25 Apr

Our First Year of Early Retirement

A year ago our portfolio hit $1 Million and we quit our jobs, packed up Bruno the 4Runner, and began our journey driving south from California to Costa Rica. The following twelve months became the best of my life to-date, hands down! So now that it’s been a whole year – how much money did we end up spending, and how well did our portfolio survive?

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Our last camping trip in the San Francisco Bay Area (on Angel Island) before quitting our jobs and driving south into Mexico.

After living in Costa Rica for five months, we’ve now returned to the US and have chosen the city of Asheville, North Carolina as a place to put down some roots for a bit. We’ve started house hunting and for temporary housing we’ve signed a 3-month lease for an apartment. As a result, we’re finding ourselves adjusting to the new norm of having more room than the 6×6 ft space Bruno afforded us. It’s quite the change!

A Year In Review

We originally quit our jobs in March 2015. April and May, we traveled around Mexico and Central America. In June, July and August, we were living in Costa Rica. We backpacked through Panama in September and flew back to the US to visit friends. In October, we were back in Costa Rica, and by November we prepared to leave. We traveled back up through Central America and Mexico in November and December, arriving back in the US at the end of January 2016. In February and March we traveled around the US and Canada, finally coming back to North Carolina.

At the end of each month, we summarized our financial situation, keeping track of our expenses and our portfolio balance. Here’s what the last twelve months have looked like:

Month Income Expenses Net Monthly Portfolio Balance
April -$2,044 -$2,044 $1,000,000
May -$2,764 -$2,764 N/A
June $200 -$4,416 -$4,216 N/A
July -$2,684 -$2,684 N/A
August -$2,804 -$2,804 N/A
September -$9,817 -$9,817 $960,000
October -$1,542 -$1,542 $970,000
November $1,333 -$1,106 $226 $950,000
December -$1,626 -$1,626 $957,000
January $569 -$2,355 -$1,786 $918,000
February -$1,755 -$1,755 $920,000
March $141 -$1,591 -$1,449 $950,000
Average $187 -$2,875 -$2,688 $946,429
Sum $2,243 -$34,503 -$32,260

Yes, that’s a lot of numbers! Let’s dig into the details:

Portfolio Balance

Note that we didn’t start recording the monthly snapshots of our portfolio balance until September, at which point we realized how useful this number was to capture. We started the year with $1,000,000 and ended it with $950,000. Where did our money go!?? Did I sleep walk one night and order a Telsa Model S on the internet!??

Overall, market performance for the 12-month period has been flat with a few ups and downs throughout the year. I have some shares I got from a San Francisco solar startup that were significantly devalued when the company had their IPO last summer, which didn’t help our portfolio. The remaining loss of the mystery $50,000 is basically all the expenses of our lives!

Expenses

In total, we spent $32,260 of our portfolio as expenses over the year. Dividing this by an average of our portfolio balance, we get an overall Withdrawal Rate for the year of 3.4% ($32,260/$946,429). Our target for the year was a very conservative 3%, so we’re reasonably happy with this! Our September expenses include an unexpected trip to the ER in Costa Rica. If this were excluded, our spend rate would be closer to 2.7%. All in all, we did a great job of controlling our expenses for the year! Camping our way through beautiful countries with low cost of living certainly helped.

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Testing out the camping gear in our first overnight experience with Bruno (Anthony Chabot Regional Park, Oakland, CA).

Income

Not really much to report for income here, since we did quit our jobs last March. This blog returns zero income, although we have just added a ‘Recommended‘ page that also happens to contain an affiliate link for one of the products we love.

The small incomes that are listed in the table above is the sale of our surf boards and bicycles in Costa Rica, as well as the return of our security deposit for the home we were renting there. Others ones were Christmas gifts from family and cash back rewards from our credit cards. Goodbye surfboards, I’ll miss you!

Summary

All in all, it’s been a hell of a year. With our extensive travels through 10 different countries, we’re trying to truly appreciate how lucky we’ve been in our lives so far. Sure, it’s not all luck – we’ve worked hard to save money and advance our careers, but none of that would have been possible without some stars being aligned: being raised by stable loving families, growing up without worrying where our next meals will come from, and simply being born in a wealthy developed country like Canada.

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House hunting in Asheville, NC and meeting neighborhood cats!

