BiggerPockets Money Podcast - 155: Retired at 35: How Robert from Stop Ironing Shirts Achieved FI Even During The Great Recession

Episode Date: December 14, 2020

Robert from Stop Ironing Shirts has had quite a lucrative career path. Starting out as a bank teller in college, he learnt that he really enjoyed math that had dollar signs attached to the numbers. From there, he launched his career forward, first as a commercial banker, and later becoming a well-paid top executive. While he had a great job and a partner who was also bringing in a solid paycheck every month, he slowly started to get tired of the corporate bureaucracy, politics, location dependency, and long hours. Robert has made some mistakes on his path to early retirement. He lost money on a few real` estate deals and he even bought a brand new car (gasp!). None of this stopped him from still living below his means, siphoning off a large portion of his income for investments, and capitalizing on special programs such as the 409a plan. Robert now lives life on his schedule. Whether that be spending copious amounts of time shopping at Costco or surfing at the beach, Robert has a life where he decides what he wants to do, everyday. Thankfully, it didn’t take him 30+ years of working to get there! In This Episode We Cover The importance of choosing a highly lucrative skill set How to fight lifestyle creep, even when you’re making serious money The real cost of a daily commute  How he recovered from real estate losses in 2009 (and after) The psychological difficulties many face when retiring early  What a 409a plan is (and how high-earners can take advantage of it) How much cash should be in reserves for financial independence  And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums BiggerPockets Money Podcast 153 with Bill Bengen BiggerPockets Money Podcast 120 with Michael Kitces BiggerPockets Money Podcast 136 with Doug Nordman Mr. Money Mustache The Non-Qualified Deferred Compensation Plan Check the full show notes here: https://www.biggerpockets.com/moneyshow155 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 155, where we interview Robert from Stop Ironing Shirts and hear what life is like as an early retiree. You know, there's really no one-size-fits-all path to financial independence. I mean, to me, it was finding a sales position, you know, find something where you can increase your income dramatically and not have to deal with a lot of the politics around what it takes to get promotions. I think there's three things that help people make money. You have to either need a unique skill. set that's marketable. You need to be able to sell or you need to be able to lead and inspire people. And for folks that can combine two or three of those things together, they'll do really well. Hello, hello, hello. My name is Mindy Jensen. And with me as always is my fabulous perspective on life co-host, Scott Trench. Thank you, Mindy. Always a new wrinkle with these introductions. Scott and I are here to make financial independence less scary, less just for somebody else, and show you that by following the proven path, you can put yourself on the road to

early financial freedom and get money out of the way so you can lead your best life. That's right. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate or start your own business will help you build a position capable of launching yourself towards those dreams. I'm super excited to have Robert on the show today because he is post-financial independence, post-retire early. And it's really interesting to talk to somebody who has that perspective. Oh, here's what I thought it was going to be and then here's what it actually is. Yep, I think it's always great to interview folks that have gone through it.

I think the challenge is, you know, you learn a lot from the money stories and the periods of getting started. You learn a lot from folks who are in that grind of multiple years of going from, you know, that first $100,000 to close to that million mark. And then there's another inflection point when it comes to actually parting ways with that identity or that part of the, that tie to the job. that's maybe less financial once you start getting into the later stages of your money journey. And I think we learned a lot about all three of those phases from Robert today. Yeah, and not only did we learn about those things, the psychological lead up to actually leaving your job. But we also talked a little bit about what he's doing after retirement. He's not just sitting around on the beach.

The internet retirement police are very angry with him because he does continue to generate income in the form of deferred compensation. which is a topic that we have not discussed yet on this show. And you and I need to discuss that personally, Scott. And we talk about working in a gig economy. He had this high-paid, high-flying job, and now he sometimes does other things for the gig economy that maybe aren't the same pay level, but the enjoyment level seems to be far higher.

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Don't put this one off. Join thousands of small business owners who have streamlined their finances with Found. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leen or Stronger for Fitness, the anxious generation for parenting perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful is its breadth. Beyond audiobooks, you're

you also get Audible originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Robert from Stop Ironing Shirts. Welcome to the Bigger Pockets Money podcast.

I'm so excited to have you on the show today because You are actually retired early. Is that correct? That's correct. This is kind of a treat because I feel like I have a unique perspective on this. My husband is retired. His wife, Fye, is what he calls it, because his wife still works, which is fine. I love working.

