|Update: 10 Years Into Early Retirement
The ten-year mark seems like a natural time to step
back and see how you’re doing with any big decision
in life. So how are we doing ten years after retiring
early? The short answer is, great! As of January
2017 our nest egg stands at $1,024,000, plus
we have a condo valued at $236,000 per Zillow
estimates. That represents a net worth of about
$1,260,000. What this means is that even after
taking money off the table each year (typically about
$30K per year, or roughly $300K over ten years),
we have more invested now than we did when we first retired.
Readers of our book will know we retired in December 2006 with $926,000 to
our name. Of that amount, roughly $625K was in stocks and bonds and the
other $300K in real estate. After selling our home we put the sale proceeds
into a Vanguard bond fund and had only liquid assets for two years until
purchasing our condo in 2009 for about $100K.
At present we have roughly $820K in stocks, $200K in bonds, and $240K in
real estate. That’s over $300K more in net worth than when we first retired.
It may come as a surprise to some that we have more money now than we did
when we first retired, but this actually makes sense when you think about it.
Since we typically withdraw 3% to 4% of our portfolio per year, and the market
tends to grow faster than 4%, it’s not so surprising that we’ve made money
even while living off our investments. If anything, the surprise is how slowly our
portfolio has grown – but it helps to remember that we retired into the Great
Recession and growth has been below historic norms over the past ten years.
The compound annual growth rate of the S&P 500 for the past ten years has
been 6.93%, compared to a historic 9.07%.
We continue to live frugally except when it comes to travel, and as our website
shows, we’ve logged quite a few miles over the past ten years. It just goes to
show that retiring early doesn’t mean retiring from life but only from a 9-to-5
job! This past year we rode camels in the Sahara Desert in Morocco, hiked
500 miles along the Camino de Santiago in Spain, and spent a month in a
quaint Airbnb rental in Ireland. The takeaway is that early retirement really can
be your chance to make your dreams come true, and you don’t have to pinch
pennies particularly hard to make it work.
The latest clever (we think) approach to supplementing our retirement income
has been to rent out our condo in Boulder since we’re not living in it anyway,
being so busy traveling. The condo rents for $1,500 per month, and we use
that money to pay for our digs in places like Panama City Beach, Florida,
where we like to stay in January and February, happily riding out the winter.
The same rental income helped as we traveled through Europe this past
summer. In fact, with the $18,000 the condo brought in over 2016, plus
another $2,000 or so in book income, we ended up only needing to withdraw
$20,000 from our investments this past year to live on our usual $40,000 to
$45,000 per year.
One adjustment for us has been getting used to the slower pace of growth in
our portfolio since we retired. During our investing years we were used to
seeing our portfolio increase dramatically in good years and at least stay
positive in bad years because of all the “new” money we were putting in. But
once we retired there was no more new money going in. In fact, we were taking
money out each year. So it’s good to be aware that while your nest egg may
continue to grow even after you retire, the rate will probably be slower than
you're used to. Our portfolio hovered for most of these past ten years at just
below the million dollar mark, and we found it a little frustrating at times not to
cross over for so long! So if you want a million dollar nest egg, we suggest
hitting that milestone first, before you retire.
That said, we have absolutely no regrets about retiring at 43 and would do it
all over again in a heartbeat. We're doing well financially and love being able
to follow the sun around the U.S. and world. So for those who are on the fence
(and we know you’re out there!), we would remind you that life is short and now
might just be the right time to take the plunge.
|Completely updated for 2018