In January 2023, I set the ambitious goal of retiring in my early 40s after 2 more years of work. I’m 24 checks into my countdown of 48 more paydays.
A lot has changed these past 12 months. Inflation continues to fall toward historical norms, the Fed stopped raising rates, and the stock market has nearly recovered its losses and returned to 2021 highs.
With all this change, am I still on track? The short answer: an emphatic YES!
Revisiting countdown numbers
I started my January countdown with $1.65M in networth against a goal of $2.15M – a whopping half million dollar difference. This goal, however, was actually quite conservative. How?
Well, first, my January stock values were artificially low and due for a double digit correction. Instead I planned for the worst and assumed an ultra conservative 5% average market return for 2 years.
In short, this conservative goal was intended to be fail proof and more than likely bested. That is precisely what happened. Though earlier than most expected, the market indeed recovered, and by July, my networth was already up a quarter million at $1.9M.
At that time, I observed that I was on pace to reach multi-millionaire status by the end of 2023.
Knocking on the door
As of this writing, my networth has indeed crossed the multi-millionaire threshold. I currently sit at $2.05M, just a hundred thousand dollars shy of my goal. That’s $1.6M in investments and home equity of $0.45M.
At this pace, I could easily reach the $2.15M net worth goal in just the next couple months. In fact, I am likely to surpass it by a significant amount when I retire at the end of 2024. Why?
Besides our ~75% savings rate, the main reason is because the Fed is expected to begin lowering interest rates in 2024 (aggressively, some say as early as March, though I expect more around mid-year). And once rates start dropping, stock values will transition from recovery to growth.
Eighth Wonder
Albert Einstein is oft quoted to have said, “Compound interest is the eighth wonder of the world.” This couldn’t be any more true of the FIRE journey in particular.
My networth shot up $400K in just one year, for example, primarily because I already had significant stock assets subject to compound interest. Had I started the year with 0$ and saved 100% of my income and cheated taxes, I still would have come nowhere close to $400K.
The lesson? Your money is like an employee that works for you. Once your assets grow large enough (at or near FI), your money starts to bring in as much or more money than you can yourself.
What comes next
Though I could turn in my work badge and walk away any day now, I am still resolved to work through all 48 paydays in my 2 year countdown.
It’s hard to say where I will end up exactly by 2025, but it appears inevitable that I’ll achieve the $2.15M target net worth and likely best it by a significant degree.
If inflation drops and thus interest rates (as many expect) in 2024, I could see my net worth grow as high as $2.4M or $2.5M, a number far higher than what I need for my early retirement plans.
Will I stick to my retirement plan then? Or will I find I just can’t shake myself of “one more year syndrome?” It can be addictive to keep amassing piles of cash once you are already FI.
At the start of my career, every year worked went to paying debts. Now a multi-millionaire, one more year syndrome means my networth will go up $0.3 ~ $0.5M every extra year worked. Some people just can’t let go when so much money is at stake.
After all, the stock market doubles every 8 years on average. So every year you work past FI, the eighth wonder of the world, compounding interest, just keeps growing your pile of cash to dizzying new heights. That’s why the affluent in high paying positions or late career professionals have trouble quitting a job they no longer need: they can’t give up the easy money.
Five Million? No thanks
If my wife and I follow this path and continue working, our net worth is likely to climb well over $5M in 8 years. I’m not convinced we’ll know how to spend the money we already have, and can only imagine we’ll struggle even more with an absurd figure like $5M.
Sure, you could argue that this is the point of financial independence – to have sustainable wealth that never depletes. But I already have that now and am only working another year to comfortably trade up one time to a higher cost city/house.
But I only need $2.15M in net worth to achieve this goal (my 48 check countdown target). Clearly, $5M is overkill. And worse, I’ll have to exchange 8 prime years of my life to amass such opulence.
Life gives no guarantees. I don’t know how long I will have my current mental acuity, psychical strength, and sense of adventure. I could work 8 more years and drop dead with $5M in my pocket unspent, robbing my family and myself of an even greater gift: time together.
Even if I am fortunate to live a healthy life until I am one hundred years old, I still won’t choose to serve 8 more years at the whim of an employer, rather than at the whim of my personal motivations. That would be nearly a decade of freedom sacrificed to raise more cash than I know how to spend.
Instead, I plan to stick to my 2 year countdown to retirement. So time marches forward, and I’ll be counting off 24 more checks. I will likely move to Colorado during this last year, with the goal of securing a more desirable post-retirement location. After that, I’ll bid corporate America adieu and open up the next chapter of my life.
I’ll check back in at the next milestone on my countdown to retirement. Thanks for reading.