You Knew You Were FI When...

[EscapeVelocity2020]

I'm cribbing a little off of a 'why don't more people seek earlier retirement' (http://forum.mrmoneymustache.com/welcome-to-the-forum/why-don't-more-people-seek-earlier-retirement/?topicseen).

I made a few responses there, but (as an engineer) realize that this is not addressing the 'root cause'.  What is missing from the conversation is how people felt about their 'FI-ness' at ER.  I'm not looking for the easy response of - my time was worth more than 'a little more money', although that is certainly valid.  I would've screwed up had I 'retired' in my 20's like I thought I could (given my portfolio was increasing more than a paycheck per week, due to investing in everything internet).  What I really want to know is how people confidently left the workforce forever.  Like, "I'll be in the ground before I'm back at a desk"-type of FI.

I'll start off with my own answer - I had a large number (not knowing the 4% rule) in my 20's.  It was plenty of FU money and I really just hated my job.  The stock market soared, I thought I could quit, but then the tech bubble collapsed.  I was actually quite fortunate to have a stable job and muddled through the early 2000's.  Things really took off for us in 2007 and (even though there was a downturn somewhere in there) things have been on the up-and-up ever since!  So, my 'number' is long forgotten given it is a fraction of what I currently have, I'm finally these last years feeling fully FI...

[Cheddar Stacker]

Not there yet, so I'll share a story about how I know I'm close/on my way.

I just bought a house. And I already have one of those. I bought the second one to rehab. And I wrote a big check with a big smile on my face. I realized as I was doing it that some people couldn't ever afford this house no matter what they do in their lives, and I just picked it up casually on a Friday morning without any worry.

Then I went to work, checked the market, and by the end of the day my paper investments made about $2,000. Some people make that amount of money in 1 or 2 months of hard work. My money made that money in a day, and all I did was not spend it all.

Feeling very fortunate today to be on my way to FI.

[27y/oTennesseeRetiree]

My Dad crashed his airplane when I was 27. He survived, but spent 37 days in Trauma at a level 5 Trauma Unit. I spent 38 nights there it was the only way my Mom would go home and sleep. A funny thing happened... I essentially stopped working, but my income went up. I realized I didn't have to work anymore. It was amazing... I used my new found freedom to go to law school... Which I loved.

However... My first full year of law school my passive income  was about $120k. My last full year... More like $30k. It was a wakeup call. I was doing too much short-term active investing. And not enough long term passive income investing. Truth be told... It was a fucked up and depressing year.

That being said... I am back to FI... With some reduced spending, a retirement job with a salary that provides all my living expenses, health insurance, and $18k to a 401k for about 10 hours a week.

My investment income is reinvested and growing... So this week when I was doing some math I realized that I don't even need my retirement job anymore to grow and maintain.

So... I love Real Estate. I'm 30... And retired again... For now.

[Exflyboy]

Intellectually I know I have a number thats big enough.

Believing it is another matter.. I quite like earning enough money so my WR is negative.. it will do for now until the Wife quits next year..:)

[humblefi]

I am a long way from FI, but I will suggest an exercise I plan to use for myself.

It all depends on what investment strategies you are relying on for ER. Take those strategies and test them big time.

SWR strategy:
Let us say that you are fully invested in the stock market. Take the worst stock fall drop of the last 100 years and see if you can still ER.
Basically, how low of an SWR can you survive on.

Dividend Income Strategy
Take the worst stock fall drop of the last 100 years...note that when stock markets were down almost 50% circa 2008, a lot of the safe dividend paying stocks also cut dividends. So, assume the worst dividend income drops and see if you can still ER.

Real Estate Rental Income
Take the worst real estate scenario...and assume varying %ages of loss of income and see if you can still ER.
Maybe a better hedge is REITs which are geographically distributed....

Health Scare
Take some costly health scares, find the cost of treatment and see if you can survive one or two financially.