I love my job. I have a great job. But not everybody has a great job. Robert, let's look at your money story and see how your journey with money begins. Well, I'm excited to be on the show. I've been a longtime reader, Carl's blog, and it was one that I was very, reading up until the point when I retired. Still browse it occasionally, but you read less blogs when you're not stuck in the office. My money story started growing up, I had parents that had me at a

relatively young age. They had jobs on and off, weren't entirely great with money, but also had some younger grandparents who were more traditional. They held steady jobs, went to college. So they were a pretty good influence on me. And I kind of saw early on the different. between how your life is if you don't have money and you don't hold a steady job versus how your life is if you are responsible with money. So I was really fortunate to have them growing up. So with that, I did okay in high school, but I didn't get into the college that I wanted. So I was left scrambling and then started looking at all my options and said, well, at these three or four state schools to choose from, let me just pick the lowest cost one. So I did that, did that, went to a fairly low

cost university, started off in computer science and decided I was just a terrible programmer. So I almost had the perfect five-story if I had gone in to be a computer programmer. And instead, I never really liked math until you put dollar signs in front of it. And lo and behold, I dropped into a degree in finance. So I started. So from there, I worked a couple different jobs when I was in college. But when summer, I went to work for a bank as a bank teller. actually my future mother-in-law had found the ad and said, hey, you may be able to do this if you're

coming back home. So I did that that helped navigate me into a training program. And lo and behold, I was 22 years old and had a title of a commercial banker. Nice. So this is after graduation of college is when you get this first teller job and then the commercial banking job. Is that right? I got the teller job between my junior and senior year of college. Okay. Great. then was hired into a short training program. And what was your kind of financial position leaving college? Did you have student loan debts or between the jobs? Were you able to mitigate that?

A little bit of both. I left college with about $12,000 in student loan debt. I was able to pay, you know, I was able to pay my own way for most of my housing expense. So I was primarily looking at tuition books. And fortunately at the time, student loan debt was all of 2%. So wasn't that too difficult? Wasn't that difficult to manage coming out?

Okay, great. So $12,000 to loan debt at a pretty modest level. And now all of a sudden, you're a commercial banker. So what happens next? So what happens next? I navigate myself back to being around my future wife. She was actually in veterinary school at the time. So worked in that small town,

learning the business, but there were limitations to just how much was around because we were in a small area. And then when I was 25, she was about to grab up. graduate and we were able to move to Atlanta, Georgia. And that's where I really saw the career trajectory start taking off. Now, I understand that veterinarians often sometimes will take on a large amount of student loan debt in there, almost like getting a medical degree with that. Was that something that you guys faced? Yes, making enough to her living expenses. And she went to the state veterinary school, and we still racked up just over 100,000 in student loan debt. And that's a lot

a debt when her starting salary coming out was $50,000. Yeah, I've talked to some veterinarians in the past about this, and it seems like it's almost like one of the hardest career choices for five because of that problem that you just articulated. The amount of student loan debt is like becoming a doctor, and the starting salary is like graduating with an economics degree. Yeah, and you delay earning it for an extra four years, and veterinary school is so grinding. their very limited windows where you can even hold a job outside of school. All right, but we already know that we already know the good stuff.

You guys are retired now. So how did you kind of handle the issue? And, you know, let's pick it back up your story with the career with that context. Yeah, well, fortunately, we kind of learned to live fairly cheap. When she was in vet school, I wasn't making a lot of money working for the bank to start out. I think I was making $34,000 a year. But it was enough to buy a little townhouse. We enjoyed life.

So by the time we moved to Atlanta, she started working. I was working. You know, we had kind of gotten used to living on three or four thousand a month, and we were making a whole lot more than that at that time being, you know, two professionals with no kids. So we kind of got used to what I would call our happiness level of spending, and then our incomes kept moving. For me in particular, I was able to, you know,

once I moved to Atlanta, I was able to start doing bigger and bigger deals, finding customers, and the power of sales really took off. But the great thing about sales, you get paid, percentage of what you make. How do you stop lifestyle creep from happening? How do you prevent that? Because that's something that I hear a lot of people struggle with and, you know, oh, well, I was making good money.

So now I deserve a new car and I deserve a new house and I deserve the new iPhone and all the things. And how do you stop that? I don't know if it's an easy answer. It's just about understanding what you like and what you have value in. You know, for me, once I was able to replace a car shortly after I moved for that job, and then I still own that car today. But why don't you win a bigger car?

Oh, you bought it new. Oh, how did you retire? You bought a new car. You know, funny how that works. What kind of car is it? I bought a Honda Ridge line. Oh. And you still retired.

Look at that. And I did. Look at that. But fortunately with the job, I was driving around a lot for work. You get mileage reimbursement. pretty much covered the car. And actually, while in my first job, I was putting over 20,000 miles a year on a small compact car and I was just saving the mileage money off of it. So if you get paid 50 cents a mile to drive something and you're driving an old car that gets 40 miles to a gallon,

you come out ahead pretty quickly. Okay. So picking back up the story here, you have a very frugal lifestyle with a lot of discipline. And what year did your wife graduate vet school? 2007. 2007. Okay, great. And what does your, you know, it sounds like at that point, you're beginning to accumulate money a little bit more, more seriously than you were on the $34,000 a year prior to that.

