Family of Four Taking Flight to Financial Independence

Early Retirement: The "What Abouts"

As you go through your journey to reach FI (financial independence), you will inevitably have conversations with family / friends / co-workers who are concerned (some extremely concerned) about the “What Abouts” that could happen (example: What About ... running out of money!?).  (And many are just curious / don't really understand).  We want to go through the Top 5 “What About” questions that we have come across and answer them.  

Let’s dive in!

What About ... the freedom of time in our calendar?  The ability to see public art anywhere in the world?  (Location: Houston's East End).

Top 5 What Abouts 

1) What About: A Job??!  Boredom?
2) What About: Running Out of Money?  What About: When The Stock Market Crashes?  (I'll lump these two together).
3) What About: Health Insurance?
United States
4) What About: Being Away From Family / Friends?
5) What About: Education?

What About: A Job

Often times when people hear that we plan to be financially independent and retire early they still ask about our jobs.  What about work?  What do you mean you don't need to work?  Okay, I get it.  The concept is non-traditional and does take some time to sink in, but the beauty of FIRE is you have the financial independence to not rely on full-time work (if that is what you choose to do).

So yes, we plan to move to Spain (at least to try it out for a school year ... maybe more), and no we do not plan to have full-time traditional jobs in our near future (in fact, we plan to apply for Non-Lucrative Visas so that means we can't work even if we wanted to).

So once people get a handle on, okay ... you actually plan to retire early ... well, won't you be bored?  For me (Tara), the strong answer is no.  We are going to focus on our kids and travel (time for naps?  reading?  making art?).  Even if I was bored (unlikely), my answer wouldn't be working full-time again in a traditional sense.

What About: Running Out of Money?

This question is simply a lack of understanding of how our investment strategy works.  We invest in VTSAX which covers the entire US Stock Market.  Historically the data shows that this will net us about a 7% return on investment after adjusting for inflation (10% return without adjusting for inflation).  We only plan to take between 3 - 3.5% from our investments each year to live off of (and we all know the safe withdrawal rate is actually 4%).  Being that we are withdrawing less than the safe withdrawal rate each year, we have a built-in safety margin to our plan.  This is absolutely overkill and extremely conservative, but it helps me sleep better at night.  

Let's look at a spreadsheet to see what $1,000,000 will do over time assuming 7% returns and then withdrawing 3.5% per year over 50 years.  

As you can see, we start with $1,000,000.  We earn a rate of return that has historically proven to be as good an indicator as any as to what to expect our future returns to be, and we have withdrawn 3.5% per year.  After 50 years, our account has grown to over $5,500,000!  If I’m being honest, I think this is actually on the low end of what our account will end up being because we will have part-time income of some sort (eventually) that will lower our withdrawal rates even more during some years (not to mention the possibility of Social Security in our future).  

What About: A Stock Market Crash?

This is a great one because it’s not IF the market will crash but WHEN.  I anticipate at least 3 - 4 more really major stock market crashes in my lifetime (I’m not talking about what happened in the 4th Qtr of 2018, I’m talking about 2008 level legit crashes).  

This is when you tap into your safety margins, and as we already discussed above, our 3 – 3.5% withdrawal is like having a safety margin already in our plan.  Some other things we will consider when the market crashes, is to pick up extra income through part-time work / side hustles, move to a cheaper part of the country / world, spend less (cheaper vacations, less eating out, etc.).  If we have managed our funds well up to this point, we aren’t going to one day be irresponsible and blow it all down the drain.  

What About: Health Insurance in Spain?

This is one of the most common concerns from US Citizens and rightfully so because a medical emergency in the US could set you back quite a bit if you don’t have the right insurance coverage.  Since we plan to live in Spain our first year in retirement, we aren’t nearly as concerned about this because health care in pretty much every other developed country in the world (other than the US) is affordable!  Go figure.  (And we have to have health insurance to qualify for our Non-Lucrative Visa).  We mention one health insurance option we are considering in this post.

What About: Health Insurance in the US?

