It’s happening fast now. I’m three years from the goal and I can see the milestones lining up. Yes, it’s exciting. Yes, it’s terrifying. No, I don’t think I’m ready. Let’s take a look.
In true corporate fashion, I sat down last week and created a document called “FI-2029-draft2-Final(1).docx.” In that document I listed the next few milestones on my path to FI, then spent hours working with a custom calculator (one that I’m going to try to post in a new calculator section here soon), to put dates and dollars to those milestones.
My current list of milestones on my path to being freed by 50 (there it is again!) is as follows:
- Build emergency fund up to one year of expenses
For years I’ve had 3-6 months of expenses in my emergency fund. Occasionally I’ve dipped into it to accelerate a project a month or two prior to a liquidity event from work (not the smartest idea), but generally I’ve played it safe. Due to the issues at my job, my inability to change roles, and my impending plans for FI, I’m pushing this savings up to one year of expenses.
The idea is threefold. First, in times of instability it’s a good idea to have a bigger than normal emergency fund. If I find myself out of work, I’ll likely get a couple of months severance plus having a year of expenses in cash. Second, in order to reduce sequence of return risk in retirement, it’s prudent to have a cash position to fall back on rather than being forced to liquidate stock in a down market. It’s a very complicated topic and not one I’m going to get deep into now. Third, as you’ll see in the FI bridge below, this will help cover my potential 10-11 year glide path to utilizing my retirement accounts.
In order to do this quickly, I’ve reduced my mega backdoor Roth contributions drastically and I’m stacking the cash. I’m also diverting my next RSU vesting period to this, which should help me fully fund it by May of this year. - Build brokerage account up quickly as an “escape hatch”
Once the emergency fund is fully up to one year in May, I’m diverting all extra cash, RSU vesting periods, bonus payouts and ESPP events to my brokerage account. It’s already fairly robust, but this will be the main way I would fund my life from the time I stop work until I can access my retirement accounts at 58.5. It’s highly unlikely that I would completely exit the workforce in my 40’s or even in my early 50’s, but lets assume the worst for this exercise.
The idea is to rapidly increase the investments in my after tax brokerage account to the point that if we had to, we could draw that account all the way down to zero and then live off of retirement accounts when I hit 58.5. This isn’t my end goal, it’s an emergency escape hatch. If I suddenly found myself out of work and decided I just couldn’t ever work a corporate job again, this could carry us to full retirement.
This would mean having about $750k in my brokerage account. I had previously reported that I was shooting for about $650k, but further analysis has me thinking that number would need to come up, especially if I expected to be able to pull $10k/month out of it for a long period of time. Bare in mind that this is not a static account. It is fully invested in broad market equities and should be able to continue to earn significant money even as I draw it down.
Again, this is not my FI plan, it’s the emergency escape hatch should I reach the breaking point with my job. The very good news is that I should hit this number at or about February of 2027. - Convert escape hatch to FI bridge from leaving work to accessing retirement funds
This is the real meat of the plan. With my full year emergency fund filled and knowing I could walk away any time, I can focus on what could be my final two years of work. This means all extra funds would be diverted to the after tax brokerage account from February 2007 until March of 2009. If you’re paying attention, you might be thinking “Wait, but you’ll already be 50 in March of 2029!” And you’d be right, I would be two months past 50. However, if I’m still employed at my current company at that time, I’d also be due a sizeable bonus and multiple RSU payouts in February, and I’m not about to walk away from those.
With average market conditions, my brokerage account alone would be up to $1.2M, which could easily fund my retirement until I can access my retirement accounts in 2037. In fact, by that time, my retirement accounts will be well above where I’d need them to be and my mortgage would be two years gone.
I have a bit of a debate going about this part of the plan since I have access to a mega backdoor Roth. Since the contributions can be accessed penalty free, and the growth is tax free, it could make a lot more sense to focus on the tax advantaged account rather than my after tax brokerage. I may wind up splitting the difference and going half and half. - Full financial independence
The current date for this is April 2029. This is five months past my 50th birthday. This also assumes I never get a raise or my company’s current stock price never increases. I expect this date to float around a bit over the next three years and I’m hoping to see it move much closer, or into, 2028. At this point anything I earned would be gravy, and anything I saved would be well beyond what I need to fund a very healthy retirement. As it stands, I’d easily be able to cover all of my expenses, my kids college, health insurance, and vacations indefinitely. Should I choose to retire at this point and live off of my brokerage account and savings, it could cover nearly everything indefinitely and still be a very healthy balance when I reach full retirement age.
That may or may not seem like a short list, but keep in mind I have three years to accomplish all of it. Somehow, three years is both a very long and incredibly short time. I don’t want to rush it. Work might suck right now, but my life is great! My kids are a lot of fun (when I’m not yelling at them) and my wife and I have really been enjoying introducing more travel into our lives.
FI is just one focus in my life, but not the focus of my life. These next few years will be interesting and I’m really excited to see if the math holds up, getting me to the finish line on or close to schedule. Freedom is around the corner!
Freed by 50 