real estate business to earn passive income and build a portfolio for depreciation so that I could offset the high earned income tax rate of my 1099 business. (Real estate professional ) These people who have the same 1099 could do the same but don’t. It’s interesting how many people (as you say ) just don’t get it.
I’m asking you to elaborate on that because you seem to have had a similar experience.
Again – great share.
RI-43 says
M-124,
Thank you for reading. Lol, yes. I was definitely told I was crazy more than a few times! Most of those folks are still working at their W2 jobs and are still confused and curiously trying to figure out how we’ve managed to really be retired for six years.
I think it’s true for anyone starting a new endeavor or business. There are always naysayers in our lives. (Sometimes we are our own worst naysayers.) There are always risks. There are always pitfalls. And yes…maybe there are many more failures than successes. A fear of failure can paralyzing, but it can also be extremely motivating. Many people day dream about owning and controlling their own destiny, but few are willing to actually grab it and run with it. It’s scary to truly own your destiny. I believe FIRE is within grasp of most people intellectually. I am certainly no genius! But I think there are core consistencies in successful personalities that make certain folks succeed. I believe that’s why ESI has struck gold with these interviews. For me the motivation came down to: 1) a fear of not retiring young enough to enjoy it and providing for family, 2) sheer persistence, 3) a belief in my own ability to navigate the pitfalls verses allowing someone else to dictate my future. So to anyone trying to be successful, I say, “…ditch all the naysayers and take control!”
Wind says
Wow!! Awesome work! I am very impressed with your detailed planning. That is where I am lacking. We are saving and investing but detailed planning and future projection is missing. haha.
We will need a financial planner soon to map out our projection. 🙂
Thank you for sharing your story!
RI-43 says
Wind,
Thank you very much! I believe most readers of ESI have the ability to put together their own plan, but a financial planner can be helpful if you’re not yet comfortable with how to get started. Keep reading the FIRE blogs and it will likely start coming together. Thanks again!
Linda says
Love to work for MEGA CORP!!
RI-43 says
Linda,
MegaCorp can provide many things…a great salary, good benefits for raising a family, incredible friendships with colleagues, etc. But mine lacked fulfillment for me personally. But I freely admit, that it did provide a great opportunity to create side hustle that could provide the lifestyle we truly desired. Don’t get me wrong. I appreciate everything MegaCorp provided. I just wanted something different, and now (fortunately) I never have to look back. Cheers to your MegaCorp! I hope it provides whatever wonderful lifestyle you choose!
gsam57 says
Fantastic interview with tons of useful information! We are planning to retire within next few months and have very adequate funds to do so. My wife just is very concerned about paying for healthcare. I will be eligible for Medicare, but she will have to take either Cobra for first 18 months or just on ACA. I understand that Cobra can be very expensive, maybe more than ACA? Caan you please elaborate more on your ability to shuffle MAGI to get ACA subsidies? Any help in healthcare subject would be greatly appreciated.
RI-43 says
gsam57, Thanks for commenting. It sounds like you guys a extremely close! Congratulations!
ACA has been helpful for us. Each individual’s situation can vary significantly, so without knowing your specifics, it would be difficult to make suggestions, but I’ll gladly expand on our situation in hopes that it may be helpful to your situation. In our case Cobra was roughly $1850 per month in 2017. I left MegaCorp in May with six months provided Cobra via my severance package. That took us through October of that year. I paid for two months of Cobra out of pocket for Nov & Dec of 2017. Open enrollment for ACA is typically in November each year, so we quickly enrolled for Jan-Dec of 2018 in November 2017. In our specific situation, the majority of our income was from rental income for 2018. Thanks to depreciation, we had significant (nearly 50%) paper deductions thanks to depreciation on our Schedule E form. This alone essentially makes our MAGI look like half on paper. (This is one of the HUGE advantages of rental income. The IRS has setup laws favoring rental income to incentivize investors to provide necessary housing.) There are other “above the line”deductions that can also help. We specifically opted for a Bronze HSA plan because you can further reduce MAGI by the HSA annual contribution amount ($7750 per family + $1000 each for being over 55 years old this year for a total deduction of $9750 in 2022). Any previous Carry Over deductions (up to $3000 per year) also further reduces MAGI. In all, you can easily make a $120k income appear reduced to $50k pretty easily with all of the above legally provided IRS deductions. In our first full year (2018) of retirement, our ACA Bronze plan cost was roughly $1575 per month (verses $1850 for Cobra), but our subsidy covered all but $1.54 per month (Yes, our cost was only one dollar and fifty-four cents per month!) I hope this helps. Your tax professional should be able to help you identify potential MAGI reductions. It would be well worth a short visit to your tax professional to ease your spouse’s concerns.
