FIRE Update – Year 0

It’s official! Becky and I are proud to announce that we’ve recently started the next chapter of our lives: Early Retirement

I haven’t written a proper post on this blog in nearly 7 years, so I think it’s time for an update on some of the things we’ve been up to and how we got here. Let’s dive in.

College Graduation to Retired in ~13 years

After graduating college and moving to Seattle for work, my future wife and I started earning real money for the first time in our lives but were still living like college students for the most part. A little extra started accumulating in our checking accounts and we asked ourselves: What should we do with this money?

This led to months of digging into personal finance, investing, and numerous other related topics, but the one that stuck with me the most was FIRE: Financial Independence, Retire Early. The idea that we could set aside a good % of our income now, invest in index funds, and then retire and live off those assets decades before traditional retirement age set off a bomb in my mind. I had no doubt this was a viable plan for us. Becky was hesitant at first, but eventually got on board as well and we were off to the races.

I started this blog (Money Metagame) at the end of 2014 as a way to organize my thoughts on personal finance, credit card churning, side hustles, and more. One of the earlier posts was titled: Our Financial Independence Plan: FI by 40.

The core of that post remained true over time even if our rough math around how much we would need for FI wasn’t very close. Now here we are, ahead of schedule at age 35, walking away from a steady paycheck with no plans to return.

Our Timeline of Events

For posterity, here’s a rough timeline with key events:

• 2013
  • I graduate from college (Becky was 1 year ahead of me and already working) and we both move out to Seattle from the Midwest where we grew up and went to school.
  • Noah joins big tech company #1 as a Software Engineer
  • Becky gets a job as a Nurse in labor and delivery
  • Noah discovers the idea of FIRE and goes down the rabbit hole of information
• 2014
  • Noah starts Money Metagame (the blog you’re reading)
  • We both optimize our finances for the long term
    • Max out retirement accounts
    • Invest in low cost index funds (mostly VTSAX and equivalents)
    • Track our spending
      • We’ve never stuck to a strict “budget”, but have always tracked spending to make sure we were aware where it was all going
    • Aim for a ~50% savings rate (aka: spend half our income, invest the other half)
  • We discover credit card churning and start opening a lot of cards for the signup bonuses
• 2016
  • We got married!
    • This included an amazing honeymoon for under $400 thanks to points and miles
• 2017
  • With both of us feeling a little burnt out from work, we start to look at different options. Ultimately, we decide to take a mini retirement (or “Gap Year” as we called it)
• 2018
  • Both of us left our jobs by February and we kick off our gap year road tripping around the country!
    • Way more gap year info here
• 2019
  • To finish off our gap year, we settled down in an Airbnb in Colorado and started the job hunt
  • A month or so later with a couple job offers in hand, we decide to move to California
  • Noah joins big tech company #2 as a Senior Software Engineer
  • Becky starts up again in Nursing
• 2022
  • We have our first child!
  • Becky stops working to stay home with our daughter
• 2023
  • While keeping the same job, I switch to being a remote employee and we move to Colorado
• 2024
  • We have our second child! A boy this time
• 2026
  • Noah quits his job
  • FIRE!

Our Investment Strategy: Boring by Design

The general advice in many personal finance (and especially FIRE related) articles and books is to buy broad, low-cost index funds and we did exactly that.

The Simple Path to Wealth (and other similar resources) were the blueprint and we just followed the steps month after month, year after year. It didn’t matter if the market was up or down, over or undervalued, we just consistently left our current investments alone and bought more. The goal being to ride the market average slowly upward over time.

A lot of this investing was automated through our paychecks. To help optimize both current and future taxes, we were maxing out our respective 401ks and HSAs through our employers each year. We also took advantage of the backdoor Roth IRA during our time in Seattle. For the second half of our journey (in CA), I had access to the “Mega Backdoor Roth” through my employer’s 401k so we maxed that as well.

Anything that didn’t fit into a tax-advantaged retirement account was then put into a standard brokerage account and invested the same way.

Two Deviations from Our Investment Plan

There were 2 times we deviated from the standard plan above (one win and one loss):

1. The Rental Property
   • In 2014, we bought a townhouse in Seattle to live in. When we left in 2018 to start our gap year, we decided to rent it out instead of selling it.
   • We found a property manager to take care of everything and other than the occasional email every couple months, it’s been completely hands off which has been great.
   • Financially, the property has been functionally break-even. Rent coming in was almost exactly cancelled out by the mortgage, taxes, maintenance, etc. Not the worst place to be, but also not the best.
   • We’ve wanted to sell it for a few years now, but didn’t want to take the capital gains tax hit (because we haven’t lived there in a while). Now that I’m not working, we have already put the wheels in motion to sell it this year.
   • In retrospect, this rental property adventure was a financial mistake that I estimate cost us ~$400k in opportunity cost (compared to selling when we left and putting the proceeds into VTSAX)
2. Employee Stock Option Program
   • One of the benefits of the 2nd large tech company I worked at was a stock option program.
   • Typically, investing in a single company (especially the same one paying your salary!) is frowned upon and lies on the opposite end of the spectrum from the low-cost broad index fund strategy.
   • However, these options had a couple things going for them that made them an interesting opportunity despite being very high risk.
     • They were leveraged: We only paid 40% of the current value of the stock
     • The options lasted for 10 years
     • The options were purchased pre-tax (and then taxed as regular income when exercised)
   • As someone with plans to retire in the next 10 years, this made for an interesting (although high risk) opportunity to delay current income in a high tax bracket to future years where we would have little to no other income.
   • The only catch is that the options could end up completely worthless! (as is the case for many companies both in and outside of the tech world)
   • Weighing the potential benefits and risks, I decided to allocate 10% of my salary to the stock option program for my first 5 years at the company. That was the amount we were comfortable losing in the worst case (our FI goals were on track whether it worked out or not). After that point I already had a decent amount and wanted extra cash flow to help pay down our Colorado mortgage early.
   • This opportunity has already paid off as we liquidated about half of our options last year to both diversify our investments and pay off a good chunk of our mortgage early.
   • We’re still holding on to the other half for now, but there’s a timer for when we’ll need to exercise them. As we need cash in retirement, these will likely be the first investments sold and we will be able to take advantage of the deferred income to pay lower taxes.
   • I won’t know for sure how much of a net win this was until all the options are gone (the remaining ones could still drop to 0, especially if the market crashes at the wrong time!), but my conservative estimate is that we’ll end up $300-600k ahead of where we would have been just taking the cash salary and buying VTSAX.

