Early Retirement & Frequently Asked Questions

March 2019 is going to be a busy month!  We are two weeks away from the news being out about the change.   I’ll be posting more often to chronicle the recent adventures leading up to exiting my employment.

I wanted to begin this series with a Frequently Asked Questions, inspired by someone who just went through leaving his job forever (thank you Steve).

Who is your blog’s target audience / who do you most relate to?

Everyone’s story is unique.  The most suitable person is the working professional who is tired of working in a mega corporation and wants to find their early exit.   However, our story includes many parts:

• Growing up with money problems/divorce: Check
• Dealing with six figures of student loan debt:  Check
• Accelerating college for financial reasons:  Check
• Growing a career income inside a large company:  Check
• Veterinarian debt and burnout (spouse):  Check
• Transitioning into leadership/middle management: Check
• Financial Issues when dealing with a chronic health issue:  Check
• Want to quit but dealing with golden handcuffs:  Check

Stick around and read through some of the content, there’s something here that might benefit you.

Why did you start another early retirement blog?

My early money advice and the the correlation between income and expenses came from the Clark Howard radio show.  Clark is an original early retiree who’s second career turned into a consumer rights advocate and personal finance educator.  I spent hundreds of hours on his message board taking in information then subsequently answering questions.

In 2013 I saw a comment about Mr. Money Mustache and found his site and message boards.  I’ll always remember finding his site and realizing I was okay on expenses, but not quite dedicated enough.  Eventually I was answering the same questions over and over and decided it was worth writing on my own site for the world to see and for people to find answers with the power of Google.  I was to specifically thank some of the 2013 coherts I was commenting back and forth with on that board such as Root of Good and Frugalwoods.

How much money did you make when you were working?

I’ll answer this question in two parts and I share more detail in By 35: Our Income and Net Worth.   Ages 22 – 31:  I started at $36,000 per year in a commercial banking role.  The salary moved slowly for the first five years and I had to move to a major metro area.  Thanks to nice bonuses and repeated salary increases, I averaged around $125,000 per year in the last three years in the role.

Mrs Shirts incurred nearly $100,000 in student loan debt and practiced as a veterinarian for seven years.  Her salary averaged $68,000 per year, but the additional time in school delayed her earnings by four years.

Ages 32 – 36:  Including base salary, bonus compensation, stock awards, and a generous 401k match, I averaged $225,000 per year.   The big jump came from stock rewards, which was a benefit of staying with the same company for my entire career.   This jump required two separate geographic moves and was pretty disruptive.

I’m one of the contrarians when it comes to changing companies to advance your career.  There were many times I could have changed and made a bit more money, especially in my late 20s and early 30s.  Sticking with the same company and the internal relationships I developed helped me into the higher level job that “outside hires” can’t often get elevated into.  I did interview from time to time and networked with peers at other institutions to ensure I wasn’t too far behind the market on pay and recommend others do the same.

What was your savings rate?

Our savings rate was roughly 50% for the last ten years of our working career.  We didn’t exactly calculate this and I believe savings rates are difficult to calculate/compare after you get past 50%.  If you save half of your income, the math is shockingly simple.

How are you investing for Early Retirement?

I will post quite a bit on investing and strategies for managing an early retirement.  I will be retiring on only a stock/bond portfolio and putting the 4% rule to the test.   In addition to this site, the two resources I align closest to are Early Retirement Now’s Safe Withdraw Series and Millennial Revolution’s Yield Shield Series.  You can find my full Investment Policy Statement if you want to find out more.

What if the market tanks?

The market “tanking” isn’t an “if” question, but a “when” question.   The S&P 500 will return somewhere between 8% and 12% over 15+ year periods of time.  The problem is the S&P 500 rarely returns 8% – 12% per year.   I have lived through four declines of more than 15% since 2007, but have also benefited from the near 20% or better returns of 2009, 2012, and 2017.   I decided in 2018 to work One More Year, which has been more beneficial than originally projected.

What do you do/ plan to do about health insurance?

Health Insurance isn’t easy in the United States, but as I once heard say in person: “Self employed people have been buying health insurance for as long as its been in existence”. My early retirement is a form of self employment, I have to log into an investment account occasionally and transfer money. That’s work, right? In all seriousness, here is our specific plan: We will stay on our employer’s health insurance via COBRA until the end of the first calendar year. Afterwards we intend on utilizing the Health Care Exchange.

