As long term readers on this blog know I started planning my retirement to be ‘Free at 45’, yet the reality has been that target has been slowly dropping for a number of years. The last official calculation I did back in 2012 (see the series on the side bar under Popular Posts) came out with me being able to leave work at 42 with cash to spare.
So I’ve had this idea in the back of my head, could I be ‘Free at 40’ instead? After all things have been going really well and I wondered how different would that look like if I decided to go for it. So I did look into it and I’ve decided I really like the idea, even if it means some significant changes to the original plan.
The major shift that occurs if I do Free at 40, is the fact I go that early I’m much more in the realm of semi-retirement rather than closer to full retirement as with the original Free at 45 plan. I’ve always had some work for me in these plans the question as always been to what degree do I feel comfortable depending on future work income. The Free at 45 plan only used work income to cover vacation spending or other purely fun items. The money wasn’t needed to pay any day to day expenses.
Yet as I grown I’ve come to realize I don’t really mind doing some work, as long as it isn’t too much. So I am willing to trade some future work at part time to cover off some expense if it means I can get out of full time work sooner. So for the longest time I had trouble finding where I could be comfortable on depending on some work income.
In the end, I approached the solution backwards, I picked the age of being done work at 40, or just under four more years. If I do that I estimate I can save approximately $600,000 by that time, which is about $100,000 less than my original $700,000 in the Free at 45 calculations. Which on a yearly basis, means I’m short about $4000 a year than my original budget (so all the other costs like food, property tax and all the house bills would be still fully covered from investment income). In practical terms, the amount is the money I would be saving on an annual basis to eventually replacement my car and future house repairs.
So a solution to provide some buffer on those amounts is to save a slush fund for approximately five years or $20,000. Thus giving me the ability to cover any immediate expenses the may come up. I’m still also attached to my backup plan of having a few years of living expenses in a second slush fund to allow me to avoid taking money out of my investments in a few really bad years. This would require another $50,000 to be saved.
These slush fund may very well be in place when I turn 40 since I typically do better on my savings and investment returns than I predict. If not, I estimate I could save those in just over six months, which would turn free at 40 into free at 40.5…I think I can handle six months if required.
So you might be wondering why bother with Free at 40, when Free at 41 would likely be damn close to the original plan? Because in short, I’m sick of making excuses to keep working full time. I’m ready now to move on and do different things with my life and the only reason I’m sticking around at the moment is to save money.
I noticed in life it is easy to make small amounts of money doing things so some dependence on income doesn’t scare me. I’m tired of finding reasons to stay working full time when more often than not I’m noticing how things can turn out just fine anyway. Humans are extremely good at adapting to our circumstances so I don’t fear doing this at all. I will still have a good life.
So what do you think of ‘Free at 40’? Brilliant, insane…somewhere in between? I welcome all feedback on this idea.