Posted by Tim Stobbs on February 22, 2010
For long time readers you are well aware that about once a year I sit down and recalculate how much I need to retire. Basically I update my assumptions and find out if I’m any closer. Given that this year I’m looking a bit more at the semi-retired option I’ve decided to run this scenario instead.
So first off you need to determine what kind of lifestyle you want in retirement since that drives your expenses and that is one of the key numbers in these type of calculations. For me that is fairly easy since I rather like my life now. I just wish I had more time. So I’ll use my current spending as a baseline.
So on a monthly basis that is $3266, but I need to adjust that number. First off I won’t have a mortgage payment, so I’ll deduct $1276. That pushes me down to $1990/month. Then for this scenario I’m still planning to work so all I want covered is my bills, property tax, food, gas, regular spending on kids (but not RESP contributions) and insurance costs. Basically any spending money I want or vacations will have to come from working. Also any new cars or home improvements will also be coming from my working income. Good motivation don’t you think? So with that in mind I can drive the monthly spending down to $1500 or $18,000/year. This is much cheaper than my usual full-retirement calculation that has me at about $27,000/year plus any yearly vacation cost.
So overall I’m on the hook for working enough to raise $9000/year after taxes from some kind of work and then a bit more for a vacation. Yet that includes me and my wife, so given right now my wife can clear about $6000/year from the daycare this should be very easy to pull off between us both. I don’t mind doing some work, but I don’t want to be chained to a full time job.
Now given this is a new scenario I’m doing some crude guess work about how long I think I need to work full time to pull this off. I know I will currently pay off my mortgage about the middle of 2012, so obviously I need to work to that point in time. After that I’m taking a stab that I’ll need to keep working for another five years. So overall that will put me at 39 when I shift over to semi-retirement (if I’m wrong I can always redo the numbers at a higher age).
I’m also going to be a bit conservative on this number crunch and assume I don’t seek a second term with the school board (also I have no idea if I’ll still want to do it at that time), so after my mortgage gets paid off in 2012 that extra money will stop flowing into savings.
On Wednesday we will pick this series up again and find out where some of this money is coming from to pull this off.