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Mrs. RB40’s Early Retirement Strategy Revealed

by retirebyforty on September 23, 2013 · 52 comments

in cash flow, early retirement, goals and milestones

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This is part 2 of RB40’s Exit Strategy Post Mortem. You might want to read that post first if you haven’t seen it. I left my corporate job over a year ago and we have been very happy and are doing fine financially. Mrs. RB40 has seen how happy I am without a corporate job and now she is yearning to spend more time with us. This was a bit unexpected because she likes working and I know she can’t be idle. She said she doesn’t really want to quit; she just wants to spend a little more quality time with her husband and kid.

As a follow up to the mentioned article above, I worked on an exit strategy for her and I’d like to share it here.

Original Plan – Early Retirement

Work until Mrs. RB40 qualifies for a pension. This will take about 12 more years with her employer. This is a great plan because we’ll both still be young enough (52) to fully enjoy our retirement. Her pension would come in very handy and we will be very comfortable until we qualify for social security payments. (Social security will be gravy for us if it’s still around.)

She still likes working now, but we don’t know if that will change in the future. She already is starting to pine for more free time, so we should plan for an earlier retirement as well. We’ll have to make some sacrifices to make it work. Nothing worthwhile is ever easy. Let’s set some goals and go over several scenarios and get Mrs. RB40’s feedback.

Household Early Retirement Goals

  • Positive Cash Flow – The cornerstone of our early retirement plan is to not spend down our retirement fund until we’re in our 60’s, so we need to have positive cash flow until then.
  • Retirement Accounts exceed $1,000,000. Let’s have a nice round number to shoot for.
  • College Fund exceeds $100,000. RB40 Jr. will be going to college in 2028 and the estimated cost of an in-state public college is around $250,000. This includes tuition, fees, room and board, books, and everything else. $100,000 might be a little low, but I’m hoping we hit this point early and then we can let it compound for 6-7 years. If he wants to go to Harvard, then he’ll need to get scholarships and/or some loans.

Plan B – Work part time

We’ll just ignore inflation for now and use today’s dollar below.

One of the easiest ways to bridge the early retirement gap is to work part time. If Mrs. RB40 can’t stand her job anymore, then perhaps she can find a part time job or start a part time business to help make ends meet.

Expense: $4,500. Our average monthly expense in 2013 is $4,000. We’d have to pay more to get the benefits currently provided by Mrs. RB40’s employer such as health insurance and life insurance. We’ll probably have more expenses as RB40 Jr. gets into sports, music, and other activities.

Income: $5,500. It would be nice to have a small cushion.

Mrs. RB40’s part time work – $1,000

Mr. RB40’s part time work (online income) – $2,500. I’m assuming my online income will grow and stabilize by the time Mrs. RB40 quits her job.

Dividend: $1,000

Rentals: $1,000

The dividend and rental income are just projections, but I think we can achieve that in 5-6 years.

Plan C – cut expenses

If Mrs. RB40 gets completely burned out, then she’d need some serious down time. In this scenario, we cut our living costs and Mrs. RB40 doesn’t have to work. How can we do this?

We’ll move to our old house and pay it off first. In 5-6 years, our old house (currently rented) will be nearly paid off. It should be easy to pay off with our reserve fund. We will also get rid of our current condo and 4plex. This will simplify our finances and boost our dividend portfolio.

Expense: $3,000. Our current housing expense is about $2,300. If we move into a paid off house, our monthly expense will drop like a rock. I think we can make it work with $2,500 to $3,000.

Income: $4,000

Mr. RB40’s part time work: $2,500

Dividend: $1,500. We should be able to hit this target after we transfer the assets from our rental properties to our dividend portfolio.

Plan D – Cut expense drastically

This is a drastic plan and I’m not sure if Mrs. RB40 would like it. In this scenario, we liquidate everything and retire to a friendly developing country. I’d put everything in our dividend portfolio in an effort to put the pedal to the metal on our dividend income.

Expense: $2,000. We can live a very comfortable lifestyle on this budget in Chiang Mai, Thailand. I’m sure there are many nice places in South America and South East Asia that fit the bill as well.