I must say that this past year has brought a whole new uplifting feeling to Monday mornings. And Tuesday mornings, and… in fact, it seems worryingly easy to adjust to this lifestyle. Happiness can sometimes be fleeting, and when I find myself occasionally slipping into a grumpy mood or uttering a complaint, I need to snap myself back to the reality of how amazing it is simply to be alive. The freedom that Amanda and I have had in the last year has allowed for experiences and joy unlike anything I have experienced before. Life is short, and I can’t wait to see what the future holds! In particular, I’m strangely excited for the inevitable time when robots will take over the world. If they don’t kill us, maybe we’ll finally get Universal Basic Income and proper justice from government when they start running things!

  • Congrats on the successful first year! It’s nice to see your plan of action’s results.

    • Travis

      Thanks Fervent!

  • Freedom35

    Sounds like an incredible year. Was Costa Rica the highlight?

    • Travis

      Yeah, I would say so! The ultimate goal was to get down there, but we really enjoyed the journey of driving through and seeing most of Mexico and Central America. Tons of friendly and welcoming people.

  • Congratulations on your first year, well lived! Thank you for sharing your numbers. We’re planning to spend about $30,000 a year traveling the US in our Airstream when we retire next year. It’s great to see you living the dream for around the same amount!

    • Amanda

      As soon as you said ‘Airstream’, I knew you had to be related to Steve @ http://www.thinksaveretire.com/ ! Wishing you all the best as you continue to save. Also looking forward to hearing tales from the road and how others like us make it work! Let us know when you come through North Carolina 🙂

  • Congrats on rocking it out and spending roughly 3% of your portfolio. Year 1 Mission accomplished, 5-6 more decades to go? 🙂 Will life get better once the robot overlords gain control?

    I’m curious about the ER visit in September. I didn’t recall reading about it (I’d appreciate a link to an article if it was discussed). Did you guys do travel insurance or was this all out of pocket? Going on an ACA plan now that you’re in the States? Thoughts on the Costa Rica hospital experience?

    • Amanda

      Thanks Justin! No post about the ER trip (I needed minor surgery and we kept that private). What I can tell you is that we opted not to buy travel insurance when we set out on our year-long trip, and therefore paid out of pocket with HSA money. The private hospital we went to (CIMA San José) was super swanky, and other than the fact that everyone spoke Spanish, it felt like we could have been in the US.

      Now that we’re back in the States, we’ve bought a high deductible health insurance plan that will be costing us $178/mo ($2133/yr). Your ACA post (http://rootofgood.com/affordable-care-act-subsidy/) was extremely helpful in this regard!

      • Thanks for the response. No problem respecting your privacy. 🙂

        I’m always debating whether it makes sense to buy travel insurance and I always come down on the side of paying out of pocket as necessary if our primary insurance doesn’t cover it (but it usually does cover emergencies). I question whether it would have been much cheaper to buy a year of travel insurance and maybe not have them cover your ER trip anyway, compared to the simple route of paying out of pocket.

        Glad you guys found affordable insurance back stateside. That looks like a pleasantly low monthly premium.

  • Xiuyuan

    Hi, congratulations on 1 yr of freedom!

    Since North Carolina has several really good
    real estate markets such as Asheville, Raleigh, Charlotte, have you ever considered
    investing in real estate? I think that
    if you can invest with a limit of $1M as down payment, you can easily
    shop in commercial real estate market. If you can leverage the
    investment, that’s where you can have 10% cash on cash and 15% NOI on
    your money without the prospect of appreciation taking into
    consideration.

    • Travis

      Hey Xiuyuan – thank you!

      This is an interesting question. It would be nice to leverage, but since we don’t have jobs anymore I think it would difficult to secure a favorable loan/mortgage with those kind of terms (using all of our assets as down payment). Second, it’s generally considered a high investment risk to “put all our eggs in one basket”, which is why experts recommend having an investment portfolio that is diversified. Last but not least, in our current portfolio we’re actually already exposed to commercial real estate, since we own shares of this REIT (Real Estate Income Trust): Vanguard REIT Index Fund Investor Shares (VGSIX) (https://personal.vanguard.com/us/FundsSnapshot?FundId=0123&FundIntExt=INT)

  • Linda

    Thanks for sharing the numbers! Awesome job with the low Withdrawal Rate. This sort of slow travel is exactly what I would love to do when I retire, so thanks for the inspiration!

    • Travis

      Thanks Linda! Before we hit FI, a number of other blogs helped give us the inspiration and motivation to keep saving and working hard. We’re now extremely happy to return the favor and give back to the internet!

