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Can we survive without Mrs. RB40’s paychecks?


As most readers know, Mrs. RB40 is still working and earning a paycheck. That’s one big reason why I could quit my job to become a stay at home dad/blogger before I turned 40. She likes working and she enjoys her work so it’s a win-win situation for both of us. Of course, the future is never certain so I like to run the numbers once in a while to see if we can survive financially without Mrs. RB40’s paychecks. I think late April would be a good spot for an annual checkup. The taxes are done and it’s a good time to take stock of our finance. I just added the annual event to Google calendar so I’ll get a reminder to do it again next year.

Can we survive without Mrs. RB40's paychecks?

Cash flow

I’ll use the cash flow data from Q1 2015 for this article. This is why it’s crucial to track your cash flow. It gives you the ability to forecast your finance if anything changes. We’ll make some modification to this table and see what our income would be without Mrs. RB40’s paychecks.

Take Home Income Average Q1 forecast
Mrs. RB40’s paycheck 5,472 0
Rental Income 342 0
Online Income 2,622 2,622
Dividend 794 794
Interest 19 19
P2P 34 34
Misc 77 77
Pre-Tax Saving -3,554 0
Estimated Tax -155 -300
Total Take Home 5,652 3,246


I made 4 big changes to the table.

  1. I reduced Mrs. RB40’s paycheck to 0.
  2. I reduced our rental income to 0. I’ll explain why in the next section.
  3. I reduced our pre-tax saving to 0. We’ll curtail pre-tax saving until our income increases.
  4. I increased my estimated tax to account for not contributing to my solo 401k.

With these 4 changes, our take home income would be reduced by about $2,400. Actually, that’s not as bad as I thought. At first glance, it would seem like our take home would be very low, but that’s not the case. By reducing our tax advantaged saving to 0, we will be able to keep our take home income at a moderate level. However, is $3,246 enough to cover our monthly expenses?


Expense Average Q1 forecast
Housing -2,228 -1,000
Cash allowance 0 0
Groceries -375 -375
Transportation -47 -47
Pet -13 -13
Kid -487 -487
Bills -246 -246
Medical -77 -290
Entertainment -173 -173
Misc -162 -162
Total expense -3,808 -2,793


I’m keeping most of our expenses the same because the goal is to maintain our current lifestyle. There are 2 major changes in this table.

  1. We can reduce our housing cost to about $1,000 per month by selling our rental and using the proceeds to pay off the mortgage on our primary residence. The $1,000 would cover property tax, insurance, utilities, and maintenance. We won’t have the income from the rental anymore, but our cash flow will improve.
  2. Medical care is where I’m not sure about. We will go with Obamacare if Mrs. RB40 doesn’t have a job anymore. I went to healthcare.gov and checked the price for a mid level health insurance plan (silver). Our annual income would be about $40,000 without Mrs. RB40’s paychecks. I put this into the estimator and they said we could be eligible for $216 tax credit toward the insurance premium per month. We’d pay $214/month after the tax credit. That’s actually not too expensive for a family.

With these two changes, our projected month expenses came out to be $2,793. That’s pretty good! We’ll have about $450 as a cushion every month.

Things look good for Mrs. RB40

All in all, I’m pretty happy with the result. We wouldn’t have to change our lifestyle much even if Mrs. RB40 quits her job today. However, there are a few of things I’m concerned about.

  • Health insurance – That estimate seems low to me. If you’re buying insurance through the healthcare market place, can you give us some feedback?
  • Travel – We would like to travel more once we both are retired. This expense sheet doesn’t include travel because we haven’t gone on a holiday yet this year.
  • Cushion – The monthly cushion of $450 is too small for my liking. Inflation will eat into this in a few short years.

So while we are in good shape, we’re not quite ‘there’ yet. We could start withdrawing from our retirement fund via rule 72(t). That would provide us with a nice travel fund and give us a comfortable cushion. I wouldn’t be happy with raiding our retirement this early in life, though. So what can we do over the next 12 months to improve our outlook?

