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Living the dream and then some

Where did the time go? So I am quite busy living the dream and have been since May 2nd, 2020. That was roughly the last day of work for me in the fire department. My official retirement day was July 1, 2020. I couldn’t wait to get out the door. By that time, I was just working on menial tasks and not getting into any real heavy cases at work. The last thing I wanted was to get wrapped up in a serious arson or code compliance case and have to come back for court. Ugh, I have already received a summons for January and February 2022. Yes, you read that correctly. That was not part of my dream. Where is the dislike button? Interesting note though, they have to pay me the salary rate I was making when I left to come back for court.

That passive income stream just keeps on flowing

Before I left, I needed to purchase another piece of property while I still had my sweet annual salary. Making roughly 130K a year with an excellent credit/fico score, I was a shoo in for an approval to purchase a second home. I didn’t have any other debt besides the home in Burke which was almost 19 yrs in to a 30 yr mortgage. I shopped around for months and kept my eye on a piece of property. It was a bit high priced but I kept it in my favorites in Zillow. It went off the market under contract and then came back. This was a good sign for me. Keep in mind that Covid was silently creeping into the US and was not a pandemic yet. I found a house with an in-ground pool and negotiated the hell out of it. It was vacant for months, had some issues that needed to be addressed but it was my perfect purchase. I rented out my townhouse in Burke and had my sister move in with me into the new house to supplement my income. Living large in the hood. Cha ching! Then the pandemic hit and with travel locked down, it was a great summer to have the pool.

T’s private paradise 2020

I do what makes me happy

So I’m collecting my pension for the rest of my life. That makes me happy. I am also drawing down on my 457 and decided to take $2000 a month for now and will re-evaluate yearly. I am also working part time as a 1099 contract worker for a government agency. Sweet cash, and fun work. I recently just picked up another part time gig at a winery working in their brewery. Yes they do have a brewery at the Winery at Sunshine Ridge Farms in Gainesville, VA. This all makes me very happy and all the while money just flows in to my pockets. I don’t want to come off as a braggart, just saying that this too, can all be for you. A little planning and automation, and you will be on the right track.

The magic of compound interest

As I stated, currently I am drawing down $2000 a month pre-taxed. I posted previously that I would take the standard 4% but I opted to go a different route. My son knows that I don’t plan to leave a legacy behind. Keep in mind the new SECURE Act effects the distribution of inherited IRA’s. Check out the link below for more info on the SECURE Act. Folks can’t draw out the inheritance for life anymore, it has to all be taken out within 10 yrs so the tax man can get is $$. My funds will last me till I’m 85 or 90. Heck, the family can have whatever is left over after I’m done living my best life.

https://www.fool.com/retirement/plans/inherited-ira/rules/

I have taught the financial freedom methods to my son and he is well aware that he is able to do the same things that I have done, so as not to have to rely on anyone for assistance in the future. The kids and other family members need not worry about how to pay for any future expenses should I need them such as long term care etc.

Since I have left the department, the magic of compound interest has done wonders for my 457 as well as the Bull market. I’ve drawn down the 2k monthly in 9 months since retirement for a total of 18,000. I have not been able to add any money to this account since it was a work place investment, however it has increased in value at a rate of 26% since I left work last July 2020. For my fire department friends, listen up. Get out of those managed funds and stop paying those folks to tell you what to put your money in to. They will take you for the expense ratio, their extra fees and probably not make you the best money you can because they always play it safe. Let your money make more money for you.

Slow and steady makes it sexy

Slowly increase your contributions so you won’t feel the pinch. Make sure you do a percentage of your salary and not a dollar amount. Do this until you max out the contributions. If you have anything left, open a ROTH account at Vanguard or Fidelity. This is free and you don’t have to pay anyone to do it. I will help you set one up if you need it. My selections in the 457 are in Vanguard Small Cap, Vanguard Mid Cap, and Fidelity S&P 500. They did have the Vanguard Institutional Index which was the best by far but they got rid of that and replaced it with the S&P 500. I did not select a bond fund since my pension is in essence my “bond” fund. Keep in mind I am not a financial advisor. Take all of my writing here with a grain of salt. Also remember I retired with 20 yrs in at the age of 52 and not needing to work anymore. So set it and let it marinate. When the numbers start rising, you will feel very sexy indeed.