Income: $4,500

Mr. RB40’s part time work: $2,500

Dividend: $2,000

This plan has a lot more cushion to start off with. We’d probably travel more and live a little more luxuriously if the numbers work out. We could also just keep investing the difference in Junior’s college fund if it still needs some help.

spouse early retirement strategy

Mrs. RB40’s Opinions

Plan B, C, and D don’t sound too bad to me. I’d be willing to go with any of them if Mrs. RB40 needs to quit her job. We probably can achieve the goals we set in about 5 to 7 years. By then, the pension will be very close and I don’t know if Mrs. RB40 would be willing to give that up. Who knows what will happen though.

Here is a rare chance to hear from Mrs. RB40. What does she think of these cockamamie plans?

While Joe is willing to go after any of these plans (after all, his plan worked out), I would still lean toward our original plan.  Twelve years is not that bad since I actually like my job, my coworkers, and my company.  I’d be reluctant to give up the benefits I can get from my employer, while I still enjoy the job.  The work keeps me challenged intellectually, although there are those days when I’d like to skip going into the office.  Usually, these days consist of Joe informing me that they (he and Jr.) are going to hike Multnomah Falls or visit the zoo.  I actually have the opportunity to take these types of days off — I just have to plan for it, at least a couple days in advance; I can’t just go on a whim.  Which, I suspect, is the primary appeal of retirement — to have such a flexible schedule and the ability to change one’s mind.   I also have an emotional need for stability.  I don’t like moving around a lot, and I don’t feel the need to, as what I do is quite interesting, and no two days are alike.

Plan B – Work part time

About RB40’s big plans.  Plan B is a big ‘if.’  I considered the idea of working part time, and it’s not for me.  I am one of those people who would end up getting asked to work full time.  Or I’d get bored easily in a part time position.  My current job does not have a part time option.  It just doesn’t.  I have plenty to do to keep me occupied for more than full time.  I thought about consulting work, which I could do; however, the time commitment to set up my business and then negotiate with clients just seems so exhausting.  Joe thinks I can advise people online, and maybe I’ll consider looking into it.  Except I have so many other projects that I’d rather address.

Plan C – Cut expense by moving to our old house

Plan C probably won’t work, if it entails that I quit completely.  Knowing me, I won’t be idle for long, and this will drive Mr. RB40 nuts.  I will get involved in some project right away, and then I’ll take over because I don’t like the way it is being organized or something.  Which means that I would then be “working” full time again.  I wouldn’t mind moving back to our old house, especially since RB40 Jr. is getting bigger and could use the space.  I loved that house…all the fruit trees started producing cherries, pears, Asian pears and figs after we moved to an urban area.  The backyard is fenced in.  The neighbors were nice.  One of the rooms could be set aside as an office if necessary.  Our housing expense would really be reduced.  But it was so far from everything and I felt like I had to drive just to go somewhere, even grocery shopping.  Too bad we can’t pick up the house and plunk it down on a plot in downtown.

Plan D – Cut expense drastically by moving to a developing country

Plan D is something that I might consider…when I really retire!  I love the idea of living in another country — temporarily.  It would be longer than a tourist visit and long enough for me to get to know a place.  But then I’d need ‘down time’ by coming back to the US.  With Plan D, this option wouldn’t be there because we’d sell everything before moving.  I guess we’d visit our relatives or something, but this too, would be temporary.  It wouldn’t give me a sense of ‘our home.’ This is where personality differences come into play.  The mister doesn’t have any ties to a place or any particular sentiments regarding ‘things.’  I do…my family is one that inherits things that have meaning to the family.  I wouldn’t want these items (large ones, especially) to be in storage while we’re abroad; I would want them in a house.  It would be too expensive to ship everything each time we moved.  Unless I got a job with a company with a fantastic relocation plan…which doesn’t exactly go with Plan D.

So, plan A it is.  Sorry! I appreciate that the hubby looks out for our best interests, and keeps our finances on track. But just because I gripe every once in awhile doesn’t mean that I want to stop working at my job.  I can spend time with Mr. RB40 and Jr. as long as I have a little advance warning, not when I’m walking out the door to catch the train in the morning.  We planners need some kind of stability in that regard.