What do you do with that money? What's your wealth-building approach over that then suing next couple of years? For the first five years, it was almost solely the employer retirement accounts plus investing in a Roth IRA. So I was able to slowly creep my contributions up to the maximum. She was able to get her contributions up to the maximum, first in a 401K and then a simple IRA, which has a little smaller limits, then we're able to stick enough into a Roth IRA. And then the housing crash hit, and we actually owned a house that we bought for $250,000,

and shortly thereafter it was worth $170,000. So the rest of our, that kind of scared me, and the rest of our extra money went into just paying down that house. What about your other debts, the student loan debts? Were you, were you maxing out your retirement accounts before paying down those debts? Or what was your approach there? Usually. So we would max out the retirement accounts first, but instead of building savings outside of the retirement accounts, we were paying down debt. Okay, great. And so you said five years go by, you have this house paid out. What is your, what's the next milestone on your journey? I've got a, I think I've got a pretty good picture of like, okay, we've got a discipline.

lifestyle that enables us to save a meaningful chunk of our incomes. Yours is expanding rapidly. I imagine that your wife's is expanding less rapidly, but still increasing over this period of time, and that you're able to sock away at first a little bit in the 401k's, then a lot, then have money left over to pay down your student loan debt. And then on top of that, you know, as you make progress against that, beginning to pay down your home equity. Yeah. And it sounds like you grind it out here for a number of years. What's kind of the next phase there or correct me if any part of that's wrong? Yeah. No, I think I understand now. So there are really two big points where it improved.

One was the middle of 2009. I got a little promotion at work and then my wife also got a job where she can move a lot closer to the house. And it goes back to that. There's an article about the hidden cost of car commuting and her move getting a job right next to the house was tremendous. So in 2009 is when we really were able to kick our savings rate up and stop feeling like there was money stress. Then the next move was probably 2012. I got another promotion at work. She was doing well in practice.

And we had just slowly put stuff away, though. Stock markets wasn't great during that time. And then 2013 hit, and we finally had a 30% plus year on the S&P 500 after the first 10 years we had been investing. were pretty miserable. So at that point, it started moving and we felt like, okay, we actually have a little bit of money and might be able to do something with this. How would you characterize your net worth?

It sounds like you have us all in a lot of detail around that 2009 and then 2012 mark. What was kind of the jump between those two periods? I would say in 2009, we were still hovering at maybe 100,000 in total because between the student loan debt and having house underwater and market losses that were really offsetting anything that we could save at that time. And it was a slow grind to get out of that for the next three years. And then the markets all started turning at once. And when I say the markets turned, also the employment market for banking turned. Because it was kind of miserable.

People were being laid off. You didn't have a lot of room to negotiate pay increases at work. And then suddenly that changed again. So the income was going up, market was going up. At this point in time, were you thinking about, retirement, early retirement as the goal, or was it basic money management? What was the mindset? It was basic money management. I'd say in 2013, when we saw that start creep above, creep above 500,000, we said, okay, this is a significant amount of money to have at 31.

Maybe we can do something more with this. And that was about the time that I found Mr. Money Mustache. Now, you mentioned that you got a house that was right next to your wife's work. or she got work that was right next to your house. Which one was it? She got work right next to the house. Was that intentional and was that with the commuting cost in mind specifically? Or was that, how did that kind of come about? She was mainly trying to get out of a practice that required her to work Saturday and Sundays.

And the fact that we found a place that was close to the house was a bonus. Okay, great. One of those looking back in hindsight, that's how we have a car. we still own a 2002 vehicle with 105,000 miles on it. It's because of that, yeah. So when you look about the 80-20 rule of personal finance, it's really this housing and transportation expense concept. It sounds like you have a quite reasonable, reasonably priced house, even at its peak

right before the market crash, $250,000, is for, in many parts of the country, a very reasonable price point for primary residence. And then if you can manage your transportation costs as well, you're going to just have a sky-high savings rate. So in 2013, you discover Mr. Money Mustache, what was your savings rate prior to that and what did it eventually get to? And that, you know, what was your saving rate following this new job for your wife? Yeah, we were able to push it up over 50% by 2012.

Nice. And we held that 50% plus for the rest of my working years. So you had mentioned a moment ago that the house, You bought the house and then it immediately dropped in value. Are you still living in that house at this time in 2012-13 or have you moved and sold that? So I am still living there in 2013. Fortunately, while she was in veterinary school, I bought a little townhouse with a, you know, 3% town loan that you could get back in 2004.

Fortunately, that was my one good timing with real estate and we sold that and moved in 2007. The bad move was I took the equity that I made from that townhouse. around $30,000 and put it into this house. So nine months later, it was gone. Oh. So, and this is that townhouse that you bought for $250 and was immediately worth $125. Yeah, the first was a small townhouse in the college town, and then I bought a single family for $254, and then it was pretty quickly worth $170,000.