Company of people
Just do not do anything for two weeks...no financial planning, no work, no meeting friends, no coworkers, etc...just basically sit idle from morning to evening and see if you are ready for ER.

Finding out what your assumptions are i.e. what are the pillars of your ER and then weakening one or more than many pillars *at the same time* will show you if you are truly ready for ER.

Hope that helps. Best of luck for your ER!

[Financial.Velociraptor]

It happened for me in stages/milestones.

Stage 1: House paid off - huge mental relief, massive improvement to cash flow, altered my mental approach to investing surplus.

Stage 2: Saving more than 50% of salary - I wasn't FI, but I could semi retire at any time.  Twenty hours a week at a McJob would have let me maintain my modest lifestyle.  Thirty hours and I'd be eating a lot of steak dinners.

Stage 3: Dividends and options premium income exceeded lifestyle burn rate.  I was going to OMY at that point and collect one more annual bonus but only made it 6 months before I realized I "had enough."

5OCT2012 - Last day at the office, two months after 40th birthday.

[EscapeVelocity2020]

Thanks for the responses!  As ExFly said, sometimes feeling FI is quite a challenge, even with all the evidence to the contrary.  For instance, another rule of thumb that I have used is measuring my NW vs. folks that have been retired for decades.  I mean, if they intend to never work for a paycheck again and were confident to retire with 'x', why not feel 100% FI if you have more than 'x'?

[deborah]

Intellectually I know I have a number thats big enough.  Believing it is another matter..

Absolutely. When I moved I paid for my new house in cash, and after that I kept on building enormous amounts in cash in the bank. I kept on joking that I could live for several years on my bank account. Then three advisers told me I was FI, and could retire tomorrow. Then one adviser gave me "forward estimates", which included figures that I couldn't believe. Then I reduced all the assumptions a lot, to figures I was sure were reasonable. When I looked at the result, I thought I could retire.

Then I spent two more years checking every penny I spent, and I was under all the estimates. Only then did I think I was FI.

By the way - the "forward estimates" were wrong - they were too low.

[Exflyboy]

Deborah, I am assuming the forward estimates were too low because of the stock market run we've had since 2009??

[deborah]

Yes and no - in Australia we didn't get so low, so we had a much poorer "run", and I was out of the stock market between 2007 and 2009, so I missed the dip.

[Exflyboy]

Yes and no - in Australia we didn't get so low, so we had a much poorer "run", and I was out of the stock market between 2007 and 2009, so I missed the dip.

And yet you still came out ahead of even the best predictions?... Awesome. My own limited experience of doing compound interest calcs a number of years ago showed pretty much the same thing. Now of course we may be close to a market top (nobody knows) so having an excess of NW right now may end up proving to be the "right" amount a year or 3 from now.

[zinethstache]

Like Cheddar Stacker I am not FI yet. However DH FIed in 2011 to pursue his retirement career as a property investor. Our DTI (debt to income ratio) is so low that we've now purchased 3 rental properties which makes the process feel like oh perhaps buying a car and we qualified on my income alone for the first one. Another sign things are getting close, In the last 6 weeks my 401k earned $6600 in addition to the $2200 me and my employer contributed. Our passive gross income is almost $100k now, versus a big fat $0 3 years ago.  Ah and if I did get laid off today, I would need to scrounge up $1200/mo to meet the remaining portion of our living expenses not paid for by our net rental income - and that is only if we didnt tighten up our budget. I already have our medical costs covered by my 401k. It is reserved for that purpose once I do FIRE - goal $1200/mo, current SEPP is around $900/mo. So everything is moving in the right direction:)

We are not planning a super ERE type lifestyle. We estimate FIRE expenses to be 50k/year because we will be front loading our retirement with RV travel. We spend less than that now since my benefits are mostly paid for by my employer. I calculate that post RV travel years will likely be less expensive. We have 26 years left on our primary mortgage, but it will be sold post FIRE dropping our expenses about $900/mo. boy, that really puts us close. I could go work part time at Mcdonalds to make the difference at that point. Fun discussion!