  • The Jolly Ledger

    Really excellent first year guys! I have been following and always enjoy your posts. Please don’t stop even though your settling down. So amazing that you came close to a 2.7% withdrawal rate. Darn those emergencies! But it’s nice to see that with a flexible plan, you are still on track.

    • Travis

      Thanks Jolly Ledger! We’re currently in the process of buying a house in Asheville, NC – so we’ll probably have some posts related to this latest adventure coming up soon!

  • Andrew Daniels

    This was so motivating for me! It’s nice to see you guys are doing so great in your first year of early retirement. Thanks for this, it’s kicked my motivation for early retirement into overdrive!

    • Travis

      No, thank YOU Andrew – we’re super happy to give back to the community by sharing details like this! It’s 100% worth it just to get positive comments like yours as the return.

  • Darren N Goetz

    Good update, your current situation makes me envious, and I do have a similar future plan for myself! I guess I’ll ask a timeless question in that given your current age, and your performance over the first year (loss of approximately 5% of the portfolio), have you adjusted any of your future plans around obtaining additional funding, coming out of retirement, etc.?

    • Travis

      Hey Darren – at the end of each month, we check our portfolio balance and calculate what the 3% monthly budget will be for the next month. This method of budgeting is even more conservative than the 4% Safe Withdrawal Rate that the Trinity Study recommends, since whenever the market drops, we immediately tighten our belt to reduce over-consumption of our portfolio. So far so good.

      As far as additional funding goes, as we’re now house hunting we have considered buying a house that would allow us to occasionally host Airbnb guests for some easy income on the side. Not sure, but we’ll see how that goes!

  • Looking at your first year, how do you feel about the durability of your portfolio long-term? Is paid employment likely on the horizon?

    • Travis

      Hi Kurt! We’re pretty confident in the durability of our portfolio – as I also replied to Darren’s comment here, we’re pretty flexible with how we do our monthly 3% budgets, so whenever our portfolio shrinks, we also immediately reduce our spending for the next month. So far, we’re happy with being this conservative and currently have no plans to seek paid employment in the future. That being said, we may experiment with occasionally having Airbnb guests in our next house. TBD!

  • Sounds like an awesome year! Congrats and thanks for the updates.

    • Travis

      Thanks Katie!

  • “Happiness can sometimes be fleeting, and when I find myself occasionally slipping into a grumpy mood or uttering a complaint,..” We are taking a year off from work, and when things are hard or go badly, we started saying. “Well, at least we don’t have to go to work!” When the tire appointment runs 3 hours late: “At least we don’t have to go to work!” When a morning of dental work knocks me out for the whole day: “at least we don’t have to go to work!”. It’s been fun to read about your adventures. With 5 little kids, our adventures have been on a smaller scale this year!

    • Travis

      Yes! A great mantra – maybe I’ll start using that instead of “Serenity now!”

  • HackNow RetireEarly

    Thanks for sharing, I really enjoy seeing real-life updates. Keep it up! I’d love to hear more as you guys begin looking for a property that you can also rent out through AirBnb. I’ve considered selling our house when we FIRE and buying a smaller property that I could rent out whether we’re there or not. Maybe a duplex or similar..

    • Amanda

      Hi there! We will definitely be updating on our property search. Already one recommendation on the Airbnb rentals: check the city bylaws where you plan to be. For example, Asheville, NC doesn’t allow short-term rentals (less than 30 days) for an entire house. Single rooms in a house can be rented out short-term, but you either have to be living in the home or have some tenant that is staying longer than 30 days. You must also apply for a ~$200 city permit to do any kind of short-term rentals.

      We’ll definitely be able to work within the bylaws, but it’s not the free-for-all we were expecting!

  • It sounds like your first year couldn’t have gone any better (other than the ER visit)! Your blog has made me want to travel more so I am hoping we can do this in a few years. Thanks for sharing your numbers as it is so helpful to get some real life idea of how much it might cost. Good luck in your next adventure!

    • Amanda

      Thanks so much, Mrs. SFF! The travel bug is definitely something that gets under your skin and is hard to shake…! 🙂

  • Traveling through 10 different countries sounds pretty fabulous to me. Great to see some real world numbers. Very motivating.

    • Amanda

      Thanks for reading, Tawcan!

  • What an awesome year! I haven’t been to your blog before, so maybe I missed it, but was one million your magic number to reach before quitting your jobs?