Suburban Atlanta was not a good place to be in the housing bust. Not right then, but I know that it grew. How did that story end with that house? I sold the house more than seven years after I bought it for $224,000. So I lost $30,000 in seven years. Plus, I bought a 20-year-old house that was having all the fun stuff to replace that comes at about 20 years. Yeah, that's kind of everything. So I haven't added up.

I haven't added it all up, but it was probably close to six figures when you added in the money that I had to put into it. No need to add all that up. I mean, it's gone. It's not coming back. Exactly. I did very well in things outside of real estate. Well, I think this just continues to highlight the extraordinary discipline you guys must have with your budget. Can you walk us through what that looks like, what your day-to-day looked like and how you accounted for your money during this period?

Yeah, fortunately, we've always kept a budget. It was kind of out of necessity when she was in vet school and before taxes, there was only $3,000 coming in. so you had to figure out how do you make that last? So we always had the habit of logging every expense. And I tell anybody out there who's trying to save just log every expense because it forces you to think about what you're spending money on, was this worth it? So we kept that habit up. And when we were both working and money was coming in, it wasn't that we were trying to save that much. We just weren't really finding value in a lot of things after we spent $4,000 or $5,000 in a month at total. Okay, so your spending did go up from $3,000 to $4,000 after you both started working,

but really kind of stayed there for a pretty long sustained period of time. Is that correct? And, you know, even through until today, I mean, our budget is, you know, roughly $3,000 to $4,000 plus our cost of housing. Love it. Okay. So let's get back ahead to 2013 and your high savings rate in those types of things. And it sounds like around then you discover the concept of financial independence and early retirement. how does that change things for you? We really started thinking about what do we want to do next and what type of optionality does this give us? My wife wasn't really enjoying practicing that medicine at the time.

And I'd been in the same job for seven years and was debating, do I want to change? So first we looked at moving closer to my office, but ultimately a promotion came up at work that I decided to take. So that promotion gave me the opportunity. We moved about 80 miles. She was able to quit her job. and I was able to increase my income some.

And then we got to test out, okay, what is it like when one of us isn't working? We got a little more disciplined on the budget at the time because when you go from two salaries to one in the short term, you're taking a bit of a pay cut. So, you know, that worked really well. That's the biggest reason we reduced our restaurant expenses because we both came from a small town. You dropped us in the middle of Atlanta. We were spending a bunch of money on restaurants. And I still like good food. I just, you know, far pickier on where I spend that.

So what year did you get this new job? So I got actually had two promotions, one in early 2014 and why in late 2014. So I moved around Atlanta for the first one. Then I moved to Dallas, Texas for the second. And in relation to your FI journey, where are you at this point? What's your mindset and what are the numbers like? Yeah. So in 2014, we were close to.

a lien fine number. We said, okay, if we adjusted our expenses here and there, we could go ahead and retire. But, you know, I had an opportunity for a promotion. It was going to pay a lot of money. It was something I always wondered, could I do it? So I had that question of, do I go ahead and go ahead and declare early retirement or scale back on the job? Or do I want to go and chase this and prove to myself, can I do this? So I chose the latter. Shortly after we moved, that was probably the first time our net worth went over a million dollars. Okay, so you're sitting there around a million dollars and saying, hey, that's lean FI. Are you using the 4% rule to kind of determine that?

Yeah, a combination of the 4% rule and then what random income can you pick up? Okay, got it. And so, and you're like, you know what, I have this new opportunity. I want to go and try it. And I think that's the magical thing about financial independence is it's not about retiring necessarily. It's about having the option to retire. and figure out what you want to do. And in your case, the option to retire came at the same time as a peak career opportunity in your traditional career. And you chose to go ahead and take that.

And I love that, right? You know, I would put myself in the exact same category here, right? I love being CEO of bigger pockets. It's the coolest job in the world. Do I need it necessarily to sustain more than LeanFi? No. But like I completely empathize and understand the goal there. And so what happens next?

Yeah, so the first nearly two years of the job were, you know, everything that I thought it would be was working for a great boss, having a whole lot of fun. So it was working out really well. Then things started changing at work. You know the story of a lot of other early retirees. Things start changing in the company. People change. Unfortunately, the person I was working for got promoted way up the company ladder. And new bosses came in. A lot of the stuff that I went to work for started. deteriorating, then the real countdown begins. Yep. And I want to chime in on this one as well, because this is a common thing that some people who are resisting, you know, oh, I don't want to, you know, early retirement. I love my job. I could never think of leaving. Well, you know, you love your job now, but in five years, it's going to be completely different people.