RB40’s final words – There it is folks. I hope you enjoyed hearing from Mrs. RB40. The real lesson here is this – talk with your spouse once in a while and actually figure out how to read her mind…

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{ 52 comments… read them below or add one }

Financial Samurai September 23, 2013 at 12:40 am

I think it’s awesome the Mrs is willing to work for another 12 years to help support the family! Hope she gets more time off the longer she works at her place.

Having a long term working spouse I think is the best plan so long as the spouse is happy.

Sam

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retirebyforty September 23, 2013 at 9:13 am

Needless to say, I’m fully on board for plan A. :)
We are so lucky that she likes working and her job.

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Cash Rebel September 23, 2013 at 5:28 am

It’s refreshing to see such an analytical approach. I’d choose option D, but option A looks good too!

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retirebyforty September 23, 2013 at 9:13 am

I like option D too, but A is way better for us financially.

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Justin @ RootofGood September 23, 2013 at 5:45 am

Joe, excellent plans you have laid out. And excellent that you are getting Mrs. RB40’s input on the plan. She has reviewed the options and has demonstrated buy-in to Plan A!

There’s a huge benefit to typing out plans like you did. 1. It holds you to a plan, 2. Your wife knows the details of what you are thinking and can analyze each one and let you know what she thinks and feels, 3. If your wife ever changes her mind on working (which is ok!) you already have mapped out the what if’s of Plan B, C, and D.

At some point Mrs. RB40 may say (after a particularly bad week at work) Plan B or Plan C don’t sound so bad, and maybe you could try it out. The trade off of lots more free time might be worth small sacrifices in material wealth and income.

Good luck to her on her next 12 years! It is so awesome that you guys communicate about “The Plan” like this.

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retirebyforty September 23, 2013 at 9:15 am

It was a great exercise because now I know exactly what she thinks. It’s hard for an oblivious guy to pick up on all the hints women gave out. We talked about some of this, but I never really know what she thought. It’s hard to find time to sit down and talk in dept when you have a crazy 2 years old around.

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C. the Romanian September 23, 2013 at 5:55 am

Excellent plans and a great conclusion. I think it makes a lot of sense to know that the Mrs. wants to spend some more time with the family, especially after seeing that things work out so well for you. Why not consider starting her own blog? From what I remember, she was (or still is) the one that checks and edits your articles, which means that she’d be great at writing too. There are many profitable niches out there. Personally, I think that anything that interests you and others can be turned into a nice money making blog.

Either way, Plan A sounds like the best plan right now as 12 years are not that long of a wait and a pension still gives a cushion in case you’ll ever need that.

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retirebyforty September 23, 2013 at 9:16 am

She is our chief editor. She is too busy to start a blog now though. Perhaps when she is ready to retire.

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Insourcelife September 23, 2013 at 6:18 am

An interesting perspective from the other side of the table. One of my issues is that I make all these “great plans” that sound perfectly reasonable to me, but might not be as great from my wife’s point of view. Obviously I would not put anything into action without getting her on board as well, but I do catch myself doing this a lot, in my head at least.

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retirebyforty September 23, 2013 at 9:16 am

Exactly! That’s why I asked for her input. She likes plan A, but the other ones are more of an escape pod if things don’t work out.

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Holly@ClubThrifty September 23, 2013 at 6:19 am

Sounds like a solid plan!

I am personally terrified at the thought of what college will cost when my kids are of age. They’re 4 and 2 now. We’ve been saving since they were babies but I’m afraid it won’t be enough.

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retirebyforty September 23, 2013 at 9:17 am

It will cost about half a million dollars…. Less if you stay at home and be creative. :)
They can always get some loans.

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Pretired Nick September 23, 2013 at 7:09 am

Hi Mrs. RB40!
Great info! To me, I couldn’t even conceptualize working 12 more years. I felt that way even when I had 12 more years to go!
However I think you touched on one thing that I write about quite often — the need for stability and security. I’m the same way. However, to me, it’s about reaching the safety of financial independence as soon as possible — even if you want to keep working. And the key word there is, “want”. Once you’re at the place where you no longer need to work, life gets a lot better, even if you love what you do. You could then think about working four days a week or even taking a three month sabbatical. It’s all about choice.
So I’d recommend keeping your head down, reaching financial freedom — what I call the “pretirement” stage of life — as soon as possible. Then all the money you make is gravy. And you really are just going in to work every day because you enjoy it and want to see your friends.

