by Six years ago, my wife Tatiana and I discovered FIRE (Financial Independence—Retire Early) and charted our course towards this ambitious goal. While our plans have evolved—we’re no longer considering moving abroad after early retirement—our core objectives remain unchanged.
Milestones and Progress
Last year, we hit a significant milestone: achieving Financial Independence (FI)! But we didn’t stop there. We continued saving for a house while bolstering our retirement accounts. We increased our FI target to 25 times our projected annual spending, providing an extra cushion for our early retirement funds.
2017 was exceptionally strong for us financially, and now we’re in the homestretch. The prospect of freedom from a work schedule feels surreal as we approach our FIRE year. Let’s dive into the details of our progress.
Our Investment Buckets
Our FIRE funds, which we call the Freedom Fund Portfolio, are divided into three main buckets:
- 401(k)s
- Roth IRAs
- Brokerage account
We also have a fourth bucket, the NCF (Nuestra Casa Fund), set aside for buying a house. Currently, our buckets are almost 84% full.
| Buckets to fulfill by FIRE date | |||
|---|---|---|---|
| Name | Actual Percentage | Est. Percentage | Accessibility |
| 401(k)s | 61.7% | 60.4% | 5-year waiting period after quitting through Roth-IRA conversion ladder |
| Roth IRAs | 3.3% | 4.4% | Immediate / Restricted access |
| Brokerage account | 1.8% | 15.2% | Immediate access |
| NCF (Nuestra Casa Fund) | 17.0% | 20.0% | Immediate access |
| Total | 83.8% | 100% |
401(k)s: The Powerhouse
We’ve been maxing out our 401(k) accounts for years, and we’ve met our target amount. An impressive 26% of our net worth comes from investment returns, showcasing the phenomenal bull market run.
However, we’re not complacent. We’ve shifted to a more conservative allocation to soften potential market blows. While this might reduce short-term returns, it gives us the confidence needed to retire next year.
Roth IRAs: The Flexible Option
We’ve front-loaded one Roth IRA this year and are now working on the second. We have another year to fund them before bidding farewell to the corporate world. This bucket is where we concentrate our REIT investments.
Brokerage Account: The Work-in-Progress
This bucket aims to cover roughly five years of spending, but it’s currently our least funded at less than 2%. We plan to direct all new after-tax income here after completing our house savings in August.
We’re still fine-tuning the allocation strategy for this account, considering tax implications and the need for readily accessible funds in early retirement.
NCF (Nuestra Casa Fund): The Home Dream
Our house fund is progressing well, slightly ahead of schedule. We’ve paused contributions during the first quarter to focus on front-loading our Roth IRAs but will resume shortly after.
Looking Ahead: Realistic Expectations
As we near our FIRE date, we’re adopting a cautious outlook. Inspired by Jack Bogle’s insights, we’ve lowered our expected total rate of return on investments for the next two years from 7% to 4%. This conservative estimate includes returns from our rental property.
Even with this adjusted projection, we’re on track to surpass our target numbers if we continue working until our planned retirement month.
Reflections on Our Journey
Our FIRE journey has been both challenging and rewarding. Blogging about our plans has helped solidify our strategy and keep us accountable. While we may not have every detail perfectly in place by our retirement date, we’re committed to making the leap when we’re logistically ready.
The prospect of unleashing our creativity and traveling without time constraints far outweighs the security of a cubicle job. We’re excited about the future and the freedom FIRE will bring.
Your Turn
We’d love to hear from you! What do you think of our plans? If you’re approaching retirement, what aspects keep you up at night? Share your thoughts and experiences in the comments below.