  • Increase dividend income – We will continue to invest in dividend stock to increase our dividend income. At the current rate, our dividend income should surpass $1,000/month in about 18 months or so.
  • Pay off the mortgage on our primary residence – Our mortgage will be paid off in 15 years if we don’t pay extra. If Mrs. RB40 can last that long, we would be set financially. I’m not sure if it’s worth paying down the mortgage at this interest rate. What do you think?

2015 Outlook

Yes, we can survive without Mrs. RB40’s paychecks, but our finance will be really tight. We could take distribution from our retirement fund, but that would be the last resort. It’s probably best for Mrs. RB40 to keep working for a few more years while we shore up our passive income.  She doesn’t want to quit working right now anyway so I can’t complain.

Would you be comfortable retiring if you were in Mrs. RB40’s position? Hmm… I really should calculate the income we’d receive from taking early withdrawal via rule 72(t). The extra income would improve our prospect quite a bit.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

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.
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{ 42 comments… add one }
  • Financial Samurai April 20, 2015, 12:29 am

    I’d definitely encourage Mrs RB40 to keep working so you can stay retired! I think you are underestimating the health care amount for a family of three. Expect to pay at least double that.

    Money will be tight and I suspect there will be a little more tension around the household as a result.

    Keep her working for as long as possible!


    • retirebyforty April 20, 2015, 9:59 am

      Luckily, she still enjoys going to work so there is no problem at this time. I think the healthcare cost will be more as well.

    • Retired To Win April 20, 2015, 2:18 pm

      I would modify Financial Samurai’s advice to say encourage Mrs. RB40 to look into either a part-time or a consulting gig as a bridge to earlier retirement. This could give your household the extra wiggle room I do think you need while allowing Mrs. RB40 to start enjoying some of the same time freedom you, Joe, already enjoy.

      By the way, that is what my wife has managed to do starting about a year ago. The amazing thing is that she has wound up pulling down the same income but just putting in about one-third the job time. And, she does it at home and on her own schedule.

      Good luck to both of you on this.

      • retirebyforty April 20, 2015, 10:03 pm

        Thanks for your comment. I think she’ll probably starts looking to transition to part time in 5-6 years. That would be ideal. That’s amazing about your wife. Congratulation.

  • Pennypincher April 20, 2015, 3:22 am

    Impressive post! Awesome calculations. My first thought was health insurance. It’ll be more than that, and more out of pocket. What if something big and expensive should happen health wise, to any of you? I heard that Obama coverage is not that great.
    Other stuff you had me thinking about-never underestimate how much raising one kid to independence will cost you. It’s my first line of advice to young parents.
    I think it’s Vanguard that says estimate your stock/bond allocation by subtracting your age from 110 now. Used to be 100 minus your age. Don’t quote me on this stuff, but I think they also want you to plan to live to 100. All this means save/invest more.
    If Mrs. RB40 is ok w/her job (God bless her! She’s a heroine!), I would stay, or at least keep “one foot in your profession” as they say.
    Both Tony Robbins Money, Master the Game, and Jane Bryant Quinn’s Money Guide have really opened my eyes to saving/investing more. Both are worth anyone’s time.
    Sorry this got so long-ugh. Save/invest all that you can, pay off that mortgage, but enjoy your life too.

    (I added a link to Amazon in case anyone is interested. -RB40)

    • retirebyforty April 20, 2015, 10:02 am

      Thanks for your input. My mom is on Obamacare and it’s pretty good. She has got one of the silver plan too. She had some eye surgery last year and it wasn’t too expensive. I doubt I’ll live to 100. I don’t think any men in my family lasted to 80. Thanks for the recommendation. I will add a link and check them out.

      • Pennypincher April 20, 2015, 2:30 pm

        Joe, Jane Bryant Quinn’s book is titled, “Making the most of your money now”, in case you are interested. This money guide is not light reading. It’s full of great advice for a lifetime. It’s a keeper. Check out the library’s copy, or buy it used & save some bucks. She’s a longtime, respected money expert.

  • Ron Hamilton April 20, 2015, 4:28 am

    This is a good article but I still hope that Mrs. RB40 could still work and help with her income. It would make your dreams come true faster that way.