Best of luck!
gsam57 says
Thanks so much, RI-43. I wish I was one of your colleagues so I could take advantage of your experience/wisdom :-).
RI-43 says
You are too kind! 🙂
Kevin says
Great story and very similar to myself as far as working while acquiring rental properties. Great job on executing your plan.
I worked 25 plus years in corporste world while buying rentals and then “retired”.
Only have 20 doors and seem stuck w getting financing to expand much more beyond that. So I’m focused on paying off the leveraged properties to enhance cash flow.
How did you acquire 50 doors w financing? One can only have 10 conventional loans and then alternative financing rates not really attractive to get positive cash flow on most properties even w 30% plus down payments.
RI-43 says
Kevin,
Congrats and great job acquiring 20 units! That’s a huge accomplishment by any measure!
So we utilized a combination of financing. I’ve use everything from conventional bank financing to owner financing to our home equity line of credit in the earlier investing stages. I became very adept in searching out owners willing to finance to me directly. The key was finding their need(s) and solving their problem(s), while convincing them to finance to me. I was pretty good at finding win-win situations for the previous owners and me. I’ve done this approach multiple times early in my investing career. I have since refinanced to all conventional loans. I do find more success with smaller regional banks that are more aligned to my portfolio. I also do most of the underwriting ahead of time for them. I walk into a bank and hand them a copy of my business plan complete with a detailed portfolio of existing properties, a personal financial statement, and a detailed financial analysis of any proposed properties up front. They love it, and I’ve had great success with this approach. They know my decision matrix and strict investing rules and they know I’ve done my homework. They can also see our successes. It’s a much easier sell that way when asking for a mortgage. We’ve also focused on multi-family properties, so we’re not asking for 50 individual mortgages. I’ve never had more than six mortgages at any given time, and that was a mix of owner financing and conventional loans.
I hope this helps! Cheers to your success!
Kevin says
Thanks for information.
Multi family does change the situation for financing vs single family rentals.
I agree finding regional banks or credit unions is the way to go for more creative financing.
I’ve always wanted to get into multi family (like 10 to 20 unit property) but have not been able to crack that egg yet.
RI-43 says
Kevin, We chose to start with multi-family from the onset for a variety of reasons. We designed our business plan around it. Both categories are great for different reasons.
Wishing you much success!
SMB116 says
Congratulations on a job well done to reach retirement at such an early age. I too am interested in hearing how you shuffle your MAGI to allow for ACA subsidies. I am a single person with a 19 year old dependent (FT student) and am looking to retire in the next year. Health insurance is my only concern so am very interested in hearing how you do it! thank you!
RI-43 says
SMB116,
Thanks for reading along! I expanded (above) on our MAGI/ACA details in a response to gsam57. I hope that response may have provided sufficient info. If you have further specific questions, just let me know. Cheers!
SMB116 says
Yes thank you. I read what you provided to gsam57. Appreciate the information and definitely plan to discuss with my financial and tax professionals.
RI-43 says
SMB116,
Awesome! I’m glad it helped. Best of luck!
Jane Hladky says
Hi, I worked mega-Corp for my entire career retired at 58 yrs and like you had time on the side while raising 4 kids and traveling 70% of the time to acquire a few rental properties. We have done very well. What I love about your story is how you took your ‘smarts’ and applied it to your personal situation. Walking into a bank with the data you do no wonder you have been successful. I have never hired a property manager was always not wanting to pay for that so having 3 doors was like having 6 doors, hard work but it definitely was worth it. Now we have placed 2 kids in those paid off rental homes, gifted them half the equity and given them a 0% interest mortgage. With what they pay us we will gift to our other 2 kids and provide them with mortgages as well. They will be set for life and then we can spend the rest lol. Only issue is my husband now has cancer and his longevity is at risk. So congrats on doing it young. You never know what will come your way and the fear of leaving jobs at a young age keeps people miserable and working. Then they retire at 65 and die a year later.
