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.
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.
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.
Mr. RB40’s part time work: $2,500
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.
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…
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.