The Game Plan*** Just a head’s up, I’ll be updating this page in the near future to reflect our new plan for moving to Panama.  That’s going to up our retirement date to the end of 2019… woo-hoo!! ***

Like a lot of us, I’m tired of working.  I enjoy my job in the IT world, but there’s more to life than making the donuts, so to speak.  In order to get out of this rat race though, I needed to have a game plan.  The FIRE (Financial Independence / Retire Early) community has been a great help in figuring this out.

The most “iffy” part of the plan will be for the first five years after I quit my job.  I’ve built up a very sizable 401(k) plan and I’m continuing to max it out every year.  Once I quit, I plan to do a Roth IRA Conversion Ladder in order to access my 401(k) funds before age 70½ without penalties.  However, to make this work, each group of converted funds will need to sit in the Roth IRA for five years before it can be withdrawn penalty-free.  Because of that, for the first five years, we’ll need to be rely on other income.

The good news is that my wife plans to keep working (she’s part-time), at least for the time being.  She works at a non-profit organization and she’ll be the first to tell you that she doesn’t make a lot of money, but it’s still something to help on the income side during the beginning of the plan.

We live a very modest lifestyle and, aside from out mortgage that should be paid off, we currently spend less than $25,000/year (that’s shooting high!).  Everything else is being saved or invested which is great news.  Once I quit the rat race, most of that saving and investing will go by the wayside.

Right now, with Obamacare in place, healthcare for the family would likely run us ~$18,0000/year before any subsidies.  With me not working though, we can probably get this down to a lot less… maybe around ~$1,500/year.  This is the wildcard though because nobody knows what the government will do with healthcare over the next few years.

All in all, I’m going to shoot very conservatively and say we need to cover $45,000/year in expenses with healthcare included.  Keep in mind that these are some very rough numbers and will definitely change as we go through the years (such is life!!).  For the sake of simplicity, I’m going to keep everything high-level, conservative, and in present value dollars.  In fact, I’m not even going to account for cash flow rent increases while our loans on the property remain the same.  With all that said, here’s our game plan:

Present Day-2024

  • Get mortgage paid off on our residence.
  • Get mortgage paid off on our rental house (property #1).
  • Continue to contribute to fund Mrs. R2R’s 401(k) and max out my 401(k) invested in index funds.
  • Continue to build up solid dividend stocks in our Roth IRAs.
  • Continue to fund our Health Savings Account (HSA).
  • Continue to build up our savings.
  • Purchase more investment properties – hopefully a minimum of 2-3 more duplexes, but possibly more.
  • Continue to build up the following for this site and hopefully the advertising and affiliate income as well.

2025

  • Give formal notice to my employer.
  • Obtain financing if needed for any purchases (such as another investment property) while I still have W2 income.
  • Quit the good ol’ 9-5!!

2025-2029

  • Mrs. R2R will still be working part-time (God bless her!!).  (~$1,200/mo. net pay)
  • Use rental income from our rental house (property #1).  This house will be paid off so the cash flow should be really nice.  (~$800/mo.)
  • Use rental income from our duplex (property #2).  Although not paid off yet, it’s cash-flowing pretty nicely even after putting aside for capital expenses and vacancies. (being extremely conservative: ~$300/mo.)
  • Use rental income from other future investment properties.  For all intents and purposes, we’ll assume we have a minimum of two more duplexes bringing in the same cash flow as property #2.  We’ll also be just as conservative as the first duplex.  (~$300/mo. x 2 properties = ~$600/mo.)
  • Turn off the DRIPs in my Roth IRA to start receiving the dividends.  Right now this isn’t too impressive, but I’ll continue to grow this until I quit the 9-5.  (~$1,000/yr.)
  • Sell off some stocks in my Roth IRA and pull out contributions as needed.  (???)
  • Blogging income – not anything to write home about yet, but I’m starting to see a slight increase and I have a number of years to keep building this up.  (~$1,000/mo.??)
  • Start process of Roth IRA Conversion Ladder to move money from my 401(k) to my Roth IRA.  The amount that I will start converting will be dependent on how many rental properties I’ve been able to buy.  Do this conversion process every year.  As a reminder, the funds can’t be used until they sit for 5 years in the Roth or I’ll be penalized.

Estimated total yearly income: $47,800 – $18,000 (healthcare) = $29,800

So, let’s talk about this… like I mentioned, these first 5 years will be the hardest.  However, with my wife continuing to work, that will be a big help.  And if I work things out right, I’ll have purchased even more rental property to add to our cash flow.  Finally, that healthcare number is really a shot in the dark!  As we get closer, I’ll have a better idea of what we’re actually in for on this.

It’s possible that I might have to do a part-time job consulting.  I’m not anticipating the need to, but I’m not opposed to it either.


