Podcast: Chris Mamula on Retirement Early and the Pitfalls to Avoid

Episode 8 of the Boldin podcast is an interview with Chris Mamula — a “Financial Independence Retirement Early” (FIRE) proponent and writer for both Can I Retire Yet? and Eat the Financial Elephant. Chris discusses his journey from a “normal” guy to becoming financially independent at 41 years old. In this interview he addresses potential mistakes and pitfalls for early retirement, the difference between a traditional “lean FIRE” and an increasingly popular “fat FIRE,” balancing a love for outdoors and early retirement, and more.

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Full Transcript of Steve Chen’s Interview with Chris Mamula

Steve: Welcome to the 8th podcast for Boldin. Today we’re going to be talking with Chris Mamula, from Can I Retire Yet? and also Eat the Financial Elephant, about his journey to FIRE, Financial Independence, Retirement Early at age 41, and discussing what he’s learned along the way, which will hopefully have useful lessons for people planning for their own future. Our goal is to help people who are planning for retirement or financial independence, with financial insights, stories, and ideas for making the most of their lives. Some quick things about Chris before we get started: He’s a physical therapist, rock climber, and general outdoorsy guy. He’s 41 and lives in western Pennsylvania today, but he’s in the process of moving to Utah for lifestyle reasons, and he’s achieved financial independence, about 20 to 25 years before most people. So he’s got some great insight into financial independence, and “retirement”. I think it’ll be a pretty good discussion, and we’ll be able to contrast this with the pretty technical podcast we did with Karsten Jeske the other week. Karsten is another FIRE person, but came at the problem with a PhD in Economics, so two pretty different perspectives, but both folks have great insight. So Chris, let’s get rolling. Can you just give us a little bit about why you pursued FIRE, how you got here? Chris: Sure, oh first off, just thanks for having me, and it’s kind of interesting hearing your little intro, and hearing, I’m familiar with Karsten, and I’d also heard some of your past episodes, you’ve had Jonathan Clement and William Bernstein, and I think kind of the reason I decided to share my story is, when I hear some of these people and some of their credentials, I almost feel like, a little bit of imposter syndrome. And but I think I do bring the everyday kind of guy perspective, and as we can kind of dive into it, I’ve made a lot of mistakes. And I think it kind of shows that you don’t have to be a PhD, or you don’t have to have written 10 books about investing, and you don’t have to have a perfect path to get there. And so I hope that I’ll kind of share a message that a lot of people can achieve financial independence. Steve: Yeah, I think that’s really attractive. Chris: Yeah, so kind of what drew me to it, I guess, so you mentioned I was a physical therapist, that was my career. And I got into it thinking, I think like most people, you’re 18, you decide what you wanna do when you go to college, and you think you’re gonna wanna do this forever. And I did like it for about four or five years, and I just started to really burn out on it quickly. It got very repetitive. I was working in the exact setting I wanted to. I was doing orthopedic and sports medicine, which is what I always wanted to do, and I had probably like, just an amazing employer, great benefits. Lot of vacation time. Kind of everything you could possibly want, and I still wasn’t really happy doing that, and I kind of just started looking for, what is the way out of this? I didn’t think changing jobs or going to a different setting as a physical therapist was the answer, and to me retirement kind of became the answer, and so I started going down that path. Steve: So it sounds like you were pretty young then when you decided, “Hey listen, I really wanna pursue this FIRE idea.” Chris: Yeah, it was probably five years into my career, so I would say I was in my late 20s, early 30s, when the idea popped into my head. And to be honest with you, I mean it wasn’t like there wasn’t all these FIRE blogs out there, and I really didn’t know, for someone like me, could I actually do it, and I had a lot of doubts and I didn’t know how to go about it. We were just saving a lot of money, and with the idea that, I just had this number in my head that I would retire when I was 40, and I don’t know why I had that number. I had no real plan to get there. We were just saving a lot of money, and that was about as technical as we got with the planning aspect of it. Steve: Got it. And so and basically over a 10 year period, you went from the idea of, “Okay, I wanna be retired by the time I’m 40, to actually achieving that goal.” So you were financially independent, I think you hit it when you were 40 right? Chris: Yeah. I left my job at 41 last year, but yeah, basically more or less. Steve: Nice. So I was reading some of the stuff that you have written before, and you talk about this idea of, one of the things that motivated you was this idea of this dirtbag millionaire concept. So I know you’re a climber, and so you’ve interacted with that community, and you saw some of the great things about it, kind of the climber and I guess, the ski bum community. They’re really passionate about their lives, but they’re also not super wealthy, and you kind of combined that with what you are learning as you went through this, and being able to save a lot of money, and being on the path of financial independence, and I was wondering if you could elaborate on that a little bit? Chris: Yeah, sure, and so as a physical therapist, I think my experience was pretty common, and I associated with a lot of other medical professionals, physicians, physician