When Dale told me he and his wife are public school teachers and plan to retire in their 40s, plus have 4-year-old twins, I knew we had to talk. I quickly realized they have an amazing story about how they were able to save 50% of their income to reach their goal.
Dale, what’s your story?
Well, we live in a middle-class neighborhood, and have 4-year-old twins. My wife and I have been married for 9 years, and have been teaching in the public school system for 11 (I’m 35 and she’s 32). Even though we enjoy our careers and get more free time off than most, it’s still a tough job.
The politics of education, and just the daily grind, made us realize we don’t want to teach until we’re in our 60s, so we created a big goal to retire early.
We’re forecasting we’ll get there in 2029 (when I’ll be 49 and she’ll be 46). Our twins will be in high school, and we’re looking forward to spending as much time with them as possible before they venture off on their own.
What’s been your experience with money?
When we decided we wanted to retire early, we came to a compromise on what we were comfortable giving up, and then made those adjustments to our life. One thing we’ve noticed with other couples is they struggle with setting shared financial goals, and then cutting back to reach those goals.
It was challenging for us at first. Giving up cable, then giving up the expensive cell phones, then limiting how often we went out for dinner. But reminding ourselves why we were doing it — to spend more time with our family — made it easier.
Also, kids can be expensive, but we’ve found creating authentic experiences is what enriches their lives the most. We’ll never deny them the opportunity to do what they want, but as they get older we want to enforce how important it is for them to work for what they want.
How much do you spend and save?
Together we make about $140,000 with our main careers plus our side gigs (we coach). We’re spending about $4,250 a month, or $51,000 a year. Here’s how a typical month breaks down:
Mortgage: $1,500 (it’s a 15 year)
Property taxes: $500
Miscellaneous: $400 (travel, credit card, etc.)
College loans: $310 ($33,000 @ 5%)
Car insurance: $60
Life insurance: $20
We’re saving about $4,000 each month. So 7.5% of our pre-tax income goes to our pensions, and then we each max out our 403(b) at $18,000 a year.
With after-tax income, we each put $5,500 into a Vanguard Roth IRA. This is invested in the Total Stock Market Index Fund and REIT Index Fund.
When we turn 40, we’ll start putting $10,000 into a Vanguard taxable account. We’ll probably invest this in the Total Stock Market Index Fund, and maybe an income index fund.
How are you planning to generate passive income?
Starting in 2029 we’ll have access to our reduced benefit pension, the principal balance of our Roth IRA, and our taxable Vanguard account. With no mortgage, we should be able to withdraw enough money from these accounts to live comfortably.
In the year 2039, when I’m 59, we’ll have access to my 403(b) and we’ll use a 4% withdrawal rate. My wife’s 403(b) will be available in 2042. And when we’re in our mid-60s, we’ll have Social Security benefits too.
But it’s not like we’ll never work again. We’ll probably bring in another source of income through some kind of job, but one that’s on our own terms.
Any tools you use?
We track our spending and investments through Mint.com.
What challenges have you experienced?
The most evident is patience in reaching our goal, and feeling like we’re going against society by living a simple life (and not “keeping up with the Jones’s”).
We’re expecting future challenges, too, like health insurance. Although retirement for us is a few years away, we should be able to get a decent plan with a high deductible. We’re hoping that living a stress free life, exercising, and eating healthy keeps us away from too many medical issues.
Also, college costs. We’ll be good, loving parents, and hopefully guide our twins in the right direction, but we’ve agreed we won’t put our early retirement goal on the back burner to cover their entire college cost.
They’ll get some money from us, but they’ll be expected to attend a college in state, work at least part-time, and take out student loans. (Of course, this will be an on-going discussion with compromise as they get older and begin understanding their own life goals.)
What mistakes have you made?
When we discussed our goal to retire early with colleagues, and family and friends, they weren’t receptive, and seemed more close-minded and uninterested than anything. As a result, we’ve learned not to care so much about what other people think.
We know we’ve made the right decision for us. We want to put our family first, and not material things we’d have to work longer for because ultimately, we value our time above everything else.
What money advice would you give your 22-year-old selves?
Don’t spend so much, and save and invest more.
And for fun, what item, for $100 or less, had the biggest impact on your quality of life?
Two magazine subscriptions.
Islands, because when we get it each month, we’re reminded of the places we can go. Our hope is for our family to explore the world and create memories that last a lifetime, and each issue reinforces the fact that we’re investing now so we have the time later to enjoy what life has to offer. And Cooking Light, because it helps my wife tap into her passion for cooking, which keeps our family healthy and happy.
I’d like to thank Dale for sharing his inspiring story, thanks Dale!