[Jon_Snow]

It wasn't so much the size of the "stache" that convinced me that we had reached FI. Instead, it was the growing realization that we could live on very little and be completely happy. And some unique circumstances in terms of some land holdings would allow us to ditch the city life and move to our rural place and "live off the land" if we wanted to slash our living costs even more. Don't think my wife is quite as gung-ho on that idea as I am. ;) But in case of an absolutely catastrophic economic meltdown (or some major investment gaffs on my part) it's nice to know I have a bunch of land on which I can grow food or raise animals - and a ocean teeming with food that I have the skills to catch.

Without any debt or kids to raise we simply have so much flexibility in terms of what we can do. And when the stache reached a certain point - and the BS bucket at work was starting to overflow - it was pretty much a slam dunk that I could move on with the next phase of my life. Add to this the fact that my wife is pretty certain she wants to work another 5 years - at around age 47. So the stache will continue to grow until then. Investment income is already outpacing our spending by quite a margin and the dividends will continue to reinvest themselves and investment income will continue to increase...and I doubt our spending levels will keep up at all. :)

The really great thing is that all this is the result of a plan I hatched around ten years ago...and it actually worked.

[EscapeVelocity2020]

This exactly is why I enjoy the forum so much.  Thanks!  As Mel Lindauer over at Bogleheads used to say, 'there are many roads to Dublin', and it is especially true of FI.  From the earlier story of taking time off to look after his father in ICU, to BS buckets being full and deciding it's time to enjoy life again (with some backstop of a healthy NW meeting the 4% rule).  But what is interesting is that no-one has expressly said - I hit 4% SWR, but had a reasonable lifestyle, but nonetheless the next day I handed in my prepared resignation letter. 

I'm also interested in folks chasing FI via real estate.  I had a heated debate back in the 90's with a guy that was dong well with RE on my bowling team.  I kinda' scoffed at how hard he had to work on his passive income while I was investing in sexy silicon valley companies and making a killing when they got acquired.  I was the life of the party, people asking me for stock tips and whatnot, and he was the fuddy-duddy espousing the wisdom of 'physical assets'.  Ultimately worked out in his favor, although, like any failed gambler could tell you - "if only I'd taken my winnings at the top", when I could not believe how far ahead I was... but I still needed a little more...

It's what makes life so interesting, even if the numbers all 'work' (or don't quite work, but you are willing to take a chance on seeing if you can make it), that people usually find their way...  It's very encouraging!

[27y/oTennesseeRetiree]

@EscapeVelocity2020

Real Estate does it for me. The rent comes in. I have a property manager for everything less than $700 a month and I manage everything above $700. (This seems to be the price break for it being a headache or not in my market area.) I do some work on the managed stuff as needed... Turn the occasional apartment, fix appliances, etc.

The overextension on short term investment I mentioned while in Law School post ICU w/ Dad was building Spec Houses that didn't sell. The carrying costs and some cost overruns kicked my ass... But now they are my best rental properties. Amortized over 20 years... Between principal reduction and cash flow they make about $30,000 a year (Total for all 6 Homes.) Its passive and mostly sheltered by the depreciation.

Real Estate makes me about $50k a year cash excluding principal pay down. My ROTH IRA is also in real estate.

Now for the crappy side of Real Estate. I am about $2,100,000 in debt (in a market of $100,000 starter homes). My monthly nut on principal and interest is about $14k between my personal debt service and Roth IRA debt service. Gross rental income is about $22,000. No credit card debt, no car payment, all real estate, and law school loans.

That retirement job I mention is HOA management... It pays my bills. The rest is buying more houses and retiring student loan debt.

For me the advantage is leverage and physical assets. But it sounds like you heard about that already so I will get off my soap box now.