assistants. And I made above average income compared to the normal person, but compared to these physicians, they were making even more money than me, and just, I just was seeing that a lot of money wasn’t really equated with happiness. A lot of them were having the exact same experiences and feelings that I was. And then on the flip side, on the weekends, I would go out, and we’d be skiing every weekend, or climbing in the summer, depending on the season. And these were just a lot of times, the happiest people, the people that were truly chasing their passions, and doing what they really wanted to do. And I was just thinking, if I took the best of both worlds, ’cause these people, the “dirtbags” or the ski bums, they were really happy and passionate, but they really had very little money, and they were always like, if you’d see somebody get hurt, it would set this spiral off where it wasn’t the lifestyle that you necessarily wanted to take that extreme. But then the other side, people were working til 60, 65, 70, saving money, seemingly having a lot of money but they didn’t have happiness. I was trying to just take the best of both worlds, and that was kind of my dirtbag millionaire concept. Steve: And just for our listeners who aren’t familiar, the term dirtbag isn’t really a negative term in the climbing community. It’s really just- Chris: Nah, it’s a term of endearment. It’s something you kind of wear with a badge, with some pride as, that you’re chasing your passions I guess. Steve: Right, right. Okay, so moving on, a little bit more about FIRE. There’s this term Fat FIRE that I’ve heard about. Would you consider that to be your approach that you took? Chris: Yeah, so I guess, to contrast if you have Lean FIRE, I think that’s kind of the original, probably the person that brought this, the first blogger that was popular was Jacob Lund Fisker, and he had a blog called, Early Retirement Extreme. And it definitely lived up to the name. He lived in the San Francisco Bay area, and I think what his, he was reporting was living on about $8,000 a year, as a single person and with his partner, like $16,000. And then Mr. Money Mustache took the torch, and I think he writes about living on about $25,000 with a family of three. So I mean, you’re kind of … it really relies on frugality, and getting your expenses as low as possible to retire as quickly as possible. And then so to contrast, Fat FIRE would be, and I guess we’re kind of defining this as we go, I mean this is all a new concept, but how I would define it is just trying to get to financial independence as quickly as you can, but then living a lifestyle of abundance, so we are definitely are not living on the $25,000, let alone the $8,000, but trying to focus more on building a bit more wealth, and building more, you can call it fluff or whatever, into your lifestyle, where it’s not that bare bones existence. Steve: Got it. And who do you think, who do you say are your big influencers as you’ve gone down this path that you’ve found pretty helpful? Chris: I would say probably the first person that I really, so when I started discovering these FIRE blogs, that are the first two that I found, was Early Retirement Extreme and Mr. Money Mustache, and they were pretty popular at the time. And I related to certain aspects, but I am definitely not on that extreme frugality, again I’m a pretty average person living a pretty average existence. We just happened to save a lot of money. But the first people I really related to, a guy named Todd Tresidder, he has the site, Financial Mentor. And then through him, I found Darrow Kirkpatrick, who writes the blog, Can I Retire Yet? Which he is now my partner. I work with him on that just since the last couple of months. But I would say, those two guys in particular, I really related to their story a bit more. They’re a bit more … they’re just less extreme. Yeah, more something I can kind of grasp onto. So I would say those two guys really are, they’re more on the cusp of the FIRE community, kind of merging that with a more mainstream approach I would say. Steve: Got it. What are some of the biggest mistakes you’ve made along the way? And maybe some of the biggest lessons you’ve taken from those mistakes? Chris: Sure. So, by far my biggest mistake, when we were starting out, I was kind of caught up in the idea that investing is something you go to an advisor and you need them, and it’s complicated, and it’s not something that’s accessible for an average guy. You need to go to a professional, and you outsource that, and so that’s pretty much what we did. And starting with, basically nothing. No net worth, I mean we were kind of in the model of you’re working with a commissions based advisor. So in the process, I mean we made some, what I would consider, some pretty big mistakes. What I would say in retrospect now looking back, we got very standard advice for someone using that model. I guess probably our advice maybe looks really bad, because it is such an extreme example, because we were saving a lot of money from the beginning. So those mistakes were magnified. But as I talked to a lot of people who use advisors of different, there’s a couple different models that you can pay an advisor, but I would say the advice we got was pretty standard actually. I think it just looks particularly bad, because again, it’s kind of magnified over big dollar amounts in short time frames. I started reading different bloggers, and I went down a bunch of different paths, like looked at different strategies for investing, and I mean I have more interest I would say that the average person. Because I think as I’ve talked to people, most people aren’t gonna read even multiple books, or multiple blogs, but I’m also not the kind of person that I want to be sitting there and watching my investments every day. So I settled