20% Of The Way To FI

Hit another milestone recently in the Financial Independence (FI) world! I am now 20% of the way to the number I need to stop working and pursue passions indefinitely.  It is such a freeing and uplifting feeling knowing this It’s hard to describe.

So just how much do I need to achieve this task? I need roughly $500,000 to be able to pursue passions and spend my time, however, I feel that brings me value. This is the 4% Safe Withdrawl Rate (SWR). Here is a post about the SWR. $500,000 at 4% SWR will give me $20,000 a year well forever.

Seems like a low number right. There is no way someone can live on $20,000 a year and be happy. I am active duty military as well. I am hoping to retire as an E8 at 23 years. That would give me two great benefits.

  1. A nice pension that increases with inflation
  2. Very affordable health care

As an E8 with 23 years active duty, I will have a pension of about $35,000 a year before taxes are taken out. Now taxes are the tricky part. Because I don’t know what the tax brackets will look like then nor do I know which state I will transition too. Some states you pay no state taxes which would mean to me more money. That is my best case plan so to speak for my active duty career plan. The mid-grade plan is to retire as an E7 at 22 years which is the limit an E7 can stay in. That would give me roughly a $30,000 pension before taxes. Or I could do just 20 years as an E7 and the pension would be about $26,800. The worst case plan is to retire as an E6 at 20 years which is the limit an E6 can stay in. That would give me roughly a $22,900 pension before taxes. This shows it’s well worth it to pick up a few ranks and stay in the extra three years. The difference between an E6 at 20 years and an E8 at 23 years is $12,100 a year. That is a good amount of money. That is the equivalent of having $302,500 invested in the market at the 4% SWR. The $35,000 pension for an E8 at 23 years is the equivalent of having $875,000 invested in the market at the 4% SWR. Let’s just say a military pension is a great tool, that really allows me to accelerate my FI journey.

The healthcare after you retire from the military is another great benefit. There are two options Tricare Prime and Tricare Select. It costs about $28 for a single person and $48 for a family for Tricare Prime per month. This is what I plan to go with. The average person right now pays $321 for a single person and $833 for a family. That is a savings of $3,516 for a single person and $9,660 for a family.

These two benefits are worth gold in my eyes

  • Pension – $875,000 (As an E8 at 23 years active duty)
  • Health Care  Single – $87,900 (Based on what you would save compared to average costs)
  • Health Care Family – $241,500 (Based on what you would save compared to average costs)

These numbers above are based on the 4% SWR. 

Crazy that for a single person that is the equivalent of about $962,900  at the 4% SWR. For a family that is the equivalent of about $1,116,500. That’s over a million dollar benefit for a family. Almost a million dollar benefit for a single person.

Frankly, I could probably hit FI/FIRE on much less than $500K because of my pension, zero debt, and my already low-cost lifestyle. I currently spend about $25K a year and rent a small apartment. So If I owned a house and had it paid off living expenses would be way less. This $25K includes a few trips a year and fun money each month as well.

Now If I’m still in the military and hit $500,000 I’m not going to stop investing and start to blow money because I hit my FI/FIRE number. I actually will probably cut back more and continue to push forward because I know once I am at that amount compounding is a beautiful thing.

What Will I Retire To

Will I just go travel the world for the next 50 years? I could and do plan to do a lot more traveling once I hit FI/FIRE. Will I just sit on my couch and read or watch a few tv shows? Well, it’s possible that will be on the agenda. But in all seriousness, my plans are to not stop working at all. My plans and dreams are to be able to find work that I love doing every day and am passionate about. So if I find a career that pays $25,000 a year but I love going to work every day that is what I want. Because I would not be seeking work for income. I would not be trading my time anymore for income like most people do. See I’ll have the freedom to trade my time for doing things I love every day. If I don’t love it I could quit or stop doing that task without a second thought. Becuase once you hit FI/FIRE you don’t need the income anymore because you are set for life. You have the freedom of options.

The few careers I am thinking about transitioning to are Nursing, Teaching, Counselor, or Personal Financial Counselor. I also would be able to go back to college and get four years of in-state tuition, COLA, and a book stipend because of my GI Bill. I currently am still working on my BS in Finance right now. Again paying zero dollars for the classes is awesome!

These are careers that really speak to me because the impact I can have on helping people. That is what I want to do every day is have an impact on individuals. I also would like to volunteer more and do mission trips once I hit FI/FIRE. It’s exciting to think that in less than 10 years this is all possible and so much more. Nursing as of now is what I am leaning toward because of the demand for them everywhere plus I could try to work at the VA hospital and help veterans. Or I could do travel nursing which would also align with wanting to travel more.

FI/FIRE Stream Of Income

  1. Pension – $35K (Before taxes)
  2. Investments – $20K ($500K at 4% SWR)
  3. Rentals – $10K-$15K (This is what I hope to bring in as a cash flow at the end of the year. Not sure if I would pay cash for them to achieve this or slowly pay it down to achieve this.)

So a total of $55K before taxes are taken out without rentals. With the rentals around $65K before taxes are taken out. My goal is to hit in the ballpark of $45K a year between those two buckets. Now the question is what would I do with my income from my job? I would live off of that and up my standard of living just a little for more traveling. I would invest the pension and some of the income from work to keep building my wealth. I would like at that time to also save for a rental or two. The rentals might change as time goes on. It would be nice to have a rental or two to add to my stream of income, especially once they are paid off. Lastly, I would eventually pay off my home so that I could effectively lower my living expenses. Not sure if I would simply make extra payments or just pull from investments when the time came.

This plan is completely fluid though. As I get closer to FI/FIRE I understand things will change so I just try to plan as best as I can so I am the most prepared. When things change I simply adjust and find the most simplistic and optimized approach to get me to my target.

Well, there it is my milestone, my FI/FIRE number, and my future plans for retirement. One thing I know is this is all a fluid plan. Meaning it will change as time goes on and as I grow and change. But that is ok and I will adjust when that time comes.

 

 

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