We don’t plan to stay in Spain forever (I guess anything is possible though) ... so what about when we come back to the US? 

Keeping in mind that our income will probably be around $40k or less in retirement (and depending on what state we settle in), we will qualify for huge subsidies that allow us to pay $200 per month or less for health insurance in the US.  It’s almost like living on less in FI is a loophole for affordable health insurance (hence the Affordable Care Act).  That said, it is also very likely that one or both of us will eventually pick up some part-time work, and so it’s possible that we end up working for a company that offers health insurance as well.  Justin from Root of Good has a great post on how subsidies cover 88% of health insurance for his family of 5. 

What About: Being Away From Family / Friends?

This one will be tough for everyone involved no doubt, but even though we won’t be able to see our loved ones as often as we do now (the ones that live close by at least), when we do see them we will have the freedom to stay for a month or two or more if we so choose.  Rather than rushing in town for 5-7 days, we can visit and stay 30 - 60 days.  Not to mention that loved ones and friends could come and visit us as well and stay as long as they please.  

Honestly, I think our family / friends will end up kicking us out because they see us too much in FI.

(And another thing to keep in mind is our 5 - 7 Year Window.  We think this is the ideal time to give our children the gift of travel despite the cons, but again as mentioned above ... we will have the flexibility to visit family longer (not tied down to FT jobs)).

What About: Education: K - 12?

For our first year of FIRE (financial independence retire early), we plan to enroll the kids in school in Granada, Spain.  Part of the reason for going to Spain is to immerse them fully in the language and culture and being in school will help with that (yes, we plan to do !00% Spanish immersion for school).

But what about after that?  That is definitely up in the air at this point, but we are not at all concerned about their education.  As we mentioned in this post, we do have some ideas (that may or may not change) for our 5 - 7 year window before our oldest hits high school age.  Our one year in Spain may turn into two years in public school.  We would like to do possibly one year (World School) in NYC, and then we plan to do two years of World School while traveling.

But what about traditional American public school?  Honestly, I (Tara) have so many concerns about traditional public school (at least in the US), that I am not concerned about them possibly missing this time for up to 5 - 7 years (or more?!).  And I am a public school teacher!  (With that said, yes, there are many things we love about their teachers / school).  But I won't go into those concerns in this post.

And what about high school?  That is up in the air, but still on my mind.  I can definitely see staying put in one area as being a possibility.  Will that be the US?  Maybe.  Another country?  Also maybe.

What About: Education College?

One of the greatest perks I believe we will gain from living in different parts of the world during FI is the number of opportunities it will open up for our children's higher education.  For example, if we live in Spain for a year or two and then do some World Schooling in parts of Italy, Germany, and Croatia (for example), then it would not be out of the question for our kids to eventually go to college in one of these countries which would be SIGNIFICANTLY cheaper than going in the US.  Take a look at this article from CNN Money

We could make college in the US work as well by applying for scholarships and choosing a school in the state that we reside in.  Being that we more than likely won’t be tied down to a job, if we were currently living in Oregon, and our kids wanted to attend college in Colorado (or wherever), we could simply move to that state in order to get the in-state discount (if a public school).  We wouldn’t want to cramp their style though, so they might make us put a 50 mile radius around the campus of their choice that Mom and Dad can't live in.

But honestly, why would you pay $50,000 - $100,000 plus for a college degree in let’s say Texas, when you could get a degree in Germany for almost nothing?

Am I worried about paying for college?  Not in the least.

To Sum It Up

I’m not trying to sound like emergencies won’t happen in life, but I’m also not going to keep myself up at night worried about what might happen as life goes passing by.  All we (or anyone) can do is have a plan in place so that we can handle the curveballs that life will certainly throw at us over the years.  One thing I know for sure is that I don’t want to wake up one day and realize that I missed seeing the waterfall because I was too scared to look over the edge.  Step out of your comfort zone, hold on tight to something, and go look over the edge!

What do you think?  What are your questions or What Abouts?

-Erik (and some parts by Tara)

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