on, for me a pretty passive index investing approach, that I could set it and forget it, and focus on the things that are more important, which is living my life and having a good time. Steve: Got it. Could you give me a little bit more actually on it? I’ll back up for a second. So you basically started out using an advisor. You felt like they gave you kind of pretty standardized advice, but some of the mistakes were amplified. Can you call out what you thought were the biggest issues? Was it high fees, was it poor portfolio selection? You know can you give me a little bit more on what that was? Chris: Yeah, all of the above. So I mean, I think the first big thing is, so if you’re going to someone, and again, I started under a commission base, so they’re getting paid by selling you product. But I really don’t see a big difference if you’re using an assets under management model, because they still need to have your money under their control. So the advice we got was to basically bypass our 401K, so our employer, my employer in particular, he enrolled us to it to get the match. So I was putting in 5% of my salary so I would get a match. But that was leaving, that was I don’t know, three, four, five thousand dollars at most maybe, and I was leaving big money on the table where I was losing all that tax deduction, so it was very harmful. I was paying way more tax than I should, and then the investments we were buying, they were all front loaded mutual funds, so we were paying way more in commissions than we needed to. But we did know that at least. We were aware of those fees, but then what we weren’t aware of was how high the expense ratios, I mean I didn’t even know what an expense ratio was. When we figured it out, we were paying on average for all of our fees, about 1.25 to 1.3%, which is compared to a mutual fund, which, or a index fund, which let’s say at max maybe you’re paying .1%. You’re paying 12-13 times as much. And then, pretty much all of them had a 12B1 fee, which again, I never knew what a 12B1 fee is. So that’s a fee that comes back to the advisor, so I mean all those things. Then because we were holding things in taxable accounts, I mean these things kind of just built on one another, we didn’t make really big incomes. But, as we were saving a lot, these funds they turn over, so it creates a lot of taxable income just from your investments themselves, that an index fund wouldn’t. And if it’s in a 401K, you’re not exposed to that. So we got to the point that we couldn’t contribute to our Roth IRA anymore, because our income was getting too high, even though our income was way lower, and we should have been able to just do that. So then you’re losing that benefit. So all these things just kind of built on one another, and then probably the kicker. The worst advice we got, my wife rolled over a retirement account, and we were sold a variable annuity inside of a rollover IRA, which really high fees, and really no benefit to us, but a lot of benefit to an advisor. So, I mean pretty much anything you could do wrong, we did do wrong. Steve: Wow. I mean it’s basically, you’re a case study in why that a fiduciary rule is a good idea, and then yeah, the idea of buying certain kind, like variable annuities, in generally not the greatest thing. I mean on our site, we do talk about fixed immediate annuities, or deferred income annuities. There are efficient ways to buy certain kinds of annuities, but very often, I mean typically you don’t want to combine an annuity, which is basically paying you a stream of income, with an investment, which is just a mutual fund of something. Some kind of fund, and that’s what variable annuities do. So very often, they’re not efficient ways to invest. Chris: Yeah and just to tack onto that, I think most people don’t know what a variable annuity, they would have no idea what that even is, but surprisingly a lot of people own them. As I started writing, I kind of became the de facto expert for my family, and so my parents, that’s how we found the advisor, because they used him, and they seemed to be doing okay so we went with him. Basically half of their portfolio was in a variable annuity. At least theirs wasn’t in a taxable so it wasn’t as bad as ours. But then, another family member, he had us look at his investments, and he had a variable annuity also, in a rollover account, which is like you said, everything bad about a variable annuity, but you don’t even get any tax benefit, which once it’s already in an IRA. And then we had another relative that’s in the same situation, so basically the first four portfolios we had, all had that same scenario. So it’s not a rare thing at all. It kind of goes to the conflicts of, an advisor has a lot of incentive to do what’s in their interests. Which is unfortunate, because the average investor I think, is way undereducated and just doesn’t understand these things, and they do think this is complicated, which it does not have to be. But it’s definitely in an advisor’s interest to make it complicated. Steve: I think for most people, really understanding if you have an advisor, are they a fiduciary or not is question one, and you only wanna work with someone who’s a fiduciary to you. I think the second thing is really understanding how someone is paid, right? So, is it on commission, like your advisor was, which is really a salesperson, right? So they’re gonna be selling you stuff, because they’re paid when you do transactions. It is on assets under management? Is it an hourly fee? It is a flat fee? And then there’s many different ways to be paid, and you have to be super clear, and people should be asking, “How much are you making? How are you paid?” An advisor should be happy to share that with you, and if they’re not, then I think you should be shopping around and looking around. But it’s great to hear it from him. Chris: