by Ashley
First – thanks for all the thoughtful comments on my last post, Teaching Teens to Budget! There was great dialogue in the comments and I can’t wait to give a one-month update after this month passes (February is our first month with this experiment in effect).
For today, I’ve got a super long post ahead. Grab yourself a cup of coffee/water and settle in, because this one is a bit of a doozy!
I’ve written a bit about my desire to retire early (see my Catching Fire post, or my 2026 Financial Goals post). I’ve been thinking through many of the comments you’ve raised on these posts and wanted to share my thoughts and planning for early retirement. The big caveat is that I’m still figuring this out and am by no means an expert, so these are my early thoughts. If you notice a glaring hole or something I’m forgetting, please let me know in the comments!
Timeline for Retirement
I’ve had the dream and desire to retire early for years, but now we have a real countdown! Hubs retires in just over 6 years from a government job where he’ll have a pension and enjoy health insurance for life!
I’m currently 42 years old, and my retirement timeline is a bit more unclear. I’d love to retire when hubs does in 6 years, but if the girls go straight to college after high school, they’ll be in their sophomore year at that time. Since I work for a major university, I get great benefits for my kids to go to college, and I’d have a tough time walking away from that benefit mid-schooling. For that reason, I think my retirement date is more likely to be 8 years (age 50).
That said, I don’t think I’ll really be fully “done” working at that point. For the last year, I’ve been working on some side projects – writing a book and starting my own small business. When I retire from my W2 job, it doesn’t necessarily mean I’d be done working all together.
What “Early Retirement” Means to Us
This brings up an important point, because neither my husband nor I plan to be fully 100% out of the workforce in the next 6-8 years! When we retire from our W2 jobs, we’d both like to continue working in some fashion. The hope and goal, though, is that we wouldn’t be working for the money. We hope to be able to pursue more “passion” type of job interests. Hubs loves gardening – maybe he’d go work at a plant nursery! I love writing – maybe I can find some more freelance writing gigs?!
We both want to stay busy in some way, but we want autonomy over our time. We don’t want the day in and out corporate/government job grind. And we’d like to have enough money in savings/investments that we don’t feel trapped in other jobs for the sake of paying bills. Some people refer to it as “F You” money. The point is that we want to be set up in a position to where we don’t really need the job’s money and we could leave at any time if we’re unhappy. The extra cash is just icing on a cake, not a necessity in order to pay bills.
JP mentioned this in a previous comment, about how side hustles can become meaningful work. That’s what we’re looking for – meaningful work where we are in control of our time and can work more or less depending on how we feel and what we’re up to at the moment.
Caveat: I feel compelled to share as an aside that I really love my job and feel very grateful for it, so this isn’t a dig at my current job. It provides fulfillment and I feel I do meaningful work. If all I did was teach, it’d be great! But I have a lot of other roles and responsibilities, and I’d love to step away from the endless meetings and bureaucracy of academia.
The bottom line is that, to us, early retirement does not mean fully stepping out of the workforce. It’s more about having additional freedoms (especially autonomy over our schedules). But when we do continue working, my goal is for it to be more about earning extra income for fun, not as a necessity.
The Elephant in the Room – Health Care!
This is the big one for many, and I could not be more grateful to have hitched my wagon to a partner who has the ability to get health insurance for life, even in retirement. This makes me so glad we’re planning for early retirement in advance because we have historically been on my job’s insurance plan. His insurance rule is that you must be enrolled for 5 years prior to retirement and you are eligible for continued coverage for life.
Remember how I said we had 6 years until hubs retires? Guess whose plan we’re switching over to come open enrollment 2026? His plan! We’ll have right at 5 years coverage by the time he retires (actually 5 years & 4 months), so we’ll be eligible for continued coverage for life. And his plan isn’t just for him – it extends to the family, too! If we hadn’t started retirement planning early, we may have missed this critical window!
Aside from hubs’ health insurance, we are also maxing out our HSA every year. For most of my employment history, I’ve maxed out and then used the HSA for medical expenses. Each year I’d end up just about flat even (funds never growing). That changed just last year. One of my 2024 goals was to interview financial planners and this was one of the tips I received just about a year ago. I was told to save my medical receipts, but NOT to pull the money from my HSA, if I could afford it. Instead of treating my HSA like a revolving account that I’d fill and then spend, I’m now looking at it like an investment account. It can serve as another form of income in retirement.