If you're at a normal, a normal organization, it's going to have a completely different feel and vibe and that kind of thing. And so the job you love today may not be there in five years, may not be there in 10 years, definitely won't be there in 20 years, right? And at least in very close to the same capacity it is now. And I just think it's a really important point to note for people who are thinking about that as an objection to this journey towards fire. The stakes are high to begin pursuing it aggressively so that you can have the option to leave when that happens. So I wanted to chime in here too, because that is exactly the point that I was going to make, because I do hear that from so many people, oh, well, I love my job. I would never want to quit. Great. You don't have to

quit just because you reached financial independence. I didn't quit. I love my job. But if something changes, if every single person leaves and all of a sudden we get the jerk parade in the office and I don't enjoy the job anymore, I have the option to leave. And that's what this is all about, giving yourself as many options as possible. If I wasn't financially independent and I was working at a job I hated, you just, I just have to suck it up and do it. And I've been there. I had a job I loved, but a boss I did not. And it was difficult to go into work every single day. And people who have listened to the show before have heard me say this same thing. I feel guilty going to work sometimes. I mean, not now because I don't go because pandemic, but I would be leaving the house

and Carl is dealing with the girls fighting each other. And I'm like, okay, see you later. I'm going to go have a good time at work. Like, I felt guilty leaving because I was going to do something fun. And he's, I don't want to say stuck at home, but stuck at home dealing with two fighting girls, which, you know, only happens every day. So he's getting pretty good at it. But I have the option.

And that's what this is all about. You don't have to stay if you hate it, but you don't have to quit if you love it. Well, in my case, I saw the other side of that. You know, it wasn't the jerk parade. It was the incompetence parade that slowly showed up over two years. There's a lot of parades that come through with the workplace. You know, and then I was leaving, and I, you know, it shocked a bunch of people that I was working with. Just wondering, how can you do this? I don't understand. But, you know, at the same time, I can tell they're evaluating, okay, I probably make about as much as he did. I've been in the role for five years longer. You know, what in the world am I doing? Well, did they ask you? Did anybody ask that?

Some did, but then others were pretty quick to give the excuse of, oh, I can't do that because of XYZ. Yeah, I could never do that. Well, then you'll never retire early. And, you know, like you said, you're saving 50% of your salary. What were they doing with their money that you didn't do with yours? What were they spending on that your life was missing out on? And I still don't know the answer to that because, you know, and I said to a couple of them,

I said, you know, we make multiples of what the average salary is. for a family of four in this country. I mean, we made multiples over the median income. So it's just not that difficult to live a normal middle class lifestyle. It isn't. I think if you're not disciplined with your money, the money that comes in just flows right on through every other area like water for folks. I think that that's the reality that happens.

And it's just always the amount of money that they have coming in for a lot of people, including the irony, people in the banking, finance, and there's other related industries. It's just remarkable how the whole job revolves around really making sure that there's a lot of discipline with company financials, and then none personally. And then they're driving around in European cars with a country club membership, wondering where all their money went. So what happens here, though? So you're in this position. A couple of parades are marching through the office, and what happens? What do you do?

I really start looking at what are my exit points. What are my exit points that I can leave? Because it was a combination of, okay, how much do I have invested? But then also when you take a higher level job, you start getting stock grants. So it's when to certain grants hit, when to certain bonuses pay out. And then they had paid to move me. So I also would have owed the company back some money that I quit at a certain time. So it was really trying to balance all of those different cash inflows and potential payments.

that I would owe them. And I thought about quitting on in June of 2018, but ultimately hung in until March of 2019 for another round of stock. In June of 2018, when you're starting to think seriously about quitting, how would you describe your phi position? You were leading phi when you moved there previously. Where are you now in 2018? I was pretty much full FI on the 4% rule. Okay, great. So you're full FI there. And walk us through the details now of kind of what needs to transpire and what you need to do to feel comfortable with through that transition in March 2019. Yeah, I think there's both the, there's the number side and then there's the psychology side. I knew by the middle of June that I was going to do it and then it just became

a numbers decision. Leading up until June, you have the questions of, is it just that this job is bad? Do I need to go and get another job? Or do I really want to take some time off before even evaluating that? So the first decision was, is it just a job or do I want to step away for a certain amount of time to really evaluate, to evaluate, do I want to be a full-on early retiree? Do I just need a career break? Those are all questions you have to figure out. And when you're in the middle of a stressful job, sometimes that's difficult to know. And I would highly recommend people take that time off and figure it out because in most fields, you're still highly employable, even if you have a six or 12. month gap. What was your conclusion? My conclusion was I was to declare early retirement and give it at least 18 months. Okay. I was more than ready, especially with two plus years of a parade of incompetency. So your conclusion was, I don't really care if it's the job or not. I'm out.