    • Amanda

      Hi Alexandra! Yes, our goal was to reach one million before quitting our jobs. We came to that number by tracking our expenses over a couple years with Mint.com and dividing by the 4% safe withdrawal rate. Basically, we followed Mr. Money Mustache’s very popular post, “How Much Do I Need For Retirement”: http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

  • Visa711

    Hey there! My husband and I retired this past August at age 39 and are on a similar path as you. We have a paid-off house in a low cost of living area though, so we are staying at home and traveling as opportunities arise. Since August, we’ve been to Colombia, Panama, Costa Rica, Ireland, and a 6,000 mile US road trip (and we were camping for some of that one too!). I had a question for you on the income side of your spreadsheet. Do you count the dividends you receive from stocks, bonds, or mutual funds as income? I have been, since I don’t have them reinvested into principal anymore. Just curious how you’ve handled that part of it, if it applies to you.

    • Travis

      Hi Visa711, your journey sounds awesome! Do you have a blog? So far, we’ve not been using dividends as a source of income (we auto re-invest them). When we need money, we sell some shares and pay capital gains on what we take out.

      • Visa711

        Nope, I don’t have a blog. I feel like I’m pretty boring so I’m not so sure I have anything all that interesting to share! 🙂

        One thought on your approach to dividends, it is just my two cents. You may want to consider using the dividends as a cash flow source rather than reinvesting and then having to sell some shares. In essence, you are getting taxed twice (once when you receive the dividend and once when you sell your shares). By just using the dividends as they are paid, you should then have to sell fewer shares and be less at the mercy of the markets ups and downs, and the capital gains taxes. Again, just my humble opinion.

        Also, I really liked the spreadsheet you included above with your income, expenses, net income, and portfolio balance, so I started one of my own. I added a couple of metrics to mine which were: 1) percentage of portfolio that was spent for the month, and 2) net gain/loss for the portfolio each month after spending occurred. For me it was nice to see this for each month and will become a double check for me as I move forward.

        • Travis

          Since 2015 we’ve been residents of Nevada (no state income tax), so we haven’t had to worry about the double taxation of dividends. However, since we’re about to become residents of North Carolina we’ll probably stop the auto re-investing of dividends and use that as our cash flow for now on. Thanks!

  • Jo MF

    So, you started with $1M, and ended with $946K. That’s more along the lines of a 5.4% portfolio draw=down rate during year 1…Regardless if it comes from actual spending or worth-less solar stock. It’s a 5.4% portfolio drop. Not to mention inflation impact during the year which has made your remaining 946K balance about 2% smaller than last year in terms of spending power (927K after inflation).

    Trinity study or not, your plan seems financially risky to me. Especially in what could be an extended period of low or zero or even negative market returns. Market has been flat for nearly 2 years, Dividends today are just covering inflation. You’ll blow through that money in about 15 years at this run rate, even fewer years if we see a longer term market correction.

    Be intellectually honest here…are you REALLY retired, or just taking a sabbatical til you buy a house, have kids, and get on with life 2.0 as fully grown up adults?

    Is the blog really a 0 income situation ?

    Maybe there is more to the RETIREMENT story than being revealed (eg,back stopped with likely / large inheritance, plan to go back to work, blog income etc)?.

    I retired at 45. It was difficult to do that- lot of sacrifices. I was making good money in high tech. Still took 25 years of solid work and savings and not inflating lifestyle in order to retire early.

    • Travis

      Hi Jo! I appreciate your skepticism and congratulations on retiring at 45!

      Since you are also retired, how might you answer your own questions? Disregarding the Trinity Study and speculating that we’re entering an extended period with zero market growth, are you comfortable with the risk of retiring? How long can you live on your portfolio if this pessimistic view becomes reality, and given the answer…. do you REALLY consider yourself to be retired?

      I’m open to the idea of the future being disappointing. Instead of the prosperous possibility of having robots replace humanity’s labor creating almost infinite wealth for us all, alternatively terrible things could happen – like climate change resulting in increasingly disastrous world events causing world chaos and disrupting the forward motion of economic progress, or perhaps some sort of terrible disease will spread throughout the world and the resulting pandemic would cause stock markets to collapse.

      Amanda and I are ready to tighten our belts and live on 3% of our portfolio, regardless of what the markets do. Note that the Trinity Study is based on a 4% withdrawal rate, so we’re being extra conservative with our lifestyle. If the markets drop by 50%, then we’ll cut our budget in half and work on side projects for income, if needed. If the Internet Retirement Police revoke our “retired” licences by admitting this fact, then so be it (http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-the-internet-retirement-police/). This blog has so far produced $400 of income during it’s existence (enough for one month of groceries) and we just bought a house in a tourist town and plan to host Airbnb guests.