[mjs111]

Unless you come into a large pile of money quickly it's a gradual thing.  First you realize you have a few months living expenses saved up, then a few years, a bit of time passes and you realize you could fund your most basic living expenses at a safe withdrawal rate in perpetuity, and at some point you hit amounts that could fund a comfortable lifestyle in perpetuity.  All during that climb the market goes up and down a lot, throwing you into and out of the next category a few times before you've likely permanently climbed to the next stage.

Mike

[pom]

For me it has been gradual also.

In my early 30s I realized that I had enough to live 5 years without working, I had FU money but not FI.

In my mid 30s I had enough to cover half of my expenses from investment income, I could go for pretty much any job anywhere and be ok.

I am currently in my early 40s I can cover my expenses but I would need to sell stocks gradually, I am technically FI but I don't feel like it. If something happens at work so that I no longer enjoy it, I will quit and slowly look for something else.

I hope that by my mid 40s I will be able to cover my expenses with only the dividend and rental income. I may keep working though, as long as I enjoy it.

[Mr.Chipper77]

It was about 2 years ago where my frustration with work met MMM I realized that I can make it work buy simplifying things. Since then I have done just that and my number as soared. The thing now is going to work knowing any day I can walk away makes it easier to go. That will be happening in short order as soon as I get a few more ducks in a row.

[h2ogal]

Gradual....Yup: 

The Hierarchy of FI - Where are you on it:

Physiological - Have income and can afford to feed/house myself! 
Safety - Have built up an emergency fund for lifes little ups and downs.
Love/Belonging - As a couple we can live on one income if needed, or start a family.
Esteem - Have enough saved up that I don't need to put up with too much BS.  I can stand my ground when needed, negotiate from a position of power, and command respect
Self Actualization - Financial independence to pursue my hearts desire.

[eliza]

I'm quite far from FI, but I had a bit of an epiphany the other day that confirmed that this is the right path for me.

A few years back, I was in a really toxic work environment.  Underpaid, overworked, an @sshole of a project leader, away from home Sunday afternoon through Friday night for going on five months straight, etc.  It was just a miserable, miserable existence.  I hit my tipping point when the @sshole mentioned (at a dinner with managers and senior managers that I, for some unknown reason, was invited to despite being very junior) that he knew he was burning the staff workers (ME!) out with the excessive hours requirements, but it wasn't like they had to pay us more for the overtime so the project was wildly profitable because he could bill for all the extra hours and his staffing costs didn't go up (meaning he was going to get a huge bonus.)  I started looking for a new job that night, but kept working the miserable one for four more months until I lined up something new because I had bills to pay, little savings, and seemingly no other options. 

I happened to meet up with a couple coworkers from back in those days last week (both of whom also moved on as soon as possible after that disaster of a project) and we were commiserating about it and I said, "If it happened today, I would quit immediately."   And it's both profoundly true and something I didn't realize until I said it out loud.

I have a long, long way to go, but at 32 with $235M in invested assets/cash savings and $45M in debt, I could quit immediately if I found myself in a similar situation today.   I could move away from my super-high COLA city and use cash savings to bridge the gap until I could find a different job that would cover a more modest monthly expenditure of $1,500 plus my current $1,000/month in debt service.  And my situation will only continue to get better as I move down this path.

Nothing changed drastically in my situation recently, but since I came to this realization I have a whole new perspective on my money, my career, and my life.  I can only imagine that this feeling of freedom I have right now will be one gazillion times more intense when I actually reach FI. 

[Exflyboy]

You are closer than you think.. Just remember during a significant market pullback.. buy buy buy!

2008 recession is the only reason I'm FIRED today!

[LiseE]

Another sign things are getting close, In the last 6 weeks my 401k earned $6600 in addition to the $2200 me and my employer contributed. Our passive gross income is almost $100k now, versus a big fat $0 3 years ago.

I never thought to look at how much my 401K was earning monthly as an indicator of passive income earnings.  Do you all take that into consideration?

[Middlesbrough]

Another sign things are getting close, In the last 6 weeks my 401k earned $6600 in addition to the $2200 me and my employer contributed. Our passive gross income is almost $100k now, versus a big fat $0 3 years ago.