Yeah, and I guess, so when I got into doing this, my initial gut reaction was, as I realized, when you look at what index investing is, and whether you subscribe to the classic Vanguard, like buy one S&P 500 fund, or whether you get into modern portfolio theory, and you’re getting like William Bernstein, and you’re using international funds and a few different funds, but once you set it, it’s not that difficult. But you have to take the time to educate yourself, and if you’re just not willing to do it yourself, and you wanna hire an advisor, you still have to know what questions to ask, and what things to be looking for. I think a lot of times, once you get enough knowledge to know what questions to ask, you really do have enough knowledge to do a lot of this stuff yourself. I guess the one exception maybe is, behavioral. You have to know yourself and if you can’t control your behavior, I think that’s one place an advisor can add a lot of value. But, yeah I mean you have to go, and you have to understand these things, and you have to know what questions to ask. Steve: Before I move on, I think one other thing to mention here, which is probably good for folks to hear is, you I think felt essentially bad, right, about these, making these mistakes, and made yourself pretty unhappy by beating yourself up for a few years after this happened. Any color commentary on that? Chris: Yeah, absolutely. So it was kind of a blessing, and at the same time a curse for me to find these FIRE blogs, because basically these guys were talking about, just do these things, just have a high percentage, you throw it in index funds, life is easy. And basically I was doing everything they were doing, like a Mr. Money Mustache. I was following a very parallel path, but the mistakes I was making were so large, that it was setting me back. So when I started finding these blogs, and I really started wanting to retire badly was when my daughter was born, which was about five, five and a half years now ago. And so more than ever, I wanted to retire, and I was really focused on that. So I’m very future focused on wanting to get to retirement, and at the same time I’m looking back at the reason I’m not where I want to be, is these mistakes. And I’m kind of beating myself up, which is in retrospect very stupid, because we were still far ahead of the game, and far ahead of where most people are. But I’m kind of beating myself up about these past mistakes, and I really had a hard time just being in the present, and appreciating the things I have, so I have this brand new, at this time, a beautiful baby girl, who we didn’t think we could have kids, and it’s probably one of the times of greatest, should have been greatest joy. One of the greatest blessings of my life, and yeah, I’m beating myself up over these things, and made myself quite unhappy. So, as much as I would like people to learn from investing mistakes, I think it’s important to learn from that too, and you have to start where you are, and sometimes it’s easier said than done though. Steve: Yep. Yeah, it’s sometimes, it’s hard to “forgive yourself” right, because we hold ourselves to higher standards versus other people. Some of our users of our tool they, some of them have been asking, “What do I do if, I’m coming up on traditional retirement, and I haven’t saved enough money.” Do you think the FIRE concept gives hope to people like that? Kind of shows people, that, “Hey, you know what? If you get really serious about this, you can get to a place of financial independence in, it might be five or ten years, but it’s not like 20 or 30 years.” Chris: Yeah, I mean I think the concept applies. So because the concept of FIRE is, you build a big spread between what you make and what you spend, so you develop this high savings rate. And by doing that, you have money, you have capital, and you can invest it and start to grow it. And so, whether you do that from when you’re 20 to 30, or whether you do that from when you’re 50 to 60, the same concept applies. And the difference with the younger person is, you do have time for that money to grow, but if you’re looking at retiring at the end of that 10 year period, there’s really not a lot of time to compound in there. So it’s really a savings equation, and it absolutely applies to the person that’s behind. I would say the one thing that’s definitely going to be a bit harder, if we’re going to be honest about it, if you’re starting this when you’re 20, and you’re coming out of college, and you’re used to living a college lifestyle, I think it’s a bit easier, because you’ve never experienced different things, and you haven’t settled into a certain lifestyle. I think it would probably be harder for a 50 year old that’s been doing things for 30 years to now, dial everything back, and to maybe downsize their house and go from a new car to a used car, and do the things that are gonna really make an impact, but it’s certainly possible. And it’s also important to understand that there are people that don’t have a high income, or don’t have the ability to develop that super high savings rate, so there’s other methods of investing. You may have to go outside of a traditional investment and look at something like real estate, or you can use some leverage, something like that. But yeah, I think there’s a lot of stories and there’s a lot of applications beyond. It’s not just for people that find this message at the perfect time when they’re 20 or 25, and can retire by the time they’re 30 or 40. I think it has widespread implications for a lot of people. Steve: Got it. So that kind of bleeds into the next thing I was gonna ask you about. So it sounds like, step number one is, start with expenses, if you’re gonna get on this path to financial independence, and we talked a little bit about that. Any other tips, or considerations, or steps that