  • Robert M April 20, 2015, 6:42 am

    I wonder why you’re not more focuses on paying off the mortgage on your rental. The interest isn’t a writeoff and regardless of rate, it essentially becomes a guaranteed positive return..

    • retirebyforty April 20, 2015, 10:08 am

      The interest is deducted against the rental income. I’d rather focus on our pre-tax saving for now. If we have extra money, I’d pay off the mortgage on our primary residence first and then the rental.

  • Andrew April 20, 2015, 7:32 am

    I think many of the Early Retirement folks will probably say that you can do it. Don’t they withdraw from their nest egg early on without issue…3 or 4% withdrawal is safe. I don’t even think most have the cash flow that you have. But since Mrs. RB40 isn’t looking to quit, she should continue working.

    • retirebyforty April 20, 2015, 10:09 am

      I think a better plan is to transition to part time at some point. In 5 years, we’ll be in a much better shape for her to do that. I don’t think she would enjoy full time retirement. She likes to keep busy. Part time would be perfect for her, but I’m not sure if her employer would support that.

  • Leigh April 20, 2015, 7:59 am

    Since you plan to do this once a year, I would probably compare your average expenses last year to your average income last year. Most retirees (even early ones) would withdraw 3-4% from their investments and your plan doesn’t even involve touching principal, so I think you would probably be more than fine if your wife wanted to quit.

    The healthcare premiums may be low, but what is the deductible and how much do you guys usually spend on healthcare now? I know that I usually spend between $500-3,000 per year depending on what happens and the Obamacare plans I found have a $5k deductible, so it isn’t just the premiums that I would have to account for.

    • retirebyforty April 20, 2015, 10:11 am

      That’s what I plan to do next year. 2014 was a big mess because we sold 2 rentals. The cash flow wasn’t stable. This year should be a lot smoother.
      We go to see the doctor about once or twice per year. We haven’t spent that much, but I’m sure it will increase as we get older. The deductible would be a big factor if we need a lot of healthcare. We’re still pretty healthy right now so it’s not a big deal yet.

  • Joel April 20, 2015, 8:28 am

    First comment after reading your blog for quite a while:

    I’m a little conservative, but paid off my home residence 2 years ago (age 40) and my first rental home last year (age 41). I’m buying another rental for mostly cash this week. I could invest more in the market or something instead, but I sleep better at night with this low level of risk. If I lose my income tomorrow for any reason, I’ve got just utilities and taxes to contend with.

    I’m hoping to get out of the corporate game early, but I don’t regret paying off the mortgage(s) at all, despite their 3% rates. No payments is no payments, and it feels really good, even if I am missing out on a couple percent when I focus on knocking down a mortgage or HELOC.

    • retirebyforty April 20, 2015, 10:13 am

      That’s great! Congratulation. It sounds like you’re on your way to early retirement. Rentals are a great way to go. I don’t like having the mortgages either, but at this point I still like investing in stock better than paying them off. We’ll try to pay off all the mortgages before Mrs. RB40 retires.

  • Justin @ Root of Good April 20, 2015, 8:29 am

    Honestly, it sounds like you could swing it financially, especially with some tweaks like paying off the mortgage to get rid of that drain on your monthly cash flow. And having those retirement accounts in the background for safety is a huge Plan B if you every need it.

    But if she genuinely likes working, let her keep at it. Do what you can to make her home life as easy as possible and keep her happy! And if she ever wants to slow down, maybe she can work out a part time or consulting gig or become self employed in some way. Or help more with RB40! 😉

    Mrs. Root of Good is on the cusp of quitting work right now. She’s lined up a 3 month paid sabbatical that starts in 2 weeks and that will be a good test run for early retirement. We can see if we drive each other crazy and whether she’ll get bored. She’s hoping to have plenty of free time to read more, learn to swim, get to the gym or tennis courts more, and generally relax.