I never thought to look at how much my 401K was earning monthly as an indicator of passive income earnings.  Do you all take that into consideration?

I have a YTD run of passive income to tell me where I am at. I just started so it is small, but it will only grow in the future.

[mjs111]

You are closer than you think.. Just remember during a significant market pullback.. buy buy buy!

2008 recession is the only reason I'm FIRED today!

Agreed, Exflyboy.  Things were just so cheap across the board back then it was amazing.  Don't know if I'll ever see anything like it again in my lifetime.  Last time stocks got cut in half across the board like that was back in '73/'74. Doesn't happen too often.

Mike

[Dr. Doom]

About 2 years ago, right around this time of year, actually.  Not much of a story to tell, though-- it was as simple as plugging numbers into FIRECalc and seeing a result above 95%.  I'd been running that sim at least once a quarter for years, watching the % chance go up over time.   

Other retirement calculators, like the primitive ones on bankrate, had been telling me for a couple of years already that I was FI, but I didn't trust them because they don't care about history or sequence of returns -- it's just linear growth, all the way. 

Of course the next thing I did was turn around and ask myself:  What do I need to do to get to 100%?  I started to think 95% wasn't enough and I wanted to be closer to bulletproof.

And the answer was, reduce spending a tad more and work a couple of OMYs.  And yeah, that happened, too.  Thank you, market run-up.  Done.

[happy]

Well, about 3 years ago,  newly converted into the fold, I formally worked out my net worth for the first time and realised it was 25x my retirement expenses number.  I got very excited that I was FI.  "Wow I can quit and retire" I thought. Then realised I wasn't really as FI as I thought, since I included  my PPOR, my expenses were still too high, and I had inadequate cash-flow as I still had mortgage and stash inaccessible in retirement accounts. I thus learned retrospectively the hard way, the importance of planning such things.

[LiseE]

Do you include your property in your net worth number? (home)  Since it's not a liquid asset I'm thinking not .. our paid off home is worth 600K which is a big chunk of change and currently 40% of our net worth number.

[happy]

It is part of a "standard" net worth calculation, and adds a margin of safety if you could downsize. For purposes of FIRE its preferable not to include the PPOR since you will need a place to live, and it usually won't generate any income for you whilst are retired.

[MsRichLife]

I consider it part of my Net Worth, but I don't include it's value when I run cFIREsim or the like.

[Exflyboy]

I don't count it in our NW

Interestingly our house is worth about $400k and has 2 rentals on it that make about $15k a year... so 4% of $400k is $16,000... Plus its paid off.

So our house is paying us to live there!

In other words it much better for us financially to NOT sell it unless we moved somehwere with incredibly low rent.

[Workinghard]

It finally sunk in this year when I realized that we only needed to bridge 5 years (starting next year) before we get max SS benefits, and SS will be more than our current expenses. As far as covering the 5 years, our NW is more than 25x our annual expenses, so we should be golden. :)

[Cassie]

When we could both collect our pensions because I knew we could live on that amount if we wanted too.

[Exflyboy]

Funny I was thinking about this "problem" of risk adversity and believing the numbers. As an engineer I am driven by numbers, but there is still the little nagging doubt in the back of my mind.

I mean I run the financials in my head EVERY day, yet on paper we are well beyond a 100% success on the Cfiresim model.

[Basenji]

When Nords and other people on this board showed me how much a military retirement is worth if we had to have that income coming from investments. We ran the numbers in cFIREsim and were floored. Not exactly FIRE but close. Some choices like staying in our high-mortgage house in high COL area have put it off a few years. We thought we needed so much more money to retire than we really do. And we find our "needs" keep getting less.

[steveo]

The really great thing is that all this is the result of a plan I hatched around ten years ago...and it actually worked.

