Retiring from my long term career

Today is the first day of the rest of my life.

I have been working at various 9 to 5 jobs for the last 14 years. But no more.
June 28th was officially my final day at work. 🙂

So now I’m officially out of the workforce. And I couldn’t be happier. 😄

It’s always a bitter sweet moment when you leave the job you enjoy.
But I think I have made the right decision.
I know 14 years doesn’t sound like a long time for many people. But as a millennial it’s a large chunk of my life.

There are various definitions of retirement. I like to use the most common one which is quitting one’s job and leaving the workforce.

Thank you everyone for following along on my journey first to financial independence, and now to retiring from my 9 to 5 job. 😀

Oprah Winfrey said we become what we believe.
So when I created this blog over a decade ago I believed I could retire by age 35.

Oprah was right. 🤗

I no longer dread Mondays because everyday feels like a weekend now! 🥳

In an era when most millennials are living paycheck to paycheck, it sure is a tremendous privilege to be able to live on a stable stream of passive income for the rest of my life. 😊

What I will be doing now

It’s incredible to have an extra 40 hours every week. And I do not intend to waste a minute of it!

I’m afraid to just sit on my hands all day because I’ll probably lose feelings in my fingers.
And then I’ll really be out of touch. 😎

That’s why I will keep myself busy with fun activities that will primarily fit into 2 categories.

The first is purely for fun, such as reading comic books or watching Netflix. 🙂

The other is to improve my long term health, relationships, or financial stability.

Everything else I can simply ignore at this point and focus on developing the things that are important to me.

So for the next little while I plan to enjoy activities such as sleeping in, cooking, and chilling at home.

In terms of side projects I don’t have anything I want to take on right now.

But that’s what my free time is for. It’s hard to think clearly with a busy mind and a full schedule. But a calm mind with no time constraint is more open to discover new and interesting ideas. 🙂

Who knows? Maybe I’ll write a book, start a business, adopt a puppy, or plant a vegetable garden in my backyard. I don’t plan to do any of that right now. But they’re all possible ideas I can revisit years or even decades later. I am in no rush to start anything new. After all. I already have an abundance of the most valuable asset. Time. 😉

That’s it for what I plan to do. Now onto the household finances and making sure the numbers still work despite the bear market! 😀

Investments at a glance

Here’s how my investments look right now.

I have a total of roughly $2 million worth of investments.

About half of my investments are in real estate. I have 2 investment condos. Both are cash flow positive.

The remaining ~50% contains stocks, bonds, cryptocurrencies, etc.

Associated with these investments are loans.
My total mortgage balance and margin debt outstanding is $650,000.

This means the equity I have in my investments is worth $1,350,000.

I expect this figure to increase over time as I slowly pay down the debt while the asset side increases over time.

Household budget (income and expense)

Here are all the income sources we have now in retirement:

• Net cash flow from rental income = $2,800
• TFSA withdrawal = $1,000
• Taxable account withdrawal = $3,000
• RRSP withdrawal = $1,000

Total monthly income = $7,800

This withdrawal strategy is based on my video explaining the best way to drawdown a portfolio while minimizing income tax across time. I have tweaked the strategy a bit to compensate for current economic conditions.

I’m glad I was able to come up with this withdrawal plan before leaving the workforce. This is useful when it comes to planning for my long term financial needs and tax implications.

Am I concerned to withdraw money from my investment accounts when the stock market has fallen by so much this year? Not at all. 🙂 This was a scenario that was built in to my retirement plan.

And the $3,000 monthly withdrawal from my taxable account will not be from selling stocks, but from borrowing on margin debt. The reason is so I can capture all the upside of the next bull market when stocks eventually start going up again.

This is called the buy and borrow method, which is a much better way to manage your finances than just buying and selling. 🙂 Rather than offloading stocks in the decumulation stage of life you simply hold onto your investments forever.

Here are all our household expenses:

• Housing = $5,500 (mortgage payment + property tax)
• Groceries = $500
• Utilities = $400
• Transportation = $150
• Interest charges = $150
• Fun money = $200
• Estimated income tax = $600

Total monthly spending = $7,500

I have included tax liability into the budget to get a more accurate picture of our total cost of living. The tax amount is again based on that video I made before and the estimated tax bracket I will be in.

Based on these calculations our income should be able to cover all our expenses.
In fact, we actually have a $300 monthly surplus for unexpected cost overruns. 🙂

Does spending $7,500 per month make us chubby FIRE or is it still within the boundaries of regular FIRE?

You tell me. 🙂

Is this enough?

You might think a $300 monthly surplus is cutting it close. What if we run into an emergency and need to come up with $10,000? These scenarios are accounted for in my plan. I increased my home equity line of credit borrowing room before I quit work so now I have access to a lot more money than before.