    • retirebyforty April 20, 2015, 10:15 am

      She usually likes working. Of course, she complains once in a while, but not that often. I think part time is the way to go for her too. Perhaps in 5 years, she can start making the transition. She wouldn’t enjoy full retirement. I don’t think she can relax.. 🙂
      Good luck with the test run!

  • mike April 20, 2015, 9:59 am

    Hi Joe:

    two things to consider.

    1. as your boy gets older, it will just cost more to raise a kid.

    2. i think you need to factor in more for health insurance. as you both get older , costs will definitely be more.

    3. while you maybe able to swing it with Mrs RB40 income for a 1 or 2 years, I think longer term, expenses with start to creep up and you definitely won’t have the funds you need to travel and do other fun things.

    I guess what I am saying is that the budget you have with NOT last you forever.

  • David Michael April 20, 2015, 10:06 am

    To be honest I think it would be tough to survive in Portland without bringing in at least $2500 per month from investments. You are using your online active income at $2622 a month rather than making $2600 strictly off of passive investments, like stock dividends, etc.

    Personally, I’d have the Mrs. keep working until your investments are so well diversified that regardless of the economy you can make it. If we did have another Great Depression at some point, could you really survive without working? In addition to stock dividends which can change with a prolonged financial crisis, what else would insure passive income? That’s a tough question and why most people do not retire until they have Social Security or a Guaranteed Pension in hand.

    The ages of 45-67 are challenging because many do want to retire to do their own thing, but lack the finances to do it. I have worked with people in the 55-67 age group who had plenty of passive income investments making them millionaires but were scared to retire because of possible health costs and bankruptcy. Most are waiting for Medicare and Social Security to kick in to provide some finanical stability.

    One could change one’s lifestyle to make the retirement transition easier and faster.
    I was amazed when we lived and worked in the Middle East and Asia how low our expenses were including medical care. The same was true when we lived for seven years in our motorhome in the USA. Our monthly expenses of about $3500 (apt, condo, or house) dropped to $1500 or less. That’s why a country like Thailand or RVing in the USA is a good transition between work and retirement in one’s 50’s and early 60’s.

  • FF April 20, 2015, 10:24 am

    You’re getting close, but like others have said, if she enjoys it, why should she quit now? It’s nice to have a checkup annually to see how close you’re getting. Keeps you motivated and also informed.

  • middle class April 20, 2015, 10:28 am

    I would worry about only having a $450 cushion due to unexpected expenses that often pop up at the inconvenient times.

    A friend of mine is on Obamacare and hasn’t had issues. Your premium will depend on your income and she got a much lower rate once her income was cut in half. Also, she chose the same insurance company that she had prior with her ex-employer and services are exactly the same. I believe that is with Kaiser.

  • Peter April 20, 2015, 10:53 am

    I recently commented on your 72t article about a month ago and I’ll just copy and paste what I commented. I’m curious to hear your thoughts:

    I understand the cons regarding 72(t) as far as flexibility goes but I think for early retirees, this is a great option. Granted, I’m 31 and talking theoretical here but I think some benefits will are:

    1) Use money for early retirement.

    2) You are able to pull money from your tax deferred money and work the tax system a bit. If in early retirement, you stay within the 15% tax bracket, you’ll only get taxed at most 15% on your distribution from 72(t) and more likely less since you get your standard deductions, exemptions and other write offs. This is great if in your working years you were in the +25% tax bracket.

    2b) Because you were able to pull money from your retirement accounts before the age of 59.5, you can potentially avoid a massive tax bill once you hit 70.5. Imagine if you were 59.5 and have $1,500,000 in your retirement accounts. You’d have to pull a decent amount of money between 59.5 and 70.5 (and most likely would have to go into the 25% tax bracket) to avoid hitting the +28% tax bracket. Why not pull the money as early as possible and be able to use for early retirement and at the same time lower your future tax bill? I understand a Roth IRA conversion ladder will do the same thing BUT you’d have to figure out how to live in the first 5 years of early retirement before you get access to the Roth converted money.

    Also, you can use the money you’ve pulled from the 72t distributions and put it your brokerage account and have it still work for you. You don’t have to use it for living.

    Please let me know your thoughts! Thanks!