you think people should follow when they’re thinking about this? Chris: I love the advice of starting with expenses, and to take that a step further, so if you wanna save 50% of your income, or 30% of your income, or to develop these high savings rates that you see in the FIRE community, I mean you have to get big wins, right? I think a lot of people think like, “I couldn’t do this because I gotta give up my Starbucks,” or, “I gotta not go out to eat.” And those things can help, those kind of maybe will take you from a high end savings rate to a higher, or maybe from zero savings rate to five percent, but if you wanna have a high savings rate and you wanna have big wins, you gotta go where that’s possible. So if you do an 80-20 analysis, and you’re looking for that 20% of things where you can get 80% of the results, I mean housing, cars, and food is where most people spend their money. So that’s where you’re gonna get your big wins. So I think you have to start there. Once you start to develop a savings rate, a lot of stuff really isn’t sacrificed. I think a lot of things, if you reframe your mindset and look at things different, that’s where you’re gonna get your wins. So once you start having a savings rate, you can defer. A tax deferred savings. And so say you are in the 25, well we’ll use 25% even though it doesn’t exist anymore, because the math’s easier, and you have a family, a couple that could save $36,000, that’s $9,000 you’re saving on your tax bill immediately, without sacrificing. I mean I don’t think anybody’s crying if they don’t have to pay more taxes, so stuff like that. Stuff like insurance, when you just live with more security, and you can either self insure or take higher deductibles, things like that. Your life actually gets easier but you do have to develop that high savings rate first, and then it does get a lot easier. Steve: Really quick on you, since you’re younger, how do you deal with health insurance? I mean that’s a topic for our users as well, because if they’re retiring before 65 when Medicare kicks in, and Medicare has its own cost, but if they’re before 65, they have to have their own health insurance. How do you deal with that? Chris: So we’re very fortunate. As we were in the process of working towards our early retirement, my wife took a feeler on a job. It was a company that was just starting up, and it’s a virtual company. So she’s able to work part, essentially full time, part time, depending on how you wanna say it. It’s about 30 hours a week she has to work to be able to qualify for health care, but she’s able to get that for our family, and it allows us a really nice lifestyle where she is working and bringing in some income and also probably the most important thing for us, is we get our health care that way, and it still gives us a lot of freedom because she can work from anywhere in the country. She’s very flexible other than having a few meetings a week, so that’s our approach. I think the other things you could do, as an early retiree, you can keep your income pretty low, and as long as you stay below, it’s 400% of the federal poverty level which starts getting pretty technical, but I just looked at this for our family, a family of three, that would be about $80,000, so as long as you can stay under that, you can qualify for subsidies, and if you can keep your income very low, you can almost essentially get your health care for free. Now there’s a lot of risk in that, because that’s a political football that’s always getting kicked around, but that’s a possibility. The health sharing ministries is probably the other thing we would consider. And that may be the route we would go when it comes that time if we have to buy our own healthcare. But there’s options. There’s no great options though, and I would say that’s the biggest challenge to early retirement. Steve: You know you’ve kind of reframed some concepts around achieving financial independence and retirement, and I was wondering if you can give us your perspective, I know that one of them is reframing how you look at savings. Well I guess actually we talked about that a second ago. I think the other thing that I’ve seen you write about is having a more flexible approach to retirement spending. Instead of having a very specific budget, you have this guard rails idea, so you’re not always having to monitor every single dollar you spend. Can you give us a little bit more color on how I look at that? Chris: Yeah, I think and again, a lot of this stuff we’re making up as we go, because there’s not a lot of models, I mean even like the Mr. Money Mustache, or say Todd Tresidder or Darrow, who’s been writing about this. It’s been about a decade that FIRE has come on the radar, and so we’re kind of developing this as we go, but I think a lot of people are caught up in traditional definitions of retirement. As retirement is the time you quit working completely, you have no income. You live off of investments, and I mean, there’s no rule book out there that’s saying you have to live life by any certain model. You don’t ever have to retire, and a lot of people, that’s the reality is, they can’t. And so there’s a lot of different things you can do. You don’t have to live off of only stocks and bonds. You can live off of real estate that has a lot higher income from it, versus a current with low bond yields 3% maybe. So there’s a lot of different things you can do there. And as long as you’re willing to be flexible, you can make the math work for you. And one of the things I would look at, is if we use a traditional model, where you say you can withdraw 4% of your portfolio, so you need to save $100,000 to be able to get $4,000 of income per year. So that’s one option, for most people that may mean working a year, five years, ten years extra to make that $4,000. Or you can just find a fun job in retirement