Sounds like a get rich quick scam, right? It’s not, it took a lot of work, sweat, patience and time before I got here, but I’m doing it nonetheless. I retired two and half years ago, haven’t worked for a single penny and today I have more money than I had the day I retired. It’s like magic (but it’s not).
Doing nothing
I lied, I’ve been doing something, I’ve been enjoying early retirement. I’ve found something I’m passionate about and it keeps be busy
most day. What I’m not doing, and haven’t done for two and a half years, is working for money.
It’s all about, not working for money but letting money do the work for you. No, I haven’t done anything to make money (guess what, this blog is not making me thousands every month). Something else is making money for me: my portfolio. The Money I once worked for is now working for me.
How did I get here?
For those of you following this blog, you know. I created a 10 year plan, stuck to it and built a million dollar portfolio. It took everything from, saving where we could, living below our means, paying ourselves first, investing it all, you know….. All the FI truths that at its core are real simple. Oh, and along the way compounding did its bit. After completing the plan, it (compounding) took me from millionaire to early retirement, which takes a bit more than “just” a million (for us).
I’m not kidding when I say the principals of Financial Independence are simply. I’ve boiled it down to my 5 Keys to Building Wealth:
- Start early
- Set a goal and create a plan
- Live below your means
- Invest wisely
- Be patient and stay the course
Those keys led me to the wealth that is now working for me. I no longer have to work to build wealth, the wealth is there and it’s maintaining itself. It all came together. I joined the FIRE club (Financial Independence, Retiring(ed) Early).
How much did I make?
Brace yourself, today I have (drum-roll…) $174.00 more than the end-of-year total, the year I retired. Wow, 2 years and you made less than $200.00 LOL!!!! I actually had to wait for the latest market rally today to make this article possible, who knows where are tomorrow.
That is not the $200,000 I promised on top. All joking aside, the net difference between the end-of-year I retired and today truly is that little, but let’s expand: The year I retired saw a similar rally to this year’s so the difference between the DAY I retired and today is actually $17,150.43 (already looking a bit better). BTW, these numbers only include my financial invest-able assets (bank, stock, 401k, IRA, …). It does not include any appreciation/growth of our equity in our home (and other stuff). It does include my investment property (waterfront lot) but since it has not been re-appraised I’ve kept it at the value I purchased it at ($68,000.00). According to recent sales of lots on the same water, it should have quadrupled by now.
All I’ve talked about thus far is the net amount of money made. What I haven’t included is our living expenses. For the last two and half year I haven’t made any money but I’ve certainly been spending it. Our annual budget sits at $65,000.00 and although we’re sticking to it closely, we’ve dealt with some financial emergencies (mostly medical). Our spending from the day I retired to today has been $170,000.00 (give or take $80).
Indeed, there you have it, I haven’t worked for a single penny since retirement and yet we’ve spent $170,000 and managed to come out $17,150.43 on top. My portfolio has generated over $187,000.00 in income in the last two and a half years. Not too shabby, doing nothing.
Is it enough?
I can already hear the teeth grinding. “You’re spending way more than the 4% rule when in retirement”. “The market won’t always go up, what about the next crash?”. I hear you and point well taken but here’s my rebuttal: I retired at 43, have not had to work for the last two and a half years. So what if I’m wrong? I will have had a 3 year vacation and still come out better than most.
All of this is indeed not sound advice; any financial adviser will tell you this. I’m living on the edge of financial soundness (you might call it insanity). This is all on the risky side but here is how I think I can get away with it (and this applies to my situation and mine alone, can’t speak for yours): I’m now 46, should this fall apart then “boohoo, I’ll go back to work”. There are worse things in life than having to work at 50.
As of today, my portfolio has managed to sustain us and come next year this time I’ll re-evaluate and see what is next. Aside from some balance problems between my pre-tax and after tax account there seems to be enough for now.
Should you be doing this?
Probably not, talk to a financial adviser and I’m pretty sure he’ll tell you not to. This article isn’t about my lifestyle though. It’s about how I made close to $200,000.00 by doing absolutely nothing. The fact that I’m retired while doing so doesn’t matter.
The point is, plan your life and finances right and you no longer have to work for money, the money will do the work for you. Allowing you, to do absolutely nothing.
Good luck reaching your financial goals and Happy Holidays!!
Great post, Martin. $187K in 2 1/2 years? You’re killing it. And I love the photo of your feet up on your desk (not some little cubicle desk). Is your portfolio conservative? We moved to 50/50 equities/bonds since we stopped working. We’ll make one more transfer to max out our Roths but after that we won’t be putting additional money into any of our accounts.
Thank you, I have to say my portfolio is extremely aggressive. I’d say 98% equities and 2% cash (I’m guessing you just cringed a little). Just like it took an aggressive portfolio to retire at 43, it takes an aggressive portfolio to maintain it. Over the last 10 years I’ve averaged about 10% returns. I will need to the same going forward.
I know it’s very aggressive but I figure no one’s achieved greatness by following the pack.
Well, I read your response out loud to Mr. Groovy, and he cringed a little (more like gasped). I hear ya, though. Sometimes you’ve got to be bold to make the nest egg last. We’re playing it safe the first few years and then we intend to go back in a bit more heavily on equities.
I kinda figure, if we see another Great Recession again and the market drops 50% I might have to get a job again. I’ll still be left with a bigger nesteg than most others. Hoping for the opposite of course.
Maarten, this advice really hit the nail on the head for me. I’m 30 and I feel like I can be super aggressive in my investments. Can it fail? Sure. But if it succeeds, the extra wealth generated will be worth it. Sometimes you have to step out of your comfort zone. That includes sticking with your gut while everyone else tells you you’re wrong.
When you say “So what if I’m wrong? I will have had a 3 year vacation and still come out better than most,” it’s so true. If what you do works, you’ll have a huge head start on everyone else. If it doesn’t, so what.
Thx, I recently told a friend something similar. He’s in his 30s and 50% in bonds. I asked him if he’d be in trouble if he lost it all. The answer was no, he’s still young with plenty of time to catch up. I told him that if he could sleep fine getting more aggressive he should. If it would keep him up, he shouldn’t.
No risk no reward.
Interesting roll of the dice on retiring and the pull out. It might work out though. Honestly I run the numbers today via a retirement tool and I have a 60 percent chance of success at our current spending. If I had a crystal ball or no kids I might take that 60 percent chance. Alternately I might cut my spending tighter without the kids and shift to high 90s probability with a lower spending rate. In either case its good to have options isn’t it?
Thank you. I’m hoping it will work out. There is some chance in play but whichever way the dice rolls I think I do have options.
Chrystal ball would be nice to have though.
Love your story, my friend! Like you, I’ve gone with an aggressive portfolio. My aggression is primarily based on the fact the wife and I don’t really need the money in our investment portfolio (four retirement accounts and a brokerage account) as we could get by – if we had to – from the five defined benefit plans (pensions) coming our way.
Thank you, in your case you’ve really worked it out. Yours is aggressive because you can, ours because we must. Still, I figure if it goes awry for us, I can still get a job.
Time will tell if it pays off. I’m optimistic.
Love the experiment, Maarten. Perhaps your money won’t be dragging home another $200K in the next two and a half years. But I have a feeling your money won’t become a deadbeat anytime soon. Best of luck in 2017, my friend.
Thank you, I’m hopeful for a bit more of a bump but we are due for some correction in the not too distant future. 2015 was a pretty miserable year though. The best for you as well in 2017!