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retirebyforty September 23, 2013 at 9:20 am

I had about 10 years left before qualifying for the retirement plan at my old job. It wasn’t a pension so I’m not exactly sure what the benefit was. Maybe healthcare. Anyway, there is no way I’d last 10 more years in that job. I think we’ll hit pretirement pretty soon if we count our retirement assets.

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Done by Forty September 23, 2013 at 7:49 am

It was great to hear from the Mrs. The nice thing with Plan A is that it provides income along with the ability to reconsider plans B, C, and D (the latter gets my vote!). Flexibility is a great thing and Plan A gives the most.

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retirebyforty September 23, 2013 at 9:20 am

I like plan A the best too.

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MonicaOnMoney September 23, 2013 at 8:16 am

I think it’s great that you both realistically looked at ALL of the options to have a Plan A, B, C, etc and find which works best for you.

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Seadog September 23, 2013 at 8:18 am

I’m not a parent, but why is everyone concerned about college? What is the point of it? It has no bearing upon a persons success. I have a degree in civil engineering and all that did was put me in a job which is kinda pointless and I don’t like. From my personal experience and from what I see in the office around me, college does not make you smarter at all; it’s simply an excuse to avoid the real world, avoid growing up, do nothing productive, and accumulate tons of debt. The best thing anyone could do is work, starting as young as possible. Work makes you a better person and gives you good work ethic. Working and finding out what you want to do for a living will make you much more successful than 4 years of partying and a silly piece of paper ever will. How can you expect an 18 year old to make a choice about what they want to be when they grow up if they have no real world experience to base that on? I thought engineering sounded cool, so that’s what I majored in, even though by the time I graduated, I had no interest in it.

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retirebyforty September 23, 2013 at 9:23 am

It’s because college grads make much more money than people without a degree. If college doesn’t work out for our kid, that’s fine too, but I want to be ready to help him get a degree.
Engineer is a good money making career, but you don’t like it, you can always try something else. Good luck!

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aB September 23, 2013 at 8:35 am

Plan D really does only seem for “when you really retire”, as Mrs. RB40 said.
Probably only because I am reading the description of it, but Plan D seems to leave RB40 Jr.’s schooling kind of in limbo.

I really need to lay out some plans though..

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retirebyforty September 23, 2013 at 9:24 am

Yeah, the schooling is tough. Maybe we can home school or send him to an international school (expensive…)

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Taynia | The Fiscal Flamingo September 23, 2013 at 9:19 am

Awe! I love hearing from Mrs. RB40. Bring her back more often. She sounds like my kind of woman.

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retirebyforty September 23, 2013 at 9:39 am

She is way too busy, but I will try to get another guest article at some point. Thanks!

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Kurt @ Money Counselor September 23, 2013 at 9:39 am

You’re doing a great job Joe, but I vote for more posts by Mrs. RB40! :-)

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Lance @ Money Life and More September 23, 2013 at 10:34 am

I’m glad you guys talk about it and are both on the same page. That makes things much easier when one person is retired and the other person isn’t. My wife has been on disability for the last few months and even that was difficult. I want a few months at home just to relax and recharge!

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retirebyforty September 23, 2013 at 11:33 pm

Who wouldn’t want to take a few months off and recharge. The corporate overlords demand so much from us. Sorry to hear about your wife, hope she improves soon.

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Andrew@LivingRichCheaply September 23, 2013 at 10:35 am

Great to hear from Mrs. RB40 and awesome that she enjoys her job and wouldn’t mind another 12 years working. I also qualify for a pension and I can retire at 56 (30 years) with a good amount of income each month. But that’s another 23 years! I’ve only worked 11 years but am starting to feel like I need a change but that pension is a golden handcuff. I don’t want to let go of the benefits, but I don’t want to spend 23 years more of my life doing something that I don’t particularly enjoy. It isn’t all bad, but I’d love to try out different opportunities. P.S: Didn’t think in-state public universities were that expensive.