RI-43 says
Jane,
Thank you for reading. More importantly, I am so sorry to hear about your husband’s cancer. You are absolutely right. You hear about so many people retiring and only enjoying a handful of years before some critical health issue creeps in, so I’m a firm believer that sooner is better when it comes to FIRE. My wife’s diagnosis, just two years after early retiring, was a severe a kick in the stomach for us. We are taking it one day at a time. We all strive to achieve so much, only to have life suddenly upended. It’s a harsh reminder that nothing is a given in life. Time with loved ones is what we are all really after when it comes down to it.
My sincere best to you and your husband. Congratulations on the kids and those mortgages. Those are amazing gifts for sure.
Anthony says
Hello, great and thorough write-up. I consider myself knowledgeable about many FIRE topics and I learned a few things from your interview. One thing you I don’t believe you touched upon is how you spend your free time? Did you find it difficult to go from a structured day job to retirement? I am considering a semi-retirement job like the one you took for 17 months to ease in a transition.
I ask because I reached financial independence two years ago at the age of 40, but I continue to be fearful to jump to retirement. I’m confident in my passive income covering my expenses, but the unknown of how to spend my time is troublesome. This compounded by that in my particular industry, if I leave it may be hard to come back at my current seniority level. I appreciate any feedback that you can provide. You certainly struct a cord with your statement in an earlier comment that “A fear of failure can paralyzing.” All the best!
RI-43 says
Anthony,
Thank you for responding. There is a part 2 of my interview coming out tomorrow, which covers my day-to-day free time. So I won’t spoil the next post for ESI.
Leaving a “safe” job for FIRE is scary. It gets easier from a financial standpoint the closer to true FIRE you get. I get it! I was in the same situation leaving a VP role in the Pharma industry. There is no going back. Creating some extra buffers helps many, if the root fear is financially related. If the root cause is a lack of direction or purpose, then maybe you can find a way to ease into it, if you’re still unsure. Maybe consult for a period, where you can have one foot in and one foot still in your industry. Take a different role for a while, that allows you to still have a life line.
You picked up on something much more important though…While I encourage folks to fulfill early retirement as soon as possible, so they don’t miss out on “free time”. You need to find your “why” first. What makes you excited to wake up each day? What makes you jump out of bed, ready to take on the world? Whatever “it” is, this is likely your “why”…or some combination of those things that excite you. Some people wake up excited to just go fishing everyday. Some people wake up excited to paint. Some people like to build businesses. Some people seek a long lost hobby that they’ve longed to revisit. They are all ok, if they are your passion. Spend a little time deep diving into your true passions. Find that “thing” first, and the drive to get there will over power the analysis paralysis in no time.
Anthony says
I’m looking forward to part two. I agree with your advice. The most concise summary of a successful retirement that I have heard is that ‘it’s best to run towards something, rather than run away from it.’ I am continuing to search for my ‘why’ by revisiting old hobbies and exploring new ones. While making a salary in my ‘why’ is not my focus, as another blogger put it, making money is fun. Trying to find a combination of both is my current focus.
Reading through your interview we share similar interest. I have rental properties as well as index fund investments. I have been exploring the investment advisory field as a way to help people and make some income while doing it. This seems attractive as I can hopefully make my own hours, retain social interaction, and sharpen my financial planning skills. There is always more to learn.
As a side note, if you haven’t already, you may want to consider hard money lending given your real estate knowledge and lack of interesting opportunities. It can be a way for you to put some money to work while you wait for a downturn. All the best to you and thank you for taking the time to share your story.
RI-43 says
Best of luck Anthony! Amazing job to become FI by the age of 40!!
MI-202 says
About a week and a half ago I put up a couple of numbers on my whiteboard that represent the first date that I can retire, and another one roughy 4 months later that is my 20 year anniversary at my current company which might be nice to hit. I don’t get anything extra for getting to that but it seems like a good number. It will all depend on how I feel with the current job at the beginning of 2026.
I”m looking forward to Part 2.
RI-43 says
MI-202,
Thanks for reading along.
It was fun discreetly tracking my countdown and knowing there was a light was at the end of the tunnel. The final year was the best because you could almost taste it! It’s a great feeling when it comes. Best of luck with your dates! I’ll be waiting for your RI-interview!