So, here’s the plan… I’m not going to retire. No, I’m not throwing my hands up in disgust because I don’t think my wife and I can save the $1.5 million or so the AARP estimates it will cost to “have a comfortable retirement”. I actually think we could hit that number pretty easily by age 65 at our current pace. I’m just not thinking of life in those terms anymore.
What about the Mr. Money Mustache plan for early retirement? Get on the path to financial freedom. Keep your annual spending way down, build up a cash ‘stache of about 25 times that spending, so you can do whatever you want without having to worry about a paycheck?
I love that route!… for younger people in a slightly different spot than me.
If I had a DeLorean, I’d definitely go back in time and tell my 20-year-old self, Quit spending student loan money on pizza and beer! Then I’d tell 23-year-old me, Get out and pound the pavement, dude! You can land a better job than night clerk at the Days Inn. Then I’d punch 25-year-old me in the face and yell, Don’t buy that crappy computer on credit and definitely don’t forget to pay the bill over and over so you get charged $35 late fees on $15 minimum payments! Focus, man! Focus!
Who am I kidding, I’d give myself the Sports Almanac. My point is, if I had discovered the path to financial independence about a decade earlier, my wife and I would be in a much better position to retire early like true Mustachians. The clock is ticking though.
I’m 38 now. According to my calculations, and with the help of Mr. Money Mustache’s Shockingly Simple Math Behind Early Retirement, my wife and I have at least 10 years (probably more) before we reach true financial independence. That’s if we really buckled down and saved 60% of our take-home pay. The numbers break down thusly:
We’re saving more like 35-40% of our take-home right now. Commendable. But we’d need a few years to ramp up to 60%. And $40,000 of spending is right at current minimums. We’d have to do some work on that end too. We’re looking at 12 years or more. I don’t think I can wait that long. I’m not that patient!
Okay, if you’re not going to go the traditional route working 9 to 5 until you’re 65. And if you’re not man enough to go hardcore like Mr. Money Mustache to retire early, what exactly is the plan?
We’re eyeing a kind of mini-retirement that I like to call our Runway Retirement. I talked about it a little bit in Why I may not be able to keep my grubby little hands off my 401k. I talked about how I would rather have a short runway to use now than a long landing strip to use later.
The landing strip represents traditional retirement nest egg that you work tirelessly to build so you can land safely on it at the end of your working life. You cross your fingers you built it long enough so it doesn’t run out before you die. And you pray you don’t crash short of the landing strip (die before retirement).
The runway is a much smaller pile of cash that can be used a lot earlier in life to help your ideal life take flight. It buys you time, valuable time in the prime of your life. It buys you time away from 9-to-5 work so you can instead launch that project you’ve been meaning to get off the ground, build a lifestyle business, find the job of your dreams or simply take a much-needed break to rediscover what life is really all about.
Ms. Montana has a great article on what she and her husband have been able to do with just one year off work. Not only have they bolstered their side-businesses, but they’ve strengthened their relationships and their bodies. It’s amazing what you can do with real free time. She recently released a PDF guide outlining how anyone can take one year off work every decade. It’s an inspiring read for anyone and I think more people should think in these terms.
Our 7-year Plan
My wife and I are planning for more than a one-year sabbatical. We’re city-folk and I can’t process a deer (I don’t really do well with blood and guts), so we’re probably not as self-sufficient as the Montanas. Besides, I’m not as confident that we could return to the workforce at the same salary as we are now if took a one-year break. We need a little bit more of a cushion.
We’d feel most comfortable with 2 or, better yet, 3 years of expenses in the bank. That way, if we did pull the trigger on a runway retirement, we’d have plenty of time to figure out a way to survive and actually thrive outside of the cubicle… for good! And it gives us a little extra time to slip back into the job market if things don’t quite work out.
We’re about one and a half years into a 7-year plan that has us paying off the rest of our debt (besides mortgage) and building up a little more than 3 years of liquid savings by June 2022. If it all goes according to plan, we should then have the option of exiting the workforce to take at least a 3 year break from the rat-race and explore other avenues for our life.
Some of these avenues could include making a little bit of money, which would stretch our runway. I, myself, have always wanted to write a novel. I’ve got some ideas for an app. There are dozens of fun projects floating around my head right now. Surely, we could build residual income from at least one of them.
The best part is, if we’re optimistic about how much we’re able to save up, dropped our spending to more Mustachian levels, and if we somehow figured out a way to cobble together a few thousand dollars a month doing work we love, our runway retirement could last almost forever. And this would all be kept separate from our current 401k and IRA savings, which would continue to grow in the background untouched. Here’s a really simplified table to show how the numbers break down:
The Bottom Line
Maybe you don’t need $1.5 million to retire. Maybe you don’t need the full ‘stache of 25 times your expenses to retire early. Maybe you don’t need to retire at all. Maybe a runway retirement of just a few years in the prime of your life can give just enough breathing room to build that business, launch that product, write that best-selling novel, design that work-life you never want to retire from.
A lot can change in the 5 years we have left on this plan. Life could throw us a curve ball or our priorities could simply change. I know that. Honestly, if we had $200,000 in the bank right now, I’m not sure we would have the guts to pull the trigger on a runway retirement. We both like our jobs so I could easily see at least one of us remaining in the corporate world in some capacity.
The important part for us is to have at least the option to stop working for “the man” sooner rather than later. And if we’re moved to take the leap because we aspire to greater things, then that money will be there to back us so we can give our best effort.
That’s what we’re aiming for. A runway retirement is in our plans… for now. So, I’m curious… What could you do with a 3 year runway?
These are my opinions. Please do your own research before deciding what to do with your money.
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