Please plan to open and fund a ROTH, watch out for your expense ratios, and love what you do.

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Freedom is near!

34 working days left

I have have officially started my countdown to retirement and freedom is near. Well, lets be honest here, I’ve been counting it down for the past few months but it’s really getting close now. I have 34 working days left and I will work those over the next 10 weeks. I know that sounds weird because I work a 4 on, 4 off schedule. If I plan everything strategically perfect, my last working day will be May 2, 2020 and then hello…..freedom.

Burning the Leave

From May 3rd to July 1, 2020 I will be burning through all my annual leave that I have accrued and saved. I haven’t taken much annual leave in I don’t know how long, just so that I can peace out in this way. That will give me 2 and a half months pretty much of continuously getting a paycheck while not having to show up for work at all. In fact I won’t have to show up anywhere for work after that because I will be retired! Some were suggesting that I cash out the annual leave and have it deposited into my retirement account but my thought was why? I would rather just leave a few months earlier, not work, get paid and extend out my official retirement date.

Wow, I still can’t believe it. Everyone asks, right after they congratulate me, “what will I be doing next?” My first response is what ever I want to do. I have the freedom to do what ever I want. I have reached financial freedom and damn if it doesn’t feel amazing.

Financial Freedom

What does financial freedom mean to me? That means I have the freedom to do whatever I want to do because my passive income supports my needs. My retirement accounts, pension, and rental property provide me more money than I spend on a year worth of needs. My pension I think of as my bond fund theoretically which will never run out and pays for life. After the first full year of retirement, it will provide an increase in cost of living yearly. My 457, 401 and Roth will be drawn down at a 4% draw down rate and it will just exponentially grow due to the average rate of returns those funds provide. Currently my funds are returning anywhere from 11-17% ROR. I will essentially never run out of money if I stay the course and don’t fall victim to lifestyle inflation.

Lifestyle inflation

Lifestyle inflation is where you gradually start living beyond what you originally projected out for. So hypothetically lets say I’m real comfortable living on $75,000 a year in the Fairfax County area with my pension and draw downs. Maybe I’ll get bored and I pick up a hobby or join a vacation group for retirees. I now spend an additional amount monthly to maintain my hobby costs or go on 2 -3 vacations a year instead of 1-2 and I go large instead of mid line on those vacations. I mean heck, I’m retired now, wohooo. Let’s do it! Then your monthly income isn’t cutting it and you take out more from the investments and this just keeps going up and up each year or bi-monthly. You get what I’m saying here. The link below from investopia is an article on managing lifestyle inflation.

I did not inflate my lifestyle at all while working in the fire department for 20 years. Even though my salary went up in huge chunks throughout my career, I stayed the course in my little townhouse and paid off all my vehicles and ran them to the ground. If I had to buy a new (used) car, it was paid for within 2 years. My nicest gift to myself was my 2011 Harley Davidson Road Glide Custom. I even bought her used. Pearl is her name.

Ups and downs of the market and my draw downs

So as long as I live within my means, enjoy doing what I want to do and don’t have lifestyle creep, I will be set. I will seek out things to do that make me enjoy life. Spend time with my family, especially those grand babies. Go fishing with my mom. Spend time with my babe and plan out our travel trips to check off our bucket list. Let’s not forget that I’ll hang out with my Motorcycle club sisters also and go on amazing trips. outriderswmc.com

The market will go up and down and I will pay extra attention as I move through my retirement years. I know elections have consequences and global issues can effect our markets. As I write this now, the coronavirus is killing thousands of people in China and now is creeping out to other parts of the world.