    • retirebyforty April 20, 2015, 12:11 pm

      I like the way you think. If we both retire full time by say 50, then I probably would take advantage of the 72t distribution. We can move the money to Roth or a brokerage and save on taxes in the future. It’s probably won’t work for us right now because we have too much income.
      You don’t have to withdraw all your investment before hitting 70.5. You can take RMD at 70.5. Even with 1.5 million, I don’t think it’s a huge amount. From an online calculator, you only have to withdraw about $57,000 per year.

  • jim April 20, 2015, 11:26 am

    Your estimate on taxes seems a bit low. You’d have to pay self employment tax on your online income and you’ve got the high state tax in Oregon to deal with.

    Also I’d make sure to have a good cushion to cover out of pocket medical expenses. But on the other hand at your estimated income level I think your son might qualify for medicaid and your premiums would be lower.

    • retirebyforty April 20, 2015, 10:01 pm

      I think you’re right. I need to estimate it better. Our income will be pretty low so I don’t think we’ll pay much tax, but probably more than the number here. I forgot about state tax…

  • MU April 20, 2015, 11:52 am

    Hi Joe,

    I really like your simulation analysis. This is a proactive thinking and good for your future plan.

    My only suggestion is not to sell your rental. The rental income feeds its own mortgage and also offer you some surplus monthly income, while you are waiting for house price further appreciation.

    Thanks for continuing to be such an inspiration!

    — MU

  • RA50 April 20, 2015, 12:41 pm

    I think you are doing the correct Fiancial check up and encourage you to do it every year! I agree with you and all the comment that it is still too early Ms R40 to retired now and on top she likes her job, so go for the maximization of investment before thinking of quiting.

    Cheers, RA50

  • Paul N April 20, 2015, 2:35 pm

    Hey Joe,

    Nice honest follow up to the post the other day. A much more “real world” look at early retirement numbers. Still looks really good for you. You are both still quite young, so your not even including any Social security you or the wife may have coming in one day down the road. (not 100% sure how it works there as I am North of your border we have CPP – for me personally that would be very close to $1200.00/month)

    That certainly would help address your concern about beating inflation. Your able to get a positive cash flow now, when that kicks in it would certainly boost your income.

    However, I do like your above commenters suggesting your wife works as long as possible as well 😉 . But let’s keep that a secret!

    • retirebyforty April 20, 2015, 10:05 pm

      Thanks! I think we’ll get at least $1,500 each from social security so that would be very helpful. It’s such a long time off so I try not depend on it too much.

  • Vawt April 20, 2015, 2:53 pm

    I think your $450 would be a plenty big enough cushion, especially given you could use credit cards or your other accounts to cover any surprises. I think it might be the one more year syndrome! Mrs RB40 or you could always go back if you see your net worth increasing more than just from monthly fluctuations!

  • Kim April 20, 2015, 7:26 pm

    I didn’t read all of the comments but we are on the CA exchange until my insurance kicks in at my new job and pay aprox. $800 a month for a family of four. We are both mid 40s and kids are elementary age. That is for a basic PPO type plan with a large deductible – I am not positive but I want to say it is 3-5k so everything before that is our responsibility. It’s basically to cover a catastrophic illness at this point. It’s pricier than I was expecting for Obamacare but about 1/2 of what Cobra would have been.

    • retirebyforty April 20, 2015, 10:09 pm

      Thanks for your input. $800/month sounds about right. Our kid would qualify for medicare/medicaid in the scenario above. I need to research a bit more to see if that’s enough. You probably didn’t get any subsidy with Obamacare. The tax credit helps quite a bit.

  • EL April 21, 2015, 5:42 am

    Joe it seems the numbers you gave provide a current picture of finances and it looks doable for early retirement on her part. Budgets, inflation, and healthcare can throw the cash flow out of whack, its good your planning now to have a bigger surplus if these things increase on a monthly basis later.

  • Jason April 21, 2015, 9:02 am


    If the Mrs. loves working, then this is all just for fun.