Side note: This is one of the personal assistant tasks I have my kids helping me with – they are helping to track and manage all of our medical receipts. I’ve got a digital folder with all the medical receipts, and a spreadsheet showing the running total by year (with each transaction labeled, described, and dated).
My plan for the rest of my working years is to continue to max out our HSA and to get the most out of its triple tax benefits: contributions are tax-deductible, growth is tax-deferred, and qualified medical expense withdrawals are tax-free. Plus, there’s no deadline – so you can wait years to pay yourself back, as long as you maintain detailed records to prove the expense was qualified.
I know health insurance and healthcare is one of the biggest things for most folks considering early retirement, and I am so grateful it’s not a major concern for us!
Income Between Retirement and Traditional Retirement Age
Right behind figuring out how to pay for insurance and health care, is the topic about what to do about income between early retirement and traditional retirement age.
Things to think about:
If I retire at 50….
- I can’t withdraw from my IRA or 403b (without incurring a penalty) until 59 ½
- I can’t get social security until 62 (though the amount is higher if delaying until 70).
But here’s some places where we can pull money, listed in the order in which we will likely make withdrawals:
- Brokerage – After talking about balancing assets in a previous post, I now have two individual investment accounts that I’m trying to fund a little here-and-there so this money can grow until I retire. While this isn’t a super aggressive investment at this point, one of my primary goals is to grow these accounts between now and retirement.
- Roth IRA – We can withdraw the contributions at any time without penalty, so this could be a nice nest egg as well. In the meantime, I continue to max this account out every year.
- Part-time Income & Side Projects – this is where my side hustle(s) come into play. While my goal remains that I won’t “need” the money in retirement, anything I earn will help to offset money that needs to be withdrawn from brokerage accounts and/or from the Roth IRA.
- HSA – I can start to pull money from here at any time, first using my receipts from past medical expenses, and then pulling for current medical expenses.
The other important thing to point out about a part-time job or side project is that any money earned (even if it’s not a lot!) will help to lower the level of savings I need to attain between now and my planned retirement at age 50.
Lifestyle Unknowns & Key Trade-Offs
This brings us to the nitty gritty – exactly how much do I need to aim for in the brokerage account(s)?
This will be influenced by how much I plan to earn in retirement and how much I will have contributed to my Roth IRA and HSA, respectively.
It also makes me consider lifestyle factors in retirement like:
- Will we travel more or less?
- Do hobbies increase or decrease spending?
- Does free time reduce outsourcing costs?
- What happens when work stress disappears? (i.e., less take-out for instance?)
- Will our housing cost more or less?
Of course, it’s tough to know all the answers, but I did have a sabbatical last year so I can look at it as an example of mini-retirement. If it’s similar, I will travel more, hobbies cost about the same (not more or less), I was able to do more stuff around the house myself (e.g., tending to yard), and I cooked at home a lot more versus eating out. The big question mark is housing. We hope to move after retirement. Just based on how home prices have been, I would imagine our housing costs go up at that time. But I really don’t know!
And then there’s the matter of actually putting numbers on paper to figure out exactly how much all of this costs on an annual basis.
Action Plan
I plan to dive into the numbers this year to come up with concrete figures, and come up with a plan of attack around that. Knowledge is power. If I plan to spend $80k/year, things look very different than if I plan to spend $120k/year.
My planned/anticipated expenses really impact the age at which I’ll be able to retire! And then I can make a decision about whether I’d rather work a few extra years at my W2 job to stack up additional cash reserves, if I’d rather step back lifestyle a bit so I can retire a couple of years earlier, OR if we’re right “on target” for retirement with our current rate of savings and investments.
What am I missing? What have I not taken into account that I need to think about?
The thing I’m having the hardest time with is estimating our housing costs. That feels like such a big unknown. We literally don’t even know where we want to end up (we just know its NOT here! lol). A longer-term goal over the next 5 years is to take some domestic vacations to cities and states where we might see ourselves retiring, so we can scope them out and get a feel for where we want to end up. Of course, that greatly impacts our anticipated housing expenses.
Thank you for your comments over the years! You all have pushed me to think outside the box and have helped me learn things that have really benefitted my life financially speaking. I truly appreciate your input!