      With all of the above being said, I do prefer to be an optimist about the future. We’re ready for the worst, but I think Humans are doing great and I expect our collective wealth and prosperity to continue! Onwards and upwards!

      • Jo MF

        I FIRED at 45 with a paid for house, enough in funds to provide 4 or 5 years of state school education for my 2 kids, and 40x spending, or, enough to live 40 years more at current spend rate very slight real returns of 1% above inflation. That’s what Bogle and others call for and what we’ve started to see since 2000 where gains are way below then much quoted 7 percent rate

        So we are ok to age 85..(presuming 4 percent annual gains and 3 percent inflation). Ideally we get our withdraw rate down to what ever dividends earned are .. That will secure retirement for 50 years without running out of money unless we see 1970s style inflation again.

        Kids change the calculus. Even at our current NW, I remain nervous and cautious. To do that on 1/4 or 1/5 of what I have would be super risky

        • Jo MF

          Ps. It’s ok to take time off. That’s actually what I’m finding. Retirement is great. But my mind can’t do the retirement and relax thing. I traveled for 25 years. Been there done that. I decided to go back to school for bucket list and to show my kids it’s never too late to earn an education.

          . I may do something money making beyond watch Oprah every day in retirement. But I can “eff off” forever if I wanted to …

          • Jo MF

            Last point: . Trinity was based on a mere 25-30 year horizon at 4 percent . All bets are off for the 40 and 50 year horizon even at 3% percent it is risky, which as 30 somethings I assume you are planning for.

          • Travis

            Yeah, Trinity is limited in it’s scope and doesn’t include the possibility of reducing spending during down-market years. Still, it’s a useful compass. Another great tool is FIRECalc (http://www.firecalc.com) – starting with a portfolio of $1M and spending $35k/yr gives us a 98.8% success rate of it lasting 60 more years. Again, this doesn’t include reducing spend during down-market years. All in all, we’re comfortable with the risk. To each their own, I suppose!

          • Jo MF

            The issue with trinity study and later with tools such as FIRECALC and i-ORP is that they rely on the same market dataset and this dataset only includes US market returns –As Canadians, I’m sure you also look at the Canadian market or certainly holding broad equities as found in Vanguard funds, the equities are beyond US holdings. With globalization and other drivers, the world is hardly US-only. The last two decades brought the rise of China, the stagnation of Japan, the collapse of several economies and more. Since the world has become global we probably need to look at markets beyond the USA to really assess “safe” withdraw rates based on broader historic datasets. In our future – for example, consecutive lost decades such as the Japanese stock market from the mid late 1994’s to the late 2014 certainly could happen in markets other than Japan. Also, even FIRECALC struggles with number of simulations once the duration grows beyond 25 years. Its an absolute shortcoming of the current tools used for market simulation/planning.

            I commend the progress. I suppose 30-somethings are optimistic which is great – but please heed history eg, remember periods such as 1960’s inflation, 1970’s stagflation, lost decades of Japan (the #2 global economy at the time) etc.

            I also think the term “retirement” implies certain behavior and is used too loosely on blogs. As a younger retiree, I would not claim “retired” status as even I will continue to duck, bob, weave and do what ever it takes to navigate uncertainty.

            With the small size of your portfolio, and a mere $35K of spending (including taxes) in your budget you’re one bear market, roof leak or HVAC replacement from blowing your annual budget and needing to return to gainful employment or risking portfolio duration.

          • Travis

            Thanks for sharing! Sounds like you’ve got a solid setup through years of hard work and research, congratulations! Also nice work on going back to school – I have a pipe dream of some day getting a proper education on astronomy.

  • George Town

    Happy to hear that you kept to a low withdrawal rate. I’m also contemplating early retirement. How many years do you think you can sustain without having any active income? https://twentysomethinglawyer.wordpress.com/2016/05/24/my-first-million/

    • Travis

      Hey George, congrats on reaching your first million!! You’re probably already on top of it, but I recommend playing around with a great tool called FIRECalc (http://firecalc.com ) which for us gives a 98.8% chance of success with a $1M portfolio and spending $35k per year (and this tool doesn’t even include the possibility of reducing spending during down-market periods).

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  • I wish you all the best. I hope the years continue to be short on grumpiness and long on contentment.

    • Amanda

      Thanks ZJ!