    But I think you’re probably more flexible than you think. First, you already have a cushion, which is awesome. But I’m sure there’s room there to cut expenses if you absolutely had to. You kept the expenses the same, even after a major hit to income. I bet you would adjust in real life. There’s also the possibility of taking income from your tax-advantaged accounts early, which could significantly improve your cash flow situation. It’s also likely that all of your income sources will increase at least in line with inflation (especially dividend income), meaning that the cushion could very well improve over time. In addition, Mrs. RB40 could always just take on a part-time job, since she apparently enjoys working in some capacity. Work isn’t all or nothing. As you like to say, a little active income goes a long way.

    You guys are in a great spot. 🙂

    Best regards!

    • retirebyforty April 22, 2015, 9:59 am

      Yes, this is all just for fun until she gets tired of working full time. It’s good to be prepared, tight?
      I’m sure we can cut expense if we really needed to. We are living a moderate lifestyle and we would like to continue at that level if possible.
      I’m sure she could figure out a consulting position or something like that if she puts her mind to it. Perhaps she can take a year off and then go back to work part time. At some point.

  • Mary April 21, 2015, 9:06 am

    Bear in mind that since you are no longer putting money into tax-deferred savings, your taxes will go up.

    • retirebyforty April 22, 2015, 10:00 am

      Yes, I increased my estimated tax. We won’t be making much money so I don’t think we’ll have to pay a lot of tax.

  • Justin April 21, 2015, 11:34 am

    Long time reader here. First time poster.

    The biggest thing i see here is the rental income to housing payment. This math may be a little simplistic but hear me out. 🙂

    In 1Q15 you made an average of $342 from your rental property. You say that if you sold your rental and paid off your mortgage you would save $1000 per month from your primary residence. To me this is a simple decision. Would you rather have $342 more cashflow or $1000 more cashflow? In addition, you would have the added bonus of less headaches with the rental.

    FWIW i love real estate. I think it’s a great asset class to build wealth. Reading your previous posts about your dealings with real estate, however, i think that you should think about selling your rental and making a risk and hassle free $1000 than worrying about hustling on your rental for $342 per month.

    Sometimes a simple life is worth much more than money can buy. (the mexican fisherman and the businessman parable)

    • retirebyforty April 22, 2015, 10:05 am

      Thanks for your comment.
      The $342 is just looking at the cash flow. The rental property has other benefits. The mortgage get paid down every month. The amount going toward the principle increases the longer we own the place. Tax benefit – depreciation write off. Repair and maintenance – write off against the rental income. Price appreciation – the property is in a good area and should appreciate over the long term.
      If our cash flow is tight, then it makes sense to sell the rental. However, I think it’s better for our finance in the long term to keep it if we can afford it. You’re right about simple life, though.

  • lpl April 21, 2015, 5:23 pm

    On health care:
    – Make sure you priced a PPO plan. Other plans have lower premiums, but can end up costing you more if it turns out that you need medical care outside your area, or if your anesthesiologist, lab, etc. (which you often do not get to pick) is out-of-network. Make sure that your PPO plan includes your usual doctors.
    – In calculating costs, I budget for premiums PLUS out-of-pocket maximum each year. You may not need it unless you have a serious health issue, but the risks of such increase as you age. If you or a family member develops a serious health issue, you may hit the out-of-pocket max every year. (Plus, even PPO plans don’t cover everything, so the out-of-pocket max won’t include every possible expense). I think out-of-country expense is not covered at all (though I’m not sure), so you need to consider that.
    – Further, you need to consider what your costs will be when you are, say, 62. Premiums increase with age. Go back to healthcare.gov, windowshop, and put in your age as 62 (with corresponding increases for other family members). You need to have enough saved to cover the expenses you will face in the future.

    • retirebyforty April 22, 2015, 10:07 am

      Thanks for your input. I will budget better the next time I do the calculation.
      Perhaps I’ll add 1/2 of the out of pocket maximum. That should averages out over the years.
      I tried adding 10 years to our age and the premium didn’t change much. I don’t think it’s valid to add 20 years. Who knows what health insurance will look like then. It’ll most likely be much more expensive…

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