I will continue to listen to all my favorite podcast, upkeep my rental property, stash funds to buy vehicles out right when needed and plan for the move down to warmer climates as I get older. Hell, we could live super large in Central America.

I’m just about done cruisin’ my way to FIRE. I will be 52 on my official retirement date of 7-1-2020. I have reached Financial Independence and will soon Retire Early. It has also brought me great pleasure in coaching some of my colleagues with the ways I have reached early retirement. Hopefully they will stick to it and enjoy a life of freedom too when it’s their time. I sure hope so. Until next time, earn more, spend less and invest the rest.

https://www.investopedia.com/articles/personal-finance/092313/how-manage-lifestyle-inflation.asp

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Bonuses

Free money

If you get a bonus, see if you get the whole bonus pre-taxed if you have the ability to send it right to your tax deferred retirement account you have through your employer.  What I mean is, if you get a bonus, can you have it deposited into your retirement fund account through a payroll deduction?  If you can, can you put the whole amount in pre-taxed.  That’s what I did. 

Most folks use their bonuses to help pay off Christmas debt or go on the family vacation.  You lose so much of it in taxes, it’s outrageous.  I may have done it once in my career but then realized how much money I lost so I stopped. Take the whole amount and pretend like you don’t even get a bonus.  Put it all away in a tax deferred account through your place of employment if they allow you to do that.  If you can’t do that, then at least put it in to your Roth IRA. 

I would argue with my co-workers about this.  They would moan and groan about how much money they lose in the bonus when they take it.  When I ask what would happen if they took the bonuses away from us, they would say they were screwed.  Why?  Because they spent money they didn’t have.  They put things on a credit card and relied on the bonus to pay off the bill.  That is insanity to me.  That madness has got to stop.  Never ever rely on a bonus.  It’s a bonus, not a salary guarantee.  Stop pissing and moaning about money you were lucky to get.

No bonus but higher hourly rate

Since I had this topic planned months ago, things have changed. We no longer get a bonus anymore but what the employers did was roll the bonus into our salaries. This is now a guaranteed amount of money in our paychecks. So essentially, we got a raise which then increases my hourly rate which also increases my overtime rate. Win win. Some in the department still pissed and moaned about this. Unbelievable. Yes, I know, I don’t get $3500 dollars pre-taxed anymore as a deposit into my retirement, I just have more money in a paycheck now which still allows me to max out my ROTH contributions and my 457.

Competitive raises

I have another sweet bonus type news!  Our fiscal year begins on July 1st of each year.  We have gone through what is called a compression study and I guess that’s where they analyze our pay scales and compare them to the surrounding jurisdictions and decide whether we have been getting comparable pay or not.  Well, I guess we haven’t been getting paid so good so they decided to up everyone’s salaries to bring us up to speed.  No complaints here. 

Do what you love and the money will come

If you look back at my post on May 8th, 2019.  I posted my pay scales in the fire department.  Well the amounts I posted were what I grossed those years.  It was too much work for me to go back and see what my base rates were for those years.  Yes, I know that the numbers might be skewed a bit give or take a few grand but the numbers are still relevant. 

So, if my base pay for 2018 was $89,536.71 and add roughly $5600. for ALS (medic pay) plus time and a half for holidays and overtime, I grossed $109,604.  Not bad for showing up to work at a job I love doing.  Well, now tack on $22,383.06 to my base pay bringing it up to $111,919.78!  Add my ALS incentive of $5600 and 10 Holidays at 1 ½ time pay and any other overtime I might do.  Not bad. 

Closer I am to FI…..see what I did there? Indigo Girls fans? Anyone?

This will definitely get me to FI so much quicker.  With dedication, I should be able to max out my Roth and 457.  I will need to make sure my AGI does not go over the 135K which would prevent me from contributing to my ROTH because I make too much money.  I believe that is the cut off for that.  I’ll have to do some research.  

Anyway, I’ve always been a proponent of finding the job you love even if it doesn’t pay you well in the beginning.  The money will eventually come.  Some folks are going to look at me like I’m nuts for leaving a job that pays me 6 figures.  Alas, the quality of life is what its all about.  Young enough still to spend my time with my family while we all still have good health.  That’s the real deal.