and make $4,000 a year. And so you can change, and if you’re flexible and you’re willing to look at things differently, you don’t lock yourself into a rigid definition of this is what retirement means, I think it makes it a lot more achievable for a lot more people. But that’s, everybody has their own choice. Steve: Let’s move on to expenses and budgeting a little bit. My perspective is, financial services is focused everyone around accumulating a lot of money, and not given as much attention to helping people manage expenses, which is a huge part of what drives how much you actually end up needing. Do you guys have a budget that you stick to, and how do you manage that? Chris: This might surprise you but we do not have a budget. We do track every penny we spend, and at first people might picture us counting, literally counting pennies, but I mean it’s actually quite easy because, I usually take, I go to the ATM and take $100 or $200, like a cash allowance, like if we’re gonna go grab ice cream with our daughter or something. But basically everything we do is put on a credit card, and we just put it in a spreadsheet, so it’s quite easy to track. And then our spending just stays pretty consistent. We have a lot of our big expenses are done, like we don’t have a mortgage, we paid that off. We have paid off cars. Again, we don’t need a lot of, like we don’t have disability or life insurance, so our spending is, we don’t need a lot to be happy, and it stays fairly consistent. We’ll monitor every couple of months, and if something starts looking a little bit out of whack, we’ll focus on that a little bit, but we don’t spend a lot of time on budgeting. And because we have build flexibility into, we didn’t retire saying, “What’s the bare minimum expense we can have, can we get it down to eight or ten thousand dollars per year, our spending?” We have a lot of fluff in there. We ski, we travel, we go out to eat. We do the things that we wanna do and we could cut those things back if we needed to. And on the flip side, we also, like I said my wife is still working about 30 hours a week, I’m working on some projects with the blog. I’m looking at getting into real estate investing. I don’t see us never making more money, so we built a lot of flexibility into both sides of the equation, so we don’t have to really stay strict to a tight budget. Steve: Right. It’s interesting hearing you say that you don’t have life insurance or disability. I mean I don’t have disability because it’s really expensive, but I do have life insurance. I mean I get why you don’t have it, because you’re already independent so you don’t need it. Chris: To clarify that actually, we still do have term life, but we only have about $250,000 on each of us. So it’s a couple hundred bucks a year. But we do still actually have term. We dropped the, we don’t have any disability though. Steve: Got it, yeah, I use term too, because it’s pretty efficient way but, I’m carrying around a lot more. So, interesting. Just by the way, one related factoid here that I saw when we were doing some research for this, that if you make $32,000 per year, you are in the top one percent of income earners worldwide, which I thought was pretty interesting, so for a lot of folks out there, you actually are generating a lot more income than you might think, at least relative to everyone else. But, in order to be in the top one percent of net worth, you have to have a net worth of $770,000, which really illustrates the wealth disparity out there, so. Chris: Yeah that’s very interesting. Steve: Yeah that’s kind of surprising. All right, so now that you’re financially independent, what are you most excited about? I know you’re moving to Utah. Chris: Yeah, this is really kind of interesting. We haven’t made the move yet. We’ve been pretty busy because we’re selling our house and we’re preparing for a move, and I’m trying to get ahead on some projects, like writing ahead for the blog so I could take time. I was just saying I have a five year old daughter and I basically wanna take July completely off and just spend with her, and get her adjusted. So I don’t know that I really feel truly retired yet, because I’ve been pretty busy, but I would say that before I retired, if you had asked me like what am I looking forward to, I would say having the freedom to get out and ski, and having all these different things, and surprisingly, it’s really the little simple things that I’ve found that are most rewarding and make me most happy, now that I’m retired. Probably the biggest difference between when I was working and now is, my first two hours of the day. When I used to get up, I would just try to cram everything in. I would get up at 4:30 in the morning, and I would cram everything in between then and 7, like my writing for my blog, and my workout and everything. And I would scoop my daughter up, I wouldn’t even see her in the morning, and I would take her to daycare, and I wouldn’t even pick her up till 5:30, and we were all tired. And that time now, I still get up early. I get up about five in the morning, just because. Just my routine, I work out and I have about an hour to myself just to do whatever I want to do. Then I take an hour with my daughter and we eat breakfast and we read books, and it’s just such a relaxed pace. It’s so different and I wouldn’t have guessed that would be the thing, but that’s probably the thing that makes me the most happy. That time, it just sets the tone for the day. We go, we take her to preschool, and we talk in the car, and it’s just it so relaxed, and it’s a different pace, and it’s really cool. Steve: That’s great. That’s pretty cool to hear. Yeah I know you’ve talked a little bit about lifestyle design, so that’s an element of it. Anything else that you’re discovering as you kind of make this transition to independence? Chris: I think