Our plan to manage finances in our next life is a little bit different than some other ER bloggers in that we don’t intend to draw down our funds, at least not initially. Instead, we anticipate living off of part time and investment income for the first 10-15 years. We’ll then begin drawing down on our taxable accounts the last 10 years or so before hitting age 60 and gaining access to a slew of new cash flows.
Some of you may be wondering how is this an early retirement when we’ll both still be working? To us, it is almost a shift in mindset more than anything else. Because we will no longer need to work full time and will have the ability to choose how little or how often we work, picking only assignments or projects we find interesting and rewarding, we will consider ourselves retired from the full time workforce.
As we mentioned in part 1 of this series, at the time I leave corporate America with Mrs. DTG following suit shortly thereafter, we will not be completely financially independent. We will, however, have a significant cushion that will give us the flexibility to make work decisions with very little regard for monetary compensation.
Regular readers already know that I am currently a reservist in the military. I genuinely enjoy this work and can see myself doing it for another 15 years working roughly 25-30% of the year. Some years could be more or less, mostly by my own choice. Aside from providing somewhat steady side income, it will also result in a very nice pension beginning at age 60 (roughly $3K/month).
As for Mrs. DTG, we’ve previously mentioned that she must remain on active duty for a few more years. Once her service commitment is up, I’m selfishly hoping she will separate so we can really begin to enjoy the benefits of our next life instead of just seeing each other for a few hours in the evening. If she chooses, she should have little difficulty finding part time or short term contract work as a physical therapist, and continuing service in the reserve/national guard is a very likely option.
During this initial phase of part time employment, I’m estimating we’ll pull in roughly $45-50K in salary/wages plus another $10K or so through private lending and capital gains. I don’t anticipate this being too difficult based on the side income we currently bring in. In fact, I am on pace to make around $18K from the reserves while working 57 days (or roughly 15%) of this year. Additionally, we’re hoping to sell our rental properties in the next 5-10 years which will give us a little more money to either invest or help pay off the mortgage on our primary residence.
Assuming we both end up qualifying for some type of military pension, they would combine to be worth roughly $6-7K/month in today’s money. If we both retire as reservists, we’ll begin receiving pay at age 60. Additionally, at this age we will have our Roth IRAs, TSPs, and my 401(k). Assuming all goes well, we could have more money in our old age than at any other point in our lives.
With the above paragraph in mind, our current stash of funds in taxable accounts only needs to last approximately 20-25 years at the most. Really, it’ll be less than that since part time work should cover the bulk of our expenses over the next 10-15 years. And considering the majority of this money will not be spent for another 20 years, the magic of compound interest, reinvested dividends, and a hopefully healthy stock market should leave us with more than enough to get by.
Obviously, we’re making many assumptions, but we feel our plan is very realistic with an extremely low probability of not working out. Without knowing our exact numbers (hint: less than a million and more than several hundred thousand), what do you think of our plans? Do you see anything obvious that we’re missing?