We would not be eligible for a health sharing ministries due to pre-existing conditions. I’ve been tracking specific policies/costs/areas and the costs are starting to level out. The bigger concern for us under the ACA is the small networks offered by plans that are still part of the major insurance carriers. It’ll be quite a shock from our nationwide plan under a Fortune 500 employer. Ultimately we have budgeted the potential for $18,000/year in health care expenses.

But what about ACA subsidies?

This is a topic that’ll bring out the internet morality police! Subsidies will not likely be an option for us. We plan on moving to a lower cost of living area which will lower the bar for income at 400% of the poverty level.  We utilized a Non Qualified Deferred Compensation Plan over the last six years to put away a good chunk of money pre-tax.  The plan pays out over 15 years after employment is terminated and those payments are subject to normal income taxes

The strategy is great, money that would have been taxed at 24% to 33% in our working careers is pushed into non-working years at 10-12% tax rate.  This plus interest, dividends, capital gains, and needed Roth IRA conversions are almost certain to kick us over the ACA Subsidy Cliff. There’s no free lunch.  I personally have no issues with the early retirees who do obtain ACA subsidies, generally these people have already paid more into the system in federal income taxes than the average citizen.

Do you think you can go back to work if needed?

One reason to try early retirement is you sometimes hear “What’s the worst that can happen, I go back to my routine today.”   Its not that simple.  I could easily re-enter the workforce at the job level I was at in my early 30s at 50% to 60% of my current compensation.  The idea of golden handcuffs and the golden albatross are real, the company I worked for issued restricted stock for retention purposes and had pension benefits to employees with more than five years of service.

What do you think about privilege?

Hard pass. Okay, but that’s really not an option. I think personal finance is personal and its impact to talk about your story and use your platform to promote the stories of others.  My goal is the help inspire and educate others while not being offensive and staying removed from divisive topics.  I believe some level of financial independence is obtainable for those of able body and able mind who live in developed countries.

I’ve personally had some advantages and disadvantages. I do not intend on acknowledging these in every post, so here you go.  Advantages: I am Caucasian, male, a little taller than average, and ended up in a decent high school. I also had a grandparent who was a college educated engineer that spent most of his career at one of the largest companies in the world and I credit him for being a positive influence in my life.

The disadvantages include poverty, parental challenges that include alcoholism, multiple divorces, and likely unaddressed mental health issues.  My parents were in their young 20s when I was born, divorced shortly thereafter, and I lived with my mom until leaving at 18. Some times were more stable than others, but what I endured as a teenager made me who I am today.

I’ve always believed in the power of choice and for years I firmly believed my parents various challenges were the consequences of choices they made.  That stance has softened a little as I’ve matured and understand the power of both substances and someone’s pride causing them to refuse to accept there is a problem.  My parents had an opportunity (or better than equal opportunity) to build a successful life for themselves in the United States and made different choices.

This early understanding of the power of choice created different mindset for me.   Money does not buy happiness, but not having money brings a ton of life stress. I saw that stress firsthand growing up and I feared going back.  The last couple of years before turning eighteen were specifically tough, causing me to carefully evaluate the long-term consequences of all decisions.

I believe in equal opportunity, but not necessarily equal outcomes.  Not everyone starts from the same place and everyone doesn’t end in the same place based on a series of personal choices.  I want to see people have the opportunity to make a better life for themselves through the power of choice.

Did you ever consider taking a leave of absence?

Yes!  I considered it multiple times and wrote a post about it.

What will you do with all your time?

Present me with that challenge…

I used to think I had to figure out the answer to this before retiring.  Having an answer to this before retirement is great, but may not be feasible for everyone.   Credit goes to Doug Nordman for opening my eyes to this through one of my favorite posts, The Fog of Work.  I’ve been challenged by a fellow early retirement writer to give him a list as a guest post….more to come.

Will you make money in Early Retirement?

Maybe.  I don’t have any concrete plans today, but some additional income coming in would be nice.  I’ve been in finance and have supported entrepreneurs in my career.  I love the game of business, but don’t have the motivation or energy today to become an entrepreneur.  If I decide to play the game of business, then it will have a monetary reward.  In business money is the scorecard.  If this happens we can can expand our budget and corresponding family/charitable generosity.

Updated 3/6/2019.  If you have any questions to add, please give feedback in the comments below.