it’s kind of a work in progress. We’re learning as we go. I think it’s gonna be a big adjustment, once we get to Utah, like the things we really love to do, we love to be outside. We love to ski, we love to climb, and where we live now, there’s skiing, it’s okay. There is climbing, it’s okay and it’s an hour, hour and a half away, and when we get there, I was just looking the other day, there’s a boulder field where you can go climb, it’s three blocks from our house. We just walk up and hop on the trail. And we don’t even have to get in our car, and Snowbasin ski resort is about 20 minutes from us, and you can see it, if there’s was good enough snow, you could ski right off the back side and into our neighborhood. So just having that access to those things we wanna do every day. But again, I think a lot of times, it’s easy to romanticize early retirement, and we are moving away from our family, so there’s trade offs, and so we’re not gonna have the close access to family that we have now. But we have, again we built a lot of flexibility into our schedule so we both can work remotely, and we have money in our budget to travel, and the house we bought has a mother-in-law suite, so we’re hoping my parents are gonna come out and spend substantial time, so but yeah there’s trade offs. And that’s what we’re looking forward to next, is making that big adjustment. Steve: We’ve got some questions from our users in our Facebook group that I wanted to ask you. Some of them we’ve covered but here’s one. How do you quickly calculate your financial independence number? Chris: Yeah so I think a great starting point is, to start with your expenses, you have to know your expenses and track them. I mean you can start this immediately and maybe look in a month. But we’ve been doing this for three or four years, and so we have this really dialed in what our annual expenses look like. And then once you start with expenses, and then I would look at 25 times that, which is just the inverse of the 4% rule, which is a classic planning tool that people use. I don’t think for an early retirement, and particularly with these current interests rates and valuations that’s necessarily the answer, but I think it’s a great starting point, and that’s what we use. But again, we built a lot of flexibility in, so depending then you can take it from there. Steve: Got it. I know you’ve done some writing about your ultra safe retirement plan. Any color on what you’re doing to hedge risk? Chris: Yeah so one thing, we just built a lot of flexibility in. We’ve talked about that with being willing to earn and also being willing and able to cut spending. But as we got into this, we really thought a lot about what do we really want? Do we desire a retirement with no work ever, and I mean I think you start with this idea, you can travel, you can do whatever. But when we have a child that’s gonna be starting school, and we’re gonna be bound to that stuff anyway, so one of the things we’re looking at doing is if we kept our, some income, where we could keep our withdrawal rate between not withdrawing at all, like zero percent, and up to that four percent, then I think we’d be very safe. If you’re relying on needing that four percent, it’s be pretty risky but, by planning to have some continued income, even if it’s small amounts of income that’s earned very tax efficiently, and if we would need to buy health care, we would still qualify for subsidies and all that stuff, it really diminishes the risk. Steve: Interesting. What’s a good portfolio for someone who’s heading into retirement? Chris: Again, it’s gonna depend on how you’re defining retirement. We have a lot of equities, we’re about 80% equities, which is probably more than most people would feel comfortable with going into retirement, but again, we plan on having that income so we’re not, we’re planning on basically living off of dividends and interest at most, and maybe not even having to draw on our portfolio, so we’re very comfortable with that. And I think you do have to be careful, particularly with the low interest rates, that most people think bonds are safer but then you set yourself up with interest rate risk, and inflation risk, and you can, that can be equally risky so, it depends. You have to know your personal situation, what you desire, what your retirement’s gonna look like. So it’s hard to give a one size fits all answer there. Steve: Sure. Last thing here, so it sounds like your wife is still working, and do you think she’ll continue to work or what’s the plan there? Chris: It’s really hard to tell. She kind of fell into a pretty amazing situation where, she works from home. She has flexible hours. She makes pretty good money. We get our health care that way, and she really likes what she does. She’s a math person, and she does math modeling, which I think a lot of people would probably roll their eyes, and say, “That’s really something she likes to do?” And it’s rewarding, but she’s the kind of person that if she had a lot of free time, she’s sit around and do a jigsaw puzzle or a play with numbers on the internet, and she just loves numbers and puzzles, and solving problems so that’s kind of her thing, and it excites her. And with the flexibility, it gives us a pretty great lifestyle, so I think as long as that situation persists, I would see her sticking with it. She started, she was the seventh employee in a really small company. So you know as things grow, as things aren’t necessarily able to be as flexible and you have to put in more roles, so if things change, we’re willing to be flexible with that. But, yeah for the time being, I would say yes, she’s planning on sticking with her job for the foreseeable future at least. Steve: Right, awesome. Any questions for me? Chris: I’m kind of curious. What got you into the retirement and finance, I’m kind of curious what