If there’s anything I’ve learned from my financial journey is that you can’t plan out every detail of your retirement because things will change beyond your control. And the best way to deal with finances in retirement is to think of your retirement plan as a process, not a closed ended plan.

Re-evaluate your goals and priorities each year, just as you would if you were still working. And make adjustments accordingly. The best investment plan is one that can easily adapt to changing circumstances over time. 🙂

Also…

Additional income sources

I actually have other income streams that are unaccounted for in the budget above.

One is a retirement package that pays me about $2,000 per month on average for the next 1.5 years. This is a combination of severance, built up vacation time, and employment insurance benefits. This should provide a smooth transition from earning a full time salary to nothing.

So from now until the end of 2023 our household income will actually be $9,800 per month before dropping back down to $7,800. But a lot can happen between now and then. 🙂

I also plan to continue trading options. Spending just an hour with options each month typically produces $1,000 or more of additional income. It doesn’t take too much time and the hourly rate is hard to pass up.

I have left out these two income sources in my official retirement calculations because they’re either temporary, or require active management, whereas I would prefer my retirement income to come from permanently passive sources. So any income I do earn from my severance package or options trading will probably be invested back into my investment portfolio for growth and future use. 😀

And in case anyone is wondering, I do not make any money from running this blog. There aren’t any ads here. And I’m also not making money from my YouTube channel. In order to qualify for its partner program and run ads the channel requires 1,000 subscribers and 4,000 hours of watch time per year. And my videos only receive about 3,200 hours per year, lol. I do have over 1,000 subscribers now though so at least one of the requirements is met. Yay!

Thanks to everyone who has subscribed to my channel.

Although I do have thousands of followers on social media services like Twitter and Facebook I don’t monetize them at all either. I’m pretty good with money, but I suck at marketing myself, lol.

My hurdle rate

What would it take for me to continue working?

Right now I value my time at $200 per hour.

So if I don’t get an offer for that price I won’t do it. There are exceptions of course. If Pixar offers me a job as a story boardartist because they like my stick figure drawings I would probably bend my rate a bit for them, lol.

Everyone will have a different hurdle rate. But generally speaking the more wealthy you are, the more you will value your time, and the higher your hurdle rate will likely be.

Since I’m financially independent, I don’t need additional money to live the lifestyle I want.

However, I will consider working and paying more for an even more comfortable life.
For example, let’s say I want to fly business class instead of economy and it will cost me an extra $4,000.

Since my hurdle rate is $200 I am okay taking on a 20 hour contract so I can enjoy a business class seat on a plane. 🙂

It seems like more and more people are realizing that their time is more important than money.

This is why we’re seeing the Great Resignation across the world.

I expect my rate to go up over time. Have you thought about what your hurdle rate would be? If you’re working now do you think your rate will change once you retire? Just some fun questions to think about. 🙂

Drawdown expectations

I expect my net worth to increase, at least during the first 40 years of retirement, before fall after I turn 75 years old.

It shouldn’t be a surprise to see a portfolio grow as someone enters into retirement. In fact, that is what happens most of the time. The idea of running out of money in retirement has been excessively inflated to scare people.

Statistically if you retired with $1 million and withdraw 4% of your portfolio each year, your chance of ending up with $4 million after 30 years is higher than your chance of having less than $1 million. This is according to financial planning Michael Kitces. It’s surprising to realize your chance to 4 times your original nest egg is so high.

The data says 5 out of 6 retirees will die with more money than they started with at the beginning of their retirement. So I am not worried about running out of money.

Preventing awkward conversations 

A common issue people face when they reach early FI status is describing what they do to others in social situations.

So if anyone asks I will simply tell them I am a financial analyst. 🙂

It’s technically true. I analyze the financial markets to make appropriate decisions.

Financial analyst is a wide, catch-all role that could involve investing, budgeting, and general capital allocation.

This way I don’t have to explain to strangers how I’m retired from my day job, but manage a 7 figure investment portfolio. It’s too personal and not relatable anyway.

Why leave the workforce now in 2022?

Here are some reason why I have decided to quit my job.

1. I just finished working on a major 2 year project. So now is a good time to leave the industry. It’s bad karma to leave in the middle of a project, especially when team members rely on each other.
2. June is when my employer pays out the annual bonus. So to be honest I was waiting to receive the bonus before leaving my job. 😅
3. I turned 35 a few months ago. And I think it fits the spirit of this blog’s name to quit working at this age.
4. We’re welcoming a new member to our household and I want to stay home to look after the family and brush up on my dad jokes. 😉

Here is a snippet from my very first blog post on this site 12 years ago.

It’s been an unbelievable journey. I’ve learned so much about personal finance and connected with so many amazing readers and bloggers along the way!

I will continue to make weekly blog posts and YouTube videos to keep everyone updated on what I’m up to with my finances. 🙂

As always, thank you for reading. 😀

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Random Useless Fact:

The U.K. is currently facing the hottest day on record.