Recently, I wrote a guest post for another personal finance website, Lazy Man and Money, on the subject of how I’m escaping the rat race. The author of the site was inspired by this post and wanted to share his journey to retirement with you.
For those who don’t know me, I’ve been blogging on Lazy Man and Money for more than 8 years now. I am a Blogasaurus Rex.
That’s a long time to be thinking about personal finance and money. Over that time, I’ve focused on ideas that bring passive income and can bring in money after we’ve retired: my journey to retirement.
Saving towards retirement
I believe a strong retirement should have multiple streams of income. There are some people who believe putting a lot of money in the stock market is ideal. I believe it is just part of the retirement puzzle.
We try to put as much money in tax-deferred investing accounts as we can. In the United States that amounts to being around $20,000 a year per person. It’s a good chunk of money to invest, and we’ve done well with the stock market, especially in recent years. Using the rule of 4%, even if we didn’t put another penny in, we could withdraw $19,500 every year.
Investing in property
I’ve become much more interest in investing in real estate lately. I’m a huge fan of buying real estate because you use other people’s money. We are using the bank’s money so we can leverage our down payment . We are using the tenant’s money to pay back the bank.
In total, we now own three income properties aside from our primary residence. In the housing crash, prices were cheap and interest rates were low. Buying just made a lot of sense to me. Right now, with a 15-year mortgage, we’re breaking even. In 13 years from now, we’ll own the properties outright. After paying taxes and maintenance fees, I estimate we’ll make $25,000 a year. A beautiful thing about rents is that they generally adjust with inflation. So that isn’t just $25,000 in today’s dollars, it’s $25,000 of buying power in the future.
Aside from our retirement nest egg and our rental properties, there’s my wife’s pension. Pensions are a rare breed nowadays, but the military still awards them and probably will for some time. In 6 years, she’ll have 20 years of service and earn half of her base pay for life. It’s a tremendous deal, especially at age 44. Of course, nothing comes for free in life. As a pharmacist, she’s at the front line to be deployed to Africa for the Ebola outbreak.
Keep on keeping on
In the meantime, I’ll continue to run my websites such as Lazy Man and Money. Even in retirement, I think I’ll continue to do things that will make money, even if it isn’t managing websites. It’s in my blood to provide value to the world, and I’ve found that when you do that, the world tends to provide back to you. My definition of retirement doesn’t mean I stop working. The day I retire isn’t the end of my journey to retirement. I’m not expecting a huge amount of money from this, but I’m estimating $25,000 a year is probable. I currently make more than $25,000 from my websites, and I feel that is a conservative estimate.
Finally, there’s Social Security, which is widely consider the government’s retirement plan in the United States. We pay money out of each paycheck to a general fund. That fund pays money older Americans. It’s hard to know how much money that is going to be now, but I did some projections using their website and it seems like it could be $60,000 a year. That would be far in the future though, when money is worth a lot less. Also, the fund is underfunded. If we assume that only half of that is truly going to come to us it is still a significant piece.
When you start to add these sources of income together, it looks like a retirement of at least $150,000. If we continue to contribute to our retirement accounts and invest well in the stock market, it could be as much as $200,000 per year. It is notable that the streams of income come at different times. Our rental income comes into play before our Social Security for example.
Multiple streams of retirement income
Other than that, the big thing to focus on, is that our retirement doesn’t depend on a single income stream. We can withstand a drop in the real estate market and wait for it to recover. If the stock market drops, we can live well on our income until it comes back. And yes, I’ll technically still be working in the rat race, doing some writing, but it’s race that I choose to run because I enjoy it. That makes all the difference.
If you want to read more about this, you can read more about this retirement plan at: What Does an Annual $200,000 in Retirement Income Look Like?
So, you’ve read my escape from the rat race, and Lazy Man and Money’s approach to retirement. Now, let me know: what is your plan?