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retirebyforty September 23, 2013 at 11:36 pm

23 years is a long time. Just ignore it for now. Don’t let the golden handcuff stop you from moving into a better situation though. You need to live life now.
Yeah, the estimate is 15 years out and the cost is still increasing rapidly.

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Bryce @ Save and Conquer September 23, 2013 at 10:36 am

Sounds like a good situation. Mr. and Mrs. RB40 both like plan A. Since plan A is the most stable, I would vote for that as well. Good for you and your family.

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Maverick September 23, 2013 at 11:38 am

Well laid out, Joe. Good to hear from Mrs RB 40 too. Please encourage her to show her ‘voice’ more on the blog. As you can see from other responses, your readership likes to hear from the other opinion in your household. :) We are in a similar spot, now that I have my engineered layoff, our plan is for Mrs Maverick to pull the trigger next summer. If she can also get a severance package, all the better.

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retirebyforty September 23, 2013 at 11:37 pm

I’d love to have her write more often. I need the help. :)
Good luck to you as well!

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Prasun Choudhury September 23, 2013 at 12:33 pm

A great followup article on your family retirement plans! A couple of thoughts on your plans and cost/income breakdown:
1) Isn’t 250K for a 4 year college education a bit on the higher side? As you said, I am considering a public state university where one needs to pay only the in-state tuition. Of course, the cost will sky rocket, if one considers Stanford, Harvard, etc. For the in-state part of the tuition, is 12K – 18K for 2 semestars or 3 quarters, a decent ballpark number? Other than tuition, one probably can live ok with 2K per month. Especially, if one lives off-capus after the Freshman-Sophomore years, the cost is probably less vs. staying in an university dorm.
2) 2.5K online income sounds great and if you can achieve that without the stress of a corporate job, that sounds even better and more attractive option!

I might consider a modified version of your Plan D. Assuming I have a house/condo somewhere in US, I might rent out the house/condo for long term (1 – 2 years), live in a foreign country (Costa Rica, Thaliand, Spain or wherever I can think of within my cost limits) for long term in the range of 1 – 2years, then come back to spend some time in US and then move on to my next destination (and continue this cycle until my health and enthusiasm permits!).

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retirebyforty September 23, 2013 at 11:40 pm

The 250k is 15 years out so I don’t think it’s too far off. I guess we’ll see.
I like Plan D too. I don’t think Mrs. RB40 would rent out our place though. Maybe we can rent it to our kid or relatives.

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SavvyFinancialLatina September 23, 2013 at 2:21 pm

I like the outlined plan. My husband and I need to sit down and start crafting a our plan for financial independence.

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retirebyforty September 23, 2013 at 11:40 pm

You have to write it down. We talked quite a bit and never got on the same page. Writing this down was very helpful.

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Jack @ Enwealthen September 23, 2013 at 4:12 pm

Thanks for sharing your plan. Great hearing from Mrs. RB40! It’s always interesting to hear your other half’s perspective on your plans, whatever they might be.

With college costs growing so drastically, saving for a child’s education is a gamble, but you save the best you can, and hope for a scholarship!

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retirebyforty September 23, 2013 at 11:41 pm

I hope our kid get some kind of scholarship too. We’ll see if he can do it.

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Little House September 24, 2013 at 6:45 am

Sounds like plan A all around! Mrs. RB40 sounds like me, she likes to keep intellectually stimulated and busy. ;) It’s great that the two of you discuss various avenues of retirement and have back up plans “just in case.”

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julia @ howmuchcost.org September 24, 2013 at 6:56 pm

I really like your break down. I’m going to sit down with my husband and confront the numbers….
You guys sound like a great team!

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Krista September 24, 2013 at 9:34 pm

I think I’d be a fan of A too, knowing how much I love my job. Part of me wishes we were the plan D type but who knows, we’ve got plenty of time to turn into the adventurous kind. I really enjoyed this post!

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Charles@Gettingarichlife September 24, 2013 at 10:02 pm

Joe,
Everyone should outline their retirement plans in depth like you have. I have plans for early retirement but haven’t laid it out like you have, something I need to do. Problem is I want kids and we don’t have it yet, so they’re going to change my plans.

