My Plan for Total Financial Freedom (AKA My Retirement Plan)

$1 coin on $100 billIn The Goal: Financial Freedom I noted that my personal financial goal is to invest my assets so they generate enough income to more than pay my living expenses. This way I will never have to spend a penny of the assets themselves — just live on the income they produce. At that point I’ll have total financial freedom, be able to retire, or do whatever I want to do.

I’m shooting for this not because I want to leave my job, make any major changes, or for any other reason other than I want to have total financial freedom. At that point, I can decide what I want to do, whatever that is.

In this post, I’ll give you my thinking behind this plan as well as how I plan to get to this level.

Before I do that, let me say that much of this post sounds like bragging to me. I’ve tried to tone it down to sound as little like that as possible, but it still seems way over the top to me.

I do not mean it that way. I share this information with you so you can see that a simple person like me can put a plan like this together and that you can do the same (or at least something similar). And since I’m doing it, I can help you do it as well. And that’s what I intend to do.

If it sounds too pretentious, please accept my apology in advance.

Traditional Retirement Plan

Let’s start with the fact that years ago I decided I was not going to settle for a barely-getting-by retirement. I haven’t worked all my life to sit and barely make ends meet during my golden years — simply surviving until I die.

I am not going to settle for a retirement where my money may or may not run out when (and if) I’m 85, 90, or 95. That would feel like living with impending doom and a lifestyle I would hate.

No, the traditional retirement isn’t for me.

What is the “traditional” retirement you may ask? Something like this:

  • You work a 40+ year career, saving for retirement as you go along.
  • When you get to 65 (or older), you retire and live on a combination of Social Security and your savings.
  • If you’ve done it “right”, the savings portion allows you to withdraw 4% (the old rule) of your savings every year with a fairly high confidence that your money will last longer than you will.

And this is the retirement plan for those Americans who are pretty advanced in their saving and retirement plans. Most Americans simply have “work longer” as their plan.

Anyway, the above plan is at least decent. That is until something happens:

  • What if you outlive your money?
  • What happens if some large, unexpected expense comes along?
  • What if inflation rears its head and your money only lasts until you are 75?

Too many risks in my opinion.

How I Want My Financial Freedom

No, this “a lot of things could go wrong” retirement isn’t for me. Instead, here’s what I’m planning on:

Accumulating a substantial amount of assets that I can then turn into income generators, churning out enough income that more than covers my annual expenses.

What’s that look like? Something like this:

  • $4 million in assets
  • Assets generate a minimum of $100k in income per year
  • Live on much less than $100k per year (let’s say $70k as an estimate for now)

The benefits of this plan are probably clear, but let me spell them out just in case they aren’t:

  • I can retire and completely support my lifestyle on income generated from my assets.
  • The assets themselves are never touched. I live only on the income they provide.
  • There’s a safety net each year (between earnings and spending) in case something bad happens.

In other words, we have more than enough income generated to cover our needs (and we’re not skimping — we would have $70k a year!) plus HUGE margins of safety.

Yes, this is the sort of retirement I want to have.

It’s Not that Easy

Unfortunately this sort of plan is tough to achieve. It will require me to do several difficult things:

  • I have to get $4 million.
  • I have to get it to earn $100k per year.
  • I have to account for inflation.
  • I also need to be through all my life’s major expenses

Let’s tackle these one by one:

  • $4 Million — I still have a ways to go to hit this one, but with a good rate of savings plus a decent (8% or so) stock market performance, I should hit my financial goal in five years.
  • $100k income — I will detail below how I plan to invest my money so it earns over $100k. It should make for good conversation.
  • Inflation — My plan for inflation is to so vastly over-deliver on income, that inflation is never a threat. As you will see below, I have plenty of opportunity to do this.
  • Expenses — My last two major expenses are putting my kids through college. Fortunately I have the money set aside for those expenses, so they should be covered. (I have very little debt — and will have none within the next few months. I’ll share details of that in a future post.)

The Plan and the Numbers

Just to note, these plans are in various stages of development and execution. I may change my mind on some of them (we’ll see if your comments lead me to reconsider my options), so consider them a work in progress for now.