I love reading this. I'm at the early stages right now. I had a 10 year plan and its now 2 years past that initial planning/vision/whatever you want to call it phase. I haven't changed my plan at all other than at this point I think in 3 1/2 years time we will hit a point where part time work is an option. If I go another 2 years full time I think we will be FI. Maybe I will work part time for a year or two after that just to increase our safety margin. Waiting to get to that stage sucks.

[gman]

Realized we were FI when it sunk in that our pensions would easily cover our yearly expenses and that we would never have to touch our retirement savings if we did not want to. So I retired three months ago.

Age: 55   DW: 57

403Bs : 1.067M (Fidelity, Troweprice)
IRA Roths : 60K  (Fidelity-Total Market Index)
Cash: 185K (Bank saving account)
Vanguard: 7.5K  (Total Market Index)
House is paid for: 175K
No other debt
No children

Pensions (after tax):
Me: 38K
DW: 32K

Estimated Yearly Budget: $38K (living very well). This will increase as we add more travel.

Health Insurance paid until I am about 63.5 years old. Then we have to go shopping for a good plan.

[Dicey]

I had accumulated plenty of money to retire but was worried about healthcare costs. I have a heart condition and am a cancer survivor, so no one would touch me for a reasonable price. I was just waiting for Obamacare to kick in to see if it would be affordable. I got the idea to ask someone (a long-time acquaintance, and recent widower) if I could be their domestic partner. He agreed,which led to conversation, which led to an actual date, which led to marriage for the first time at age 54! We have been stupidly happily married for almost three years. I joke now that if I had known all those years what I was missing, I would have been positively suicidal. I had fun being single, but boy, do I love being married. I retired two months after we got married and haven't looked back since.

So, to answer the original question, I watched my assets build for years, but it wasn't until I said "I do" (and got free health care) that I had the confidence to pull the trigger. What's strange is how the money multiplies once you hit your goals. Our income, once he fully retires, will be more than either of us has ever lived on. Crazy.

[EscapeVelocity2020]

Wow Diane, that is a really cool story and I'm very happy for you, seriously made my day today happening upon that. 

Unfortunately many stories are either more mundane, or more complicated (and thus harder to share or are still in transition).  We scrimped and saved growing up (being a British family living in the Midwest).  After putting his 3rd child (me) through college, my Dad suddenly realized that he had more money than he could ever spend in a lifetime and decided to retire. 

Not long after, things went really downhill for my Mom and my Dad eventually remarried.  I'd much prefer your story over theirs, but then again I guess I wouldn't be here :)

[BTDretire]

First I have to admit I'm older 60. A couple months ago I put all my info into Firecalc.
I went with a $40k yearly withdrawal and had zero failures, I called over the wife explained
what the program does and that we will not run out of money. She was kinda, muh,
she has no interest in retiring. However, it made me comfortable that we were FI.
 Then about a month after that, I ran Firecalc again, but this time I started increasing the
yearly withdrawal amount (Duh).  I didn't have a failure until I hit $78k, yippee!
  There is one large qualification, the program allows you to add in your SS income,
so being older I can figure on having about $35k of SS income in 11 years as part of that $78k.
 I doubt we will ever spend that much.
 This is a big deal, because we spent more than half of our years as a lower income family.
The rest were middle income and a little better.
19 months before I retire!

[smiller257]

For me, it was after I received my final payout after selling the software company I took 10 years to build. The deal was structured in a way where I received upfront cash then I had 2 yearly payouts if I hit specific revenue targets. After my upfront payment I became a millionaire but did not consider myself FI yet. Then I reached my goals for year 1 and I felt closer. Finally, I hit my number of year 2 and felt comfortable calling it quits.

I've now been retired 3 years and love being FI. I still do a few side hustle things (like mobile app development and blogging) but I am comfortable where I am.

[G-dog]

I retired July 2 this year, so I am two months in to this adventure.

The stock marjpkets around the world are hiccuping, maybe worse.  I am sitting back and smiling! I bought more index fund shares yesterday!

This lack of worry makes np me feel more confident that I am FI. Hard to believe.