drew you in? Because I know, I read your recent, I think it was called a Note From the Founder on the blog, and I thought it was really great, and it lines up with a lot of the things we do at Can I Retire Yet? and My Way of Thinking, but I’m just kind of curious what drew you into it and what made you chose to tackle this problem of retirement planning? Steve: Sure. Yeah, I mean I worked in financial services coming out of school, and so I saw, I worked on the inside at places like Schwab, and I was a consultant inside of Wells Fargo and Fidelity, and various banks and insurance companies around the US and Europe. So I saw the inside of it. And then I did a company in the education space, that was about the transition to retirement. We put the whole college research, application, inquiry, financial aid process on the web early. They were actually during the first dot com boom. So I saw the efficiencies that could be brought, by going direct to consumer with better solutions. And then this company, essentially my mom came to my brother and I and said, “Hey listen, I need some help around retirement planning and just getting prepared, and being efficient.” And we looked around and we really couldn’t find someone that was willing to work with her first, and too, because she wasn’t super wealthy, and too, that really kind of understood this problem holistically. When we look at the problem, we’re kind of looking at it as, “Look, it’s not just saving and investing, but it’s how do you use Social Security, how do you use Medicare, how do you be tax efficient, how do you invest efficiently? How do you decide how much you need, how do you hedge risk, like longevity, inflation, market volatility, and how do you put all the different kind of building blocks together that you do have?” Because people have a lot of sources of wealth, right? So they’ve got their human capital, right, their ability to work. They’ve got their savings, they’ve got their home equity. There’s a whole expense side of this, you know where do they live? Should they move to a lower cost area? Should they move to a different country? How do they think about health care? How are they gonna pay for that? How are they gonna hedge longevity? Should they use annuitization? Should they maximize Social Security? Do they have a pension? So there’s all these different components, that need to come together, and there’s no simple way for people to visualize this, and make a decision around it, and so we thought, “Hey, we add a lot of value here. We can also do this in a very skillable way online. We’re not out to replace advisors, but we’re out to augment what they’re doing and educate consumers, and give people the ability to start themselves. And so I think the other big thing is, we feel like if we can help people get confident about their future, that will help unlock their human capital and they will be really thoughtful about what are they gonna do. And then also probably do what they really love to do, and as a result do much higher quality work and add more value to the world. And there’s a huge amount of human capital tied up in this population, right? You’ve got 75 million people that are baby boomers. They’re aging, but they’re still living longer. They’re living healthier lives, and they have a lot to contribute. So, how can you help tap into that. So that’s how we look at this problem overall, and why we’re interested in the problem. Chris: Yeah, I think that’s super interesting, and I mean there’s plenty of work to be done in this area, but it’s interesting to see where you’ll be able to take it, and where we can take it, and where a lot of these people that are freeing themselves financially can start thinking big, and tap on some of these big problems. Because there’s a lot of work to do, and there’s a lot of conflicts and problems with the traditional model right now, so. Steve: Totally, and I also think the community itself, like you see this in the FIRE community, people are getting educated and then they help each other. It’s a smaller group of people but they’re really passionate about it. I think you’re gonna start to see the same thing with folks just heading into retirement where, they’re some people in our audience, especially they’re obviously planners, right? Our average user’s got a million dollars saved, and they’re 50 to 60, so they’re way ahead of normal people, so they tend to be more sophisticated, and financially astute. But there’s so many other people that are way behind them in terms of being well educated, but we think there’s gonna be opportunities to tap into that community, and have them help other people, and more and more of them have time. And I definitely see this, just in the folks I’ve met in the FIRE community, and also just our users. They’re interested in helping other folks, and we wanna tap into that, and have people helping each other, and we hope that’s something that emerges with what we’re doing. Chris: Yeah, that’s awesome. That’s definitely what drew me to it. I mean I wanted to, when I realized my mistakes, a lot of the information came free or from $10 or $20 books, and that was my motivation was just pay it forward, and help as many people as we can, and I think that’s how change happens, so we’ll see where it goes. Steve: Yep, yep fingers crossed. All right, well Chris, I just wanna say thanks for being on our show, and Davorin Robison, thanks for being our sound engineer. Anyone who’s listening, thanks for listening. Hopefully you found this useful. Our goal at Boldin is to help anyone plan and manage their retirement, so that they can make the most of their money and time. We offer a powerful retirement planning tool, and educational content that you can access at boldin.com, and we’ve been recognized as Best of the Web by groups like the American Association of Individual Investors.