I'm quitting. And something that, something I didn't have in my career, but some people do is location independence. I was really tired of being told where I had to live as part of the job. And I had 16 years at that point, 17 years between college or jobs dictating where I could live. So location independence became really high on my list. Well, let's take a moment on that because, you know, that's a new and growing reality for a lot of people. And perhaps one very minor potential positive from the coronavirus is that more and more companies may move to this work remote or work flexible option with these kinds of things. But, you know, that's something a lot of people don't really consider is where do I want to live.

How did you kind of determine if, you know, first it sounds like you determined at least that you wanted location independence. How did you determine where then you wanted that to be? Fortunately, I knew where I didn't want it to be. No offense to, no offense to Texas. It was a great place to make money, but it's scalding hot in the summer. freezing cold in the winter and it's 12 hours to Colorado or the beach. So I knew it wasn't there. And I didn't put in enough time in figuring out where we wanted to move early on. It was more about what does it take just to get out of here.

So I ended up setting up on the coastal southeast. And I went for a five-mile trail run this morning and it was 68 degrees. Nice. Where'd you end up on the southeast? I'm near Charleston. Charleston, I love it. Yeah, that's a place that I've always enjoyed and I love it out there. So not surprised, very good cost of living, beautiful part of the country, beautiful beaches. But I will say, now that Doug Nordman has taught me how to surf, we may have to move to a place with more waves year round.

I know a place. Yeah. I know a place. Okay, great. So what does the transition look like? How do you like walk? Because I think that's the fun part about your journey is you've done it. You've put it in and you've retired and you're living it with that. That's a big hurdle for a lot of folks. We find a lot of folks struggle with that. They pile up more and more, you know, well past that point of fire. I think Carl struggled with that, if I remember correctly, Mindy. Carl struggled with that a lot, even just wrapping his mind around it. And I think this is something that a lot of people don't discuss because there are a lot of pre-fire bloggers, but there aren't very many who are post-fi who are still writing about it. And the idea

of retiring early is great, but then there's a lot of anxiety surrounding the actual, oh, do I really have enough money to retire? Of course, the 4% rule is awesome on paper, but how do you start pulling money out and being comfortable with the fact that your account is going down? And, you know, what am I going to do with my time? And I'm just going to play video games for six months. Except all of a sudden you decide that video games for six months isn't so much fun. So what did the end of your work time look like? How did you transition mentally? Because, I mean, if financially it's just, hey, I don't work anymore.

You're right. It's not easy. I mean, and it's not easy for multiple reasons. I think the money part of it's easy. It's the psychological transition that's really difficult. I mean, for one, I had a job that was always attached my professional. identity. In social settings, it's, what do you do? The first thing that you ask is, what's your job? You know, I don't have an answer to that anymore. You know, it used to be,

I'm such and such president for this institution and suddenly don't have that answer anymore. But, you know, the psychological adjustment is probably tougher than the actual numbers. Because we all know the numbers, people write about them repeatedly. It's how do you get in the mindset of stepping away from work? Because suddenly for the first time, time, you have full freedom of your time. Nobody's telling you where you have to be. For me, it was the first three months was primarily about getting a house sold, moving. It was pretty consumed. I would say the next nine months were almost vacationing where I lived. I still was waking up every day and wanted to pinch myself because I didn't have to go to

work anymore. I actually challenged that, a challenge that saying of, what are you going to do? sit on the beach all day. I tried. I tried and I did a lot of that for a bunch of last year and early this year. Good for you. A lot of that's just, but a lot of it's just coming to terms with, you know, what is it like waking up and being able to control your day versus everybody else dictating it to you? Yeah. So you have to get used to that and you have to get used to, you know, your professional identity not being tied to your work. And those were probably my hardest struggles. Yeah, that is a a really big struggle. And I think a lot of people don't consider that because they've always had a job.

It's always just been there and, you know, what do you do? You have an answer for that. Oh, I'm a computer programmer. Oh, I'm an investment banker. I'm, you know, whatever. And then listening to Carl, struggle to answer that question is kind of funny right now. He still struggles. He's been retired for three years. And that's okay. It's weird. It's weird to not have a job. But we're here to make it more normal. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact.

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in free skills training programs for in-demand fields. like software development and information technology. Learn more at aboutamazon.ca. So can you walk us through the specific money obstacles that remained in place between June 2018 and March 2019 that affected the timing of when you left your job? Because I think that's, I think there's some important learnings

that we can take away from what you did with that. Sure. Well, I was in what I call an executive style, compensation plan. So my compensation was a combination of base pay, an annual bonus, restricted stock, and then there was a pension that was layered in there. Because of that, I had all these different dates to consider on, when do you leave the company? You had to work half a year to get a full year of pension service. Stock went invested in March. Your bonus was paid out in February. So I laid that out, and I kind of realized that if I was going to leave, either June 30th or March made the most sense.

