4 Reasons I’m Planning for Early Retirement Despite 6-Figure Losses

  • My husband and I are currently in our early 40s, but we are on track to retire in just 4-5 years.
  • We have lost hundreds of thousands of people in the first three months of 2022, but that hasn’t deterred us.
  • We plan to think long-term, cut expenses, be debt-free, and work part-time after retirement.
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I had high hopes for an early retirement when I was ready to ring in 2022. After all, the S&P 500 returned more than 27% for the year in 2021. Meanwhile, the Vanguard Total Stock Market ETF (VTI), where I keep a decent percentage of our investments, has returned a total annual return of over 25%.

At 42, with my early retirement only eight years away, these astronomical returns have catapulted my family’s plans. All of a sudden, we began to think that my husband and I could retire even earlier than planned – in four or five years, maybe.

But, we all know what they say about plans: We make them, and God laughs.

My heart sank watching our retirement portfolio and taxable investment accounts lose hundreds of thousands of dollars in the first three months of 2022. That said, I still plan to retire at age 50, and may -be even earlier.

My husband and I always hope for the best but plan for the worst, and that’s exactly why our early retirement plans always make sense.

For full disclosure, my husband and I are both independent. We’ve maximized contributions for retirement in Solo 401(k) accounts for years, and we’ve also saved for retirement in a Roth IRA when we were eligible. We have considerable funds saved in a Health Savings Account (HSA), almost enough savings in two 529 plans for our two children’s college education, and a taxable brokerage account with Vanguard where we invest in index funds. .

Where many early retirement enthusiasts strive to save enough money to cover 25 years of their regular expenses, we pursue a plan called FAT FIRE which requires us to have saved nearly 35 times our annual expenses before throw in the towel and stop working.

To make our early retirement plans work, we estimate that we will earn a conservative return of 6% each year. Although the stock market has historically performed better than this, we believe this percentage gives us an idea of ​​where we will be without being overly optimistic.

But how can our early retirement plans still work when we have already lost hundreds of thousands of dollars this year alone? Here are four reasons I’m not worried and think we’re still on the right track.

1. We are willing (and able) to adjust our spending

Our current retirement goal is to save up to 35 times our annual expenses for early retirement, but we may have to live on less than that. The reality is that we have no idea what kind of return our investments will bring over the next seven or eight years, so we have to be comfortable with the possibility that we will have less for retirement than expected – at least at first.

If we end up having nearly 25 times our annual retirement expenses, we’ll have to work harder to keep our expenses lower than we really want. For us, that would likely mean lighter international travel for a few years, eating more at home and less in restaurants, and taking on tasks we outsource like lawn care and grocery shopping.

Were these sacrifices worth it to be able to retire at 50? We certainly think so and we are ready to change our way of life if necessary.

2. We promise to be debt free

We also pledge to be debt free when it comes to our home, our cars, and any other debts that can easily arise. We won’t have a mortgage payment during early retirement, which will give us a ton of extra flexibility when it comes to keeping our expenses low.

Without any debt, our major living expenses will include property taxes, home insurance,


car insurance

health care, utility bills and food.

3. Working part-time is a real possibility

My husband and I are both self employed in gigs which allows for part time work if we need it. With that in mind, we’ve always said that one or both of us could work part-time to cover our living expenses if we wanted to avoid dipping into our investments for a few years.

This is the scenario most likely to occur if the sequence of returns leading to our retirement is less than advantageous. Instead of retiring in a “gap year” when returns are down, we can work just enough to cover our bills and give our investments more time to rebound.

4. Long-term thinking is essential

Finally, we have always believed in flexibility for any early retirement plan to work. In the meantime, we also know that a few years of lackluster stock returns shouldn’t alter our plans.

The reality is that markets always go up if given enough time, but only if you stick around long enough for it to happen. In fact, the average 10-year stock market return is 9.2%. There will be good years and bad years, but investments have always bounced back and got back on track for the long term.

Although we have “lost” hundreds of thousands of dollars so far in 2022, these losses are only theoretical at this time. We are certainly not cashing in or changing our plans, so these losses will never materialize in a traditional sense. In fact, we’re continuing our regular contributions as always, so some would say we’re buying index funds and other “discount” investments.

Whatever happens, we are always “all in” on our investment plan, and we are not giving up. With regular investments in our Solo 401(k) plans and taxable accounts, time, and lots of luck, we’ll be ready to retire early and with plenty of cash to spare.

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