Taking both together, it looks like we’ll end up slightly ahead of a pure 100% index fund strategy but it ultimately didn’t move the needle very far (our FIRE date didn’t shift as a result).

I thought it would be interesting to break down the times we deviated from the standard advice, but these were always a minority of our overall investments. With the rental property being sold this year and the options being sold off over the next ~5 years, we’ll soon be back to a 100% index fund approach that we plan to stick with for the rest of our lives.

The Biggest Question: When to Retire?

So why now? We’ve been tracking our money for years and thinking about the day we can finally walk away from work, but pulling the trigger is another thing entirely!

In retrospect, saving money and investing is rather simple (though not easy) compared to living off of that money when your primary income stream goes away. The idea is to figure out how much we’ll need to spend per year, compare it to our overall investments, then see what kind of retirement “success rate” we’ll have with that expected withdrawal rate. Unfortunately, there’s so many unknowns to factor in!

• Healthcare expenses
  • I know what it will cost this year, but what about 5 years from now? 20?
• Kid expenses
  • Who knows what sports, hobbies, etc they will be involved in over the next 20 years
• Hobbies
  • Beyond the kids, I don’t know what hobbies I’ll be doing over the coming decades!
• Insurance rates
  • Not sure about everyone else, but our insurance premiums seem to be outpacing inflation across the board. We can potentially shop around in the short term, but it seems to be a nationwide trend at the moment. When will it level off?
• The Unknown
  • Even with tracking our spending over the past 12 years, there’s always items that end up in the “Other” category (a.k.a. things we didn’t account for). They’re different each year and vary in cost. What’s the thing we haven’t needed to spend money on for the past decade that will pop up when we least expect it?

Ultimately, we put together an estimated retirement budget that feels conservative (worst case health expenses, car/home maintenance allocations, large travel budget, extra buffer, etc). That was over a year ago at this point. When we ran that against our portfolio, there were still outlier historical scenarios where our plan fails (withdrawal rate in the high 3s %-wise).

Luckily, I still enjoyed my job at this point so we decided to go for one more year to pad our accounts and move that withdrawal rate into the 100% success rate for historical scenarios (withdrawal rate in the low 3s %-wise). That doesn’t mean it can’t fail, maybe the biggest market crash of all time will happen next week! However, we feel comfortable with our plan and having that extra buffer means we’ll sleep better at night going forward.

Now that I’ve quit my job, we successfully avoided the “One More Year Syndrome” that seems to affect others approaching the retire part of FIRE. I have no regrets with staying that extra year and don’t plan to have any in the future. If we end up with extra money, I’m sure we’ll find some good use for it.

Short Term Plans and Looking Forward

As of now, it’s been a month since my last day of work and I’m still not sure it’s fully registered internally yet. The kids keep both of us in a routine most of the time, but it’s been extremely nice to not be on my phone as much for work related slack/email/etc.

No major life changes yet, but there’s a handful of small things I’ve started already:

• Getting back into shape
  • For me, this means counting calories again, bodyweight exercises at home, and running outside when the weather permits
  • I signed up for the local community 5k race package as it always helps my motivation to have an event coming up (4x races from March-September)
• Reading more
  • We’ve been making more trips to the library and I’ve read more books in the past month than I have in the past several years
• Playing cornhole again
  • This hobby was put on hold mostly because of two small kids rather than work, but with work out of the equation it’s much easier to split kid and house duties so we can both take occasional evenings to ourselves to socialize
• Small trips planned
  • We’ve already booked small trips to visit family and friends which would have been harder to slot against work commitments
  • I expect there are many larger trips in our future of all kinds (road trips, international, cruises, etc), but we’re holding off for now while the kids are still small

On the financial side, I’ve made a few changes already:

• Turned off auto-reinvest dividends in our brokerage account
• Purchased health insurance off the marketplace
• Consolidated 401ks into a single set of IRAs

I have a few more things on my todo list for this year:

• Hammer out our exact method for living off investments (when to withdrawal/sell and from where each quarter/year/etc)
• Set up a trust/will/etc (we should have done this years ago!)
• Sell our Seattle house and invest those proceeds
• Audit all of our current credit cards and maybe sign up for more (we’ve just randomly been opening a few year each for a while without any larger plan like we used to have)

Other than that, I’ve mostly just been trying to relax, mentally reset, and see where life takes us. Without work, I’m excited to have the ability to say “Yes” to random opportunities as they present themselves. Who knows what those opportunities might be!

That’s a Wrap

Thanks for reading! It was challenging to summarize a ton of information here and I’m not even sure if I did a great job at that. Feel free to ask questions in the comments below and I’d be happy to expand on anything I either glazed over or didn’t mention at all.

I’d like to make an update like this a yearly(ish) thing, but who knows where life will take us at this point.

Cheers everyone!