I plan to split the $4 million as follows:

  • Real EstateI already have $600k invested in rental real estate. I currently have three properties (14 housing units total) earning a bit over 10% once all expenses are paid.
  • Peer-to-Peer Lending (P2P) — I hope to invest $400k in P2P and earn a net return of 7%. I have just started this investing option, so I have a lot to learn, but others are doing far better than this, so I’m optimistic.
  • Dividend Investing — My plan is to put $1 million in dividend-producing stocks that give me 3% in dividends plus an opportunity for growth. I have a friend doing close to 4% and may have him do a post on ESI Money. I have lots to learn in this area myself.
  • Growth Index Funds — Not really invested for income but for growth, this $1.5 million should still generate 1% in income.
  • Non-working Assets — The other $500k in my net worth is non-working — it won’t produce any income. This includes my house, cars, and the like.

So with those plans, here’s what I’d generate annually:

  • Rental real estate: $60k
  • P2P Lending: $28k
  • Dividend investing: $30k
  • Growth funds: $15k
  • Total: $123k

If I can come anywhere close to delivering these results, I will be well above my goal of $70k needed per year to retire.

I could adjust the mix and earn even more. For instance, what if I could find more real estate that could earn me 10% (or close) or what if I had $1 million in P2P lending? These two alone could drive significant gains.

There are also other income-producing assets to consider including annuities, bonds, and buying a business.

Other Income Sources

Remember, the above assumes no other sources of income. But I do have other opportunities for generating income that could add even more to the bottom line. These include (along with estimated annual income):

  • Social Security )for me and my wife) — $25k. This is a plug number and I have no idea if it’s accurate, but it at least seems reasonable. And, of course, I couldn’t get this until I get to retirement age which I believe is 67 for me.
  • Part-time Job (for me – consulting, teaching, etc.) — $20k. At my current rate of pay, this would mean working less than one day a week.
  • Part-time Job (for my wife) –$20k. She hasn’t worked for years (our kids were homeschooled), but wants to get out and work a bit.
  • Side Business (like this website) — $20k. Could I earn $20k a year from ESI Money? If I provide enough value. We’ll see. [Update: As of the end of 2017, I’m at $25k per year.]
  • Total extra income: $85k

So income from assets plus income from other sources could be $208k (or higher if we pressed the extra sources of income.)

As you can see, there’s lots of margin for error in this plan — which is something I really like about it.

The Transition Period

That said, there is one teensy weensy problem: I don’t have complete access to all the assets that make up the $4 million.

Roughly half of my assets are tied up in various retirement vehicles (Rollover IRAs or my current 401k) that I can’t get to fully until I’m 59 1/2 (which will still be a few years away in five years). Yes, there is a way I can pull out money in equal chunks if I want to (it’s a process called substantially equal periodic payments), but I’m not keen on that right now.

I’d prefer to have full use of the money, invest it as I’ve detailed above, and simply pull out the earnings. I will of course need to take out principal when I get to 70 1/2, but that gives me a long time of just claiming the earnings.

So, what’s my transition plan?

Well, that’s up for grabs too. My options:

  • I could keep working at my career for the next 10 years. I do enjoy what I do (not as much as being completely retired, but I do like it), so sticking with it wouldn’t be a terrible burden.
  • I could shift down a bit, take a job that generates less income but requires less time, and start to enjoy a few benefits of being at least partially retired. This could especially work if my wife finds a part-time job once our kids go to college.
  • I could do a combination of both — work at my career for five years of so and then shift down in job commitments.
  • Take the plunge now and retire fully. After all, I should be able to pay for my living expenses with my rental properties if I add just one more. However, that would be cutting things pretty close without much of a gap between income and expenses.

Lots of options…

Best Guess

So, what will I actually do?

I’m not completely sure, but here’s my best guess for now:

  • Keep working at my career. I have a job I love with people I admire, so it’s no problem to keep on working. Besides, I have two good reasons to do so: 1) I need the income to add to my assets to get me to $4 million and 2) our kids are off to college soon, and while we’ve saved for the costs, you never know if some extra will be needed.
  • Five years from now, I can then re-evaluate and see if I want to keep working or move to one of the other options listed above. I could keep working, partially retire, or do something else. Five years is a long time and a lot will probably change between now and then, so it’s difficult to forecast what my best option might be.

Oh, and before someone mentions it, I could simply take $4 million and live off $100k per year for 40 years. That would more than last me through the end of my life. But where would the fun be in that? Besides, I’d rather leave something for my family when I pass away. (FYI, being able to withdraw/spend part of my principal is another margin for error advantage for me.)

So that’s it for now. I know, it’s a lot to digest. I am COMPLETELY open to your comments, thoughts, and suggestions, so let me have it! 🙂


Originally posted at

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