And in addition to those two things, I had a deferred compensation plan through work. And that deferred compensation plan was allowing me to put away up to 50% of my base pay plus my bonus. Walk us through what deferred compensation is. Yeah, so a deferred compensation plan is also known as a non-qualified plan or a 409A. if you want to title it the same way that you title a 401 or a 403B. But this is a plan that's offered to highly compensated employees, usually by bigger companies. And what you're doing is you are choosing not to be paid a portion of your income.

And instead, that income is kept as a company asset, but it's invested at my discretion. So I would log on to my 401K, log on like everyone else has at companies, and then I would have a drop-down boss. Do you want to look at your 401K or do you want to look at your deferred compensation plan? So with that deferred compensation plan over the course of six years, I was able to put away almost $300,000. Then inside that plan, you pick, how do you want to be paid the money? And it can be anywhere from lump sum at when you leave or you can stretch out the payments. So I chose to stretch mine out over 15 years and they're replicating a paycheck for me.

great so if you're listening and this this is a brand new concept to me or a relatively new concept to me i know mindy's excited about it but what's going on here is you're saying hey i'm an executive i'm paid a lot of money i'm making this up 250 000 a year completely making it up the number with that but you're saying hey that puts me in a high income tax bracket right now i'm paying 40% marginal taxes or whatever it is right instead i'm going to knock down my compensation to $100,000, put it into a deferred compensation plan, pay taxes on $100,000 in earnings, and defer the taxes or defer the income on that $150,000 surplus. And then I'm going to invest that in an index fund, similar to my 401K, and then take it as a paycheck,

which will be ordinary income in later years. Because now, as a beach bum, you're collecting income on a much smaller scale. Your income is much lower. So you're probably, even with that deferred 15,000. you know, $15,000 and all your other stocks, I would bet your income tax bracket is in the $70,000, $80,000 range. I don't know, making that up. I would have a much lower tax bracket than previously. So it seems like it's a very smart way to tax advantage, your compensation, if you're

very intentional and specific about an end date that you have in mind for your early retirement. Is that right? That's right, especially if you're going to leave and retire before the point where Social security would kick in or any traditional pensions that would drive your marginal tax rate up anyways. So yeah, I was able to put money away at least saving at least 24% and sometimes upwards of in the 30s. And now I can draw it out and we're in the 10 to 12% bracket on most of our stuff. Okay. You said this is for highly compensated employees. Is highly compensated like a specific term? Is there a minimum dollar amount that you have to be making in order to participate

in this? Or is this just something that if your company offers it, you can do it? I don't know the answer for all companies. I can say in ours, and the one that I worked for, you had to make at least what the cap was on Social Security in that year. That was their starting point for eligibility. Okay. That's a good starter then, because I'm going to do some research and maybe have a conversation with my CEO and see if they are going to start offering this. Because, yeah, I have my bigger pockets income, but I also have a real estate. agent license and I've got that. Anybody who's an agent right now is making money hand over fist and if I could pay less taxes that I would like that.

A solo 401k yet. I've got that too. You could still only put in so much. But if I can defer it, that would be great. The company's got to love that too, even though it's an odd thing going on. But they're like, oh, great, we don't have to pay you now. I guess if they're putting into a 409A plan, they are paying it currently. They're just not. So there is no difference there. But if they can truly defer the compensation, they get access to the cash flow that much sooner.

It's put into a trust. Okay. Oh, okay. That was going to be another question. Is there any risk? Like, oh, okay, I'm going to defer my compensation. And then the company goes out of business. I'm out of luck or?

When I would loan money to a company, they would show that headway these plans, they would show on their audit both an asset and a liability. They would have a deferred company. They would report the total assets of the plan, and then they would report an equal liability. Your risk is if a company were to file for bankruptcy, there's a chance your deferred comp plan can be pulled in as an asset of the company. In my case, I was working for a highly regulated industry, and even when companies had failed, they tend to be acquired by another company versus going through a liquidation.

And in those acquisitions, they've kept the plan in place. So I felt comfortable taking the risk relative to the benefit of the tax arbitrage that Scott was talking about. Okay. Well, this is fascinating. I want to go do some more research on this. That seems like a really key part of your decision mentally. We talk about the 4% rule in a lot of these things.

And we just had Bill Bagan on to discuss the original work of the 4% rule. we've also talked with Michael Kitts's. But at the same time, no matter what, nobody we've talked to, I don't think a single person has truly retired without a cash, a large cash reserve, a wealth significantly in excess of the 4% rule, or another trick or two up their sleeve around their finances. And it seems like this is the one for you, is this deferred compensation in addition to the 4% rule and perhaps a cash reserve. Is that right? Yeah, that's correct. Yeah, so I love that. And I think that that's like a good takeaway for everybody, if you're thinking about this, is the beginning of the end is the 4% rule. You know, we love the 4% rule. The 4% rule works. The bath is sound. We're not here to dispute that, but it's the beginning of the end.

