July 1, 2020
Well, 39 months ago (Apr 2016), I started the blog, with the idea of tracking my progress, as I sought to reach FI within 39 Months, by July 1, 2020. My hope was that my comments, thoughts, mistakes and learning might assist others in their pursuit. I also took the opportunity to share some of my hobbies and books that I read on the subject.
At the beginning of 2017, we had already reached a major milestone, in that our Net Worth was over $1 million. We had paid off the last of our home loan, so we owned our house free & clear.
- Real Assets (home, cars, etc.) – $303,237
- Liquid Assets (savings, checking, emergency funds, etc.) – $139,572 (Mrs. 39 Months likes a large emergency fund)
- Investments (IRA, 401K, small brokerage, etc.) – $824,129
- Debt: $0
- Net Worth: $1,266,938
Based on the money we were sticking aside every year and some expected returns (3% inflation, 9.8% stock returns before inflation, 4.6% bond returns before inflation) we projected our net worth increase each year. The net worth would grow to $1,406,316 (not counting the house). Using the 4% rule, we came to a little over $56K/year, which, when combined with our future social security (big if) I felt was sufficient. I created and published a drawdown plan on the blog (and its one of my most popular posts, as I have updated it as the time has gone by).
Its been an interesting and rocky road over the last 39 Months
- Home value has not improved significantly ($321K now vs. 297,950 in 2017) – about 3% per year
- .Good 2017, wth 12.3% increase in net worth. No debt, kept funding
- Terrible 2018, with 1.6% drop in net worth due to market crash
- Awesome 2019, with a 22.2% increase in net worth
- Crash in 2020, with a -5.9% loss in our investments to date
Also, our assumptions for our retirement have changed significantly. Last year, we engaged a financial planner, because Mrs. 39 Months wanted a second opinion on the potential for retiring early. We had a series of meetings with him, which helped me appreciate some of the nuances of retiring early and its impact on the finances. We had some disagreements (future inflation, return on future investments, etc.) but I ended up adopting a lot of his numbers in our analysis.
- After discussions with Mrs. 39 Months, we set our annual retirement spending at $78,000/year base (going up each year for inflation)
- Inflation at 3.25%, with 6% inflation for medical inflation
- A 7.2% return on investments (based on a 60/40 allocation) or roughly 4% above inflation rate
- Drop in lifestyle spending (travel, dining out, etc.) by 35% after age 75 (pretty typical)
- Get social security at age 67, but discount mine (the higher wage earner) by 50%. I think SS will have issues in the future, and one of the ways they’ll make it work is to cut benefits.
So, with that it mind, where are we at the 39 Month mark? We are actually pretty close to what we thought back in April 2017.
- Net Worth around – 1,704K (vs. goal in April 2017 of $1,716K)
- Real Assets (home, cars, etc.) – $328K
- Liquid Assets (emergency fund, etc.) – $167K
- Investments (401K, IRA, brokerage) – 1,209K
So are we financially independent at the end of 39 Months? No.
Based on our new assumptions (6% medical inflation, 7.2% returns for stocks, etc.) the money we currently have + taking social security at 67 means that we would be able to fund a lifestyle of roughly $64K per year (not counting use of a reverse mortgage). We pretty much fell in line with the original plan, but the needs of retirement have increased. As I noted before, this was after consultation with Mrs. 39 Months, so I think the $78K number is a lot more “solid.”.
Based on the new analysis, assumptions and the current market conditions, it appears that we will achieve FIRE in 2023 (about 30 more months). In the meantime, I’m looking at side hustles that I can use to generate income after we hit FI and potentially stop the 9-5 grind.
Thanks for reading over the last three years, and I hope to hear from you on my blog in the months and years ahead!
Mr. 39 Months