2030-2036

To make life a little easier, I’ve highlighted thing that are different from the previous section…

  • Let’s assume that Mrs. R2R will be quitting her job, so we’ll lose that W2 income.
  • We’ll also begin the Roth IRA Conversion Ladder process with her 401(k) account.
  • Start systematically withdrawing from the Roth IRA from the conversion ladder.  As we get closer to my FI date, I’ll adjust this number because the amount we convert will depend on the number of rental properties.  This number will also probably increase each year to accommodate inflation.  (~$30,000/yr.)
  • Turn off the DRIPs in my wife’s Roth IRA to start receiving the dividends.  Let’s be conservative with this number.  (~$500/yr.)
  • Continue the Roth IRA Conversion Ladder every year on my 401(k).
  • Use rental income from the rental house (property #1).  (~$800/mo.)
  • Use rental income from the duplex (property #2).  (~$300/mo.)
  • Use rental income from other future investment properties.  (~$600/mo.)
  • Receive dividends from my Roth IRA.  (~$1,000/yr.)
  • Blogging income.  (~$1,000/mo.??)

Estimated total yearly income: $63,900 – $18,000 (healthcare) = $45,900


2037-2039

Differences from the previous section are highlighted…

  • At this point, I’ll now be turning 62 and can start receiving Social Security… maybe.  A lot of variables here – the minimum age of Social Security will likely change as will the benefits.  And who knows if I’ll even need to start withdrawing at the minimum age?  But for our conservative purposes, let’s assume I do and that the benefits are the same.  We’ll even just stick with the benefits the site says I would get right now.  ($1,840/mo.)
  • The duplex for rental property #2 will be paid off no later than this time frame… woo-hoo!!  That means our cash flow will increase significantly. (~$800/mo.)
  • Use rental income from the rental house (property #1). (~$800/mo.)
  • Use rental income from other future investment properties. (~$600/mo.)
  • Receive dividends from my Roth IRA. (~$1,000/yr.)
  • Receive dividends from Mrs. R2R’s Roth IRA. (~$500/yr.)
  • I’m going to guess that the blogging days will probably be behind me at this point.
  • Continue withdrawing from the Roth IRA from the conversion ladder.  Again, as we get closer to my FI date, I’ll know more as to what this number will actually be.  (~$42,000/yr.)

Estimated total yearly income: $91,980 – $18,000 (healthcare) = $73,980

As a side note, if I can wait on Social Security and nothing changes (haha!!), at the age of 67, I would receive $2,672/mo. and at 70, I would get $3,334/mo.


2040-?

Differences from the previous section are highlighted…

  • We have Mrs. R2R’s Social Security if we want to start withdrawing… same assumptions as with mine.  ($916/mo.)
  • The other future investment properties will be paid off in this time frame and the cash flow will go up as well.  (~$1,600/mo.)
  • Receive my Social Security.  ($1,840/mo.)
  • Use rental income from the rental house (property #1). (~$800/mo.)
  • Use rental income from the duplex (property #2). (~$800/mo.)
  • Receive dividends from my Roth IRA. (~$1,000/yr.)
  • Receive dividends from Mrs. R2R’s Roth IRA. (~$500/yr.)
  • I’m going to guess that the blogging days will probably be behind me at this point so that income will be gone.
  • Continue withdrawing from the Roth IRA from the conversion ladder.  Again, as we get closer to my FI date, I’ll know more as to what this number will actually be.  (~$50,000/yr.)

Estimated total yearly income: $122,972 – $10,000 (high ballpark for Medicare for both of us) = $112,972

Being eligible for Medicare should help save us some good money every year.

And with Mrs. R2R’s Social Security, we would receive $1,305/mo. if she waited until 67 or $1,618/mo. if we waited until she was 70.


Again, all these numbers are high-level and very conservative.  And seeing as I have some time before quit the 9-5, they are very likely to change.  As they do change though, this page with our game plan will be updated to become even more accurate.

To some of you, these numbers might seem like poverty and to others, it might look like we’d be living in the lap of luxury, but I know this would keep us more than comfortable in our present lifestyle.  Plus, unless I can convince my wife to go, I’ll always have the dream of Panama to let us live like royalty!!!

Thanks for reading!!

— Jim

6 thoughts on “The Game Plan

    • August 10, 2016 at 5:48 pm
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      Thanks, XYZ – it’s definitely a work in progress, but hopefully it will all come together as I get closer to my FIRE date.

      — Jim

      Reply
  • January 31, 2017 at 10:18 am
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    Wow, this is a great game plan. Conservative, so it’s executable. I have similar plan, but just to be sure, I went ahead and bought 12 units, that way my retirement gross income is starting out at 6-figures, that way I can cover both Mr.W and I. If we have a baby, I don’t want to feel like we are living in poverty because we have to.

    Reply
    • January 31, 2017 at 7:39 pm
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      Thanks, Vivianne – that’s fantastic on your 12 units! I would love to be in that position on real estate. I wish I had gotten started on that years ago. While we’re still doing some buying, it’s a little slower (the family-raising part of our lives).

      — Jim

      Reply
  • February 28, 2017 at 3:15 pm
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    Like your plan! We just paid off our mortgage and are totally debt free at 35, which was a a big deal from us. Now we need to boost savings and start working on buying some rental properties.

    Reply
    • February 28, 2017 at 9:18 pm
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      Congratulations to you!!! Paying off the mortgage is fantastic and I can only imagine how freeing that feels!

      I’ve been trying to pick up a 3rd and possibly 4th property for a couple months, but so far things have been pretty dry. The real estate market where we’re at is pretty heated… never thought I’d be waiting for another market crash! 🙂

      — Jim

      Reply

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