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Hustle, Hustle, Hustle

Last year I hustled real hard and put away 20,000 pre-taxed dollars into my tax deferred 457 retirement account.  I was able to stash away money for my 8 months emergency savings, and take a trip to Florida and Punta Cana Dominican Republic and enjoyed a few concerts as well. 

My assets

I was pretty aggressive with my portfolio throughout my career.  Investing heavily in stock mutual funds, and a bit in bonds. My cash savings was steadily increasing and that was about it. When I say stocks, I want you to know it was in stock funds not individual stocks.  I do not pick stocks and I do not try to beat the market with selected stocks.  ETF’s or exchange traded funds and Index funds are where I’m at. 

The equity in my house was another asset.  I bought my townhouse in 2002 about a year after one of my many break ups.  Once again, not wanting to rely on anyone else for anything, I bought a house I could afford all by myself.  You will see that in 2002 my gross annual income was $36,227.  I was receiving child support also but that stopped in 2007 and then I had to pay child support.  Yeah, don’t get me started with that shit. 

Making it automatic

I decided in the beginning that a percentage of my paycheck would go in to retirement, not a set dollar amount.  This way, if I cranked out some serious overtime or hit the triple holiday pay check, a larger portion would go into the accounts instead of a set dollar amount like 300 or 400 dollars. 

Bonus bonanza

I also put all 100% of my retention bonus into my retirement account.  This way the whole amount went in tax deferred.  Many of my colleagues took the cash bonus but they ended up getting nearly half of it eaten by taxes.  Screw that.  That was free money.  It was offered a few years into my career and continued until this year 2019.  After this year, the bonus amount was just rolled into our total salary for a salary increase. 

Some hyper consumer individuals liked the one-time bonus but I loved that it was rolled into my salary as now my hourly rate has increased for overtime.  It was never a promised thing so just be grateful that we got it at all.  I never ever banked on that bonus, ever!  You get yourself into trouble when you depend on bonuses to pay off Christmas and holiday debts.  I highly discourage this type of behavior. 

Learn as you go

Now even though I was selecting my own funds with the retirement accounts we had through work, I didn’t know what the hell I was doing.  I just made a nice mixture of small caps, and big caps and blends etc.  I would see what the funds returns were since inception and told myself that I think I was doing the right thing.  Well it paid off.  Yeah yeah, I could have had them manage it but then they would get a little bit more of my money. 

I wanted to hold on to my hard-earned money as much as I could.  Don’t even get me started on expense ratios.  I didn’t even learn about that until last year.  Holy shit the money I see going in to their pockets.  OMG get Personal Capital for this.  It’s free.  It’s just like Mint but I like it better.  I can see how much money I lose to them in expense ratios.  Argh!!!! 

Expense ratios are the work of the devil

Expense ratios on the down and dirty.  This is the fee they charge you for managing the fund.  Some of it is 1% or higher.  I have mine now in Vanguard funds.  Thank the bee gees that our new retirement account holders offer Vanguard funds.  Here is a clear-eyed example.  Picking a random expense ratio number, and let’s say you have $100,000 dollars in a fund, an expense ratio at .58 percent would be $580 dollars a year they take from you before they report your gains or losses.  If your expense ratio was .04%, they would take $40.00.  Which would you want them to take?  This is why you need to ask what the expense ratio is or look at it yourself.  All of that information should be visible to you.  Personal Capital reported that I was losing thousands of dollars annually to expense ratios. 

Brokerage firm Vanguard for the win

I have changed all of my funds over to Vanguard funds.  Fidelity is currently offering 0% expense ratio funds.  You better jump on these.  Get started with the Total Stock Market Index fund.  The symbol is Vanguards VTSAX if you have a cool 3 grand to start with or the ETF VTI with no minimum.  Both are Total Stock Market funds.  Fidelity offers FZROX.  Fidelity Zero Total Market Index Fund.  Do some research and see what you like best but look at the expenses for each one and get started.  I have a bit in short term bonds because I’m getting older and want a bit of security but I still have quite a bit in aggressive funds. The bonds are in VBTLS which is Vanguards Total Bond Market Index Fund. I also have a tiny bit in BSV which is Vanguards Short term bond ETF.   