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Karen September 30, 2013 at 2:50 pm

It’s nice to hear Mrs. RB40 weigh in on the plans. I can relate to her need to be busy. I’m the same way. : )

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Dan October 8, 2013 at 10:04 am

Hey Joe,

Did you guys go to the Rose City Comic Con? My family of 4 went and we were all dressed up. It was a blast! My wife was Batgirl, I was Link, our sons were Darth Vader and a ninja. Definitely something worth budgeting for in your September entertainment allocation every year. :)

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retirebyforty October 9, 2013 at 8:50 pm

We did! One of my friend got a weekend ticket and we got to go on Sunday. RB40 Jr. had a lot of fun spotting superheroes. :)

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Retire2015 March 1, 2014 at 5:24 pm

Your original plan calls for $100,000 for Jr. College fund. But if you and MrsRB40 retire by the time Jr goes to college, then according to College EFC calculators, your contribution for Jr’s college should be very small.

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SAHD April 22, 2014 at 5:10 am

I’m not sure I understand how your are retired when Mrs. RB40 is still working. I would tend to categorize you as a stay-at-home-dad as opposed to retired. There are obviously many many families that choose to have one spouse stay at home and care for the kid/s. How is what you are doing different than what thousands of other families do that are a single income family. Yes, you have a good nest egg and rental properties that can generate passive income (great job!), but so don’t a high percentage of the other families out there that have made the decision to have one parent stop working and stay at home with the kid/s. Am I confused?

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retirebyforty April 23, 2014 at 12:27 am

Sure, it just depends on perspective. I don’t plan to go back to work so I say I’m retired. Why does the missus have to quit her job if she likes it? No need to be confuse. Just enjoy life on your own term. Cheers.

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Brett June 3, 2014 at 12:20 pm

I love reading about your journey and find it inspiring but there is one thing that doesn’t sit right with me that I’d love to poke at with you to get my head around. I struggle to understand why you aspire to be supported in large part by social security in later years. Shouldn’t a genuine retirement strategy be based on becoming financially independent and not relying on all other taxpayers to contribute to ones lifestyle in retirement?

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retirebyforty June 3, 2014 at 11:54 pm

We don’t plan to be supported by social security. If we get any social security benefit, it will be gravy. We’ll use it for traveling or maybe charity giving.
We should have pension, retirement accounts, and other passive and active income. Hopefully, they will be enough to pay the basic necessities.
I’ll try to clarify it in the article.

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Kenny August 7, 2014 at 10:15 pm

Guys, your Retirement Goals should clearly state that the ‘figures are in 2014 $’ or are they in ‘future date dollars’. $1M round number in 2028 or some future date like that is ridiculously low.

$100K for College Tuition is going to be really really low. Books right now cost $150 to $250 and maybe it will go to $0 with all of the push being towards electronics.

MrsRB40’s plans is good, but I feel that like my wife, she is reacting to your plans, and may not be her own creative plans. It might be good to document your plan, and give it to her in a Word doc and have her modify it every 6 months. I do this to my Retirement Plan (fully documented), but I keep altering it with refinements to make it better, instead of really changing the macro picture.

My kids are drawing up 10 year plans also and they are only tweens right now. But, they have started to learn the power of ‘writing and documenting’, but also the power of ‘Word doc’ where it can be refined and modified without jumping the branch of the tree or jumping onto another tree.

Kenny

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retirebyforty August 8, 2014 at 9:38 am

You’re right. I need to figure out the inflation adjusted numbers.
I updated our higher education target to $250,000 in today’s dollar. According to various calculators, that should be enough to pay for 4 years of public school.
She is the chief editor so she sees an updated plan once in a while. She plans to keep working for now because she likes it. We’ll see how she feels when she’s 50.
Good job with your kids. I hope our kid can do the same when he’s older.

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Joseph Brown August 8, 2014 at 12:59 pm

There needs to be more education like this with respect to the potential for early retirement. Early retirement is achievable for anyone who avoids incurring debt and focuses primarily on creating cash flow producing assets, as opposed to stockpiling a huge lump sum in a 401k or IRA account. Not that these accounts are not useful, but retirement can be more effectively achieved by focusing on the accumulation of non-security based assets, like intellectual property, rental property, books, business systems, and income-generating websites.

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