Remember earlier when I said I was only putting in 4% when I first started?  Each year I increased it a bit, and each time I got a raise I increased it a bit, and eventually I was close to maxing out each year. Stay tuned for my salaries through the years.    

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Steady as she goes

Where did the time go? So much to do, so much to read and so much more to invest. The markets crapped the bed last year but you just have to keep plowing ahead and keep going at it with a nice steady pace. Stay on track with your goals to financial freedom.

Max out the Roth contributions and then some

I tried to max out my Roth for 2018 but I didn’t make the cut.  I wanted to hurry up and get my taxes done so I was only able contributed $4800 of my $6500 max but oh well.  I’m sure I could have continued to put money in even after my taxes were done and do some sort of amendment to my taxes next year but you know what…. I like to keep things simple.  So, I started putting money in to my Roth for 2019.  The max increased to $7000 for me so that’s sweet.  Remember I’m on the 50 and up age so I can put in a bit more.  The normal amount to max out a Roth is $6000. So far I have contributed $5100.  I want to be able to max the Roth contributions, max out a 8-10 months of emergency fund then work on maxing out $25,000 towards the tax deferred contributions to my 457 with work.  The 50 and over get to put in that much. Younger than 50 can only contribute a maximum of $19,000.

What the hell, if I max all that out, I will throw everything extra towards my mortgage principal and shorten the years on that debt.  Until next time, keep steady with the contributions and make it automatic so you don’t have to think about it each month.  You can’t spend it if you’ve already invested it right?  That’s how I look at it.  Plus, there is something so gratifying to see how much your money made for you with compounding interest!

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Plan it, Set it, Do It

You have got to set a goal to not work yourself to the bone and plan this early in your working career. I don’t care if you are just starting your career fresh out of college or right after high school. Just plan it. It’s not going to take a miracle. I’m not going to share anything new and exciting. Its tried and true, no gimmicks.

As soon as you start making a paycheck from anywhere, plan on retiring early. Like way early. With a few choice moves, you can retire early, comfortably and reach financial independence without much effort. Man, if I had known this stuff back in the day, I can only imagine how many surgeries I could have avoided. Seriously though, ask yourself. Do you want to work until you are 67 yrs. old? Do you want to work for the man until that blessed social security check starts coming? No, no, no. No, you don’t.

Read, read, read and learn as much as you can

It all started with those few Money magazines that I picked up in the grocery store line. Then I started watching the Suze Orman show. Many in the FI (Financial Independence) community may not be on the same page with Suze’s dislike for the FI generation but Suze’s show is where I got my first hit of the saving addiction. The FI community vary between frugality, living within their means, travel hacks, and saving a ton to retire early and do what they love and if it makes them money, then all the better. Here is the link for the interview with Paul Pant @affordanything.com Paula is another one of those awesome saving and do what you love kind of financially independent people. https://affordanything.com/why-i-hate-the-fire-movement-says-suze-orman/  

Anyway, my biggest take away in the beginning with Suze was to have an emergency fund. This could not mean more than it does right now with the mess the government shut down created. It wreaked havoc for weeks for folks who didn’t have enough savings. Anyway, after listening to Suze for a while on her show she had, I immediately started saving towards 6 months of emergency fund. Now, the emergency fund was to pay for my mortgage, utilities, food, etc. The necessities. I had already determined that in the worst-case scenario, that I would cut cable and other unnecessary things from my expenses in cases of emergencies. From there, the savings just increased for those emergency moments. I eventually got up to 10 months worth of savings and decided that was enough. I felt safe with that and with that said, I will leave that here and discuss more on the next post about the panic at work and my retirement savings.