And I love the way that you found a creative solution to really put you over that, that threshold there with this deferred compensation. That's a brilliant and unique approach, I think. Yeah. And I don't think that Carl would have been comfortable leaving mentally. if I didn't have a job. Robert, what are you doing for health insurance? Well, so I'm about to sign up for my fourth health plan that I've had in a span of 21 months. That sounds like super awesome fun. It is. So I initially went on COBRA, which was very good from the company that I worked for.

Then earlier this year, I briefly did a little consulting work with a former client of mine, and I ended up on their health plan for all of three months. by arranging that as a W-2. Unfortunately, that business was in something that got hit very hard through the pandemic. So the internet retirement police can once again not come after me for taking a consulting gig. And then at that point, I went with a plan on the exchange. Okay. Who are the internet retirement police?

Would you like to address that, Mindy? The internet retirement police is a group of self-important people who feel that they need to dictate how you retire. And should you make any money at all during your retirement, you are not truly retired. And they come back and call you a fraud if you declare early retirement, but then you produce a dollar in income in the future. Yes. So anytime we see an article in a major media outlet describing financial independence, the internet retirement police come out and talk about how it's not possible. how the things we talk about every week on the Bigger Pockets Money Show podcast are either not possible, not practical, or somebody's cheating, you know, has that extra chickup their sleeve or whatever

it is, like consulting work after retirement. Well, Robert is cheating. Yeah. The fact of the matter is, though, like, that's the deal is Robert is chilling on the beach, having a good early retirement here, and occasionally picking up work that sounds fun on a one-off basis. If it happens to make money, that's great. So you can feel free to get beat up by the.

the internet retirement police. Sounds like you're doing pretty well. Well, Robert has some actual income coming in. It's not just this deferred compensation income. It's not just, you know, doing a one-off consulting gig. And frankly, Carl has suggested that, oh, if I could find a really interesting consulting gig that would pay me a lot of money, I might go do that for a short term. Just because you don't work anymore doesn't mean all the information and knowledge that you

have in your head from whatever industry you were in. in, all of a sudden goes away. I will always be a real estate agent because then I get to go see houses. Robert has information from his decades of experience working in the banking industry. Should he just say, nope, I'm not going to share that with anybody? I mean, I'm assuming we didn't actually speak specific numbers, but I'm assuming that this consulting gig for your former client was paying you, you know, more than minimum wage. It was paying me a little bit more than minimum wage. But, I mean, ultimately, I mean, you know, you get drawn to a career because you like something about the career. I love looking at business deals.

Everything about it is enjoyable. One of my favorite podcasts you've done was when you had Kirk Chisholm on talking about the 70-some-odd ways to make money. And, you know, he was going through 20 or 30 of the different private company deals. And I was saying, yep, I've looked at that. I've looked at that. Look at that. My favorite thing to do now is do consulting work for limited partners. They're looking at a deal and they've never seen anything like it, but I look at it and it's the seventh time I've seen a company in that industry.

And you would know more about that than I would. I think that's great that you can go in and have fun, do the parts of your job that you like, or the parts of your former job that you like, and then just leave out all that incompetency parade garbage that you don't have to deal with. Exactly. It's the power of financial independence. It's the power of financial independence. But I also follow you on Twitter, and I know that you have actually generated income in the gig economy, which pays maybe a little bit less than your consulting gig. I would like you to talk about that. Well, we didn't talk about my portfolio at all, but my disclaimer is Costco is my single largest stockholding.

Okay, that's a good disclaimer for this next little bit. So that's my largest stock. and my wife and I have always loved shopping at Costco. We're not quite at the level where we would have had our wedding there like you've seen online, but we really like Costco. So we happen to live right near one, and unfortunately in the middle of March, a lot of our recreational activity got shut off.

So I start realizing there's this thing called Instacart. You open up your phone and it looks like a casino, and there are all these different jobs where they'll pay you to go shop at Costco for somebody else. That sounds like fun. So lo and behold, we became gig economy workers by both signing up for Instacart and shopping for Costco. And it was really fun the first two months because they would let Instacart people in before the actual store opened. So I was saying Costco and got to listen to the employees were blaring guns and roses through the loudspeakers setting up everything. And I'm just in there shopping.

And I could get two or three jobs done before 10 a.m. That's awesome. And how much does that pay? The pay was really good for three or three. for the first three or four months. But usually you can get paid at least around here, $30 to $40 per shop. And how long does a shop take? Depends on how fast you are. If you want to play at like supermarket sweep, we can get in and out there in 15 minutes.

Oh, wow. And I guess you would get a lot of, like you start to memorize where all the stuff is. You really do. And you can go in and get the stuff. You know, right where everything is, it's a good way to see what they've put on clearance. you've been eyeballing something. But on our peak month, so my wife and I, we're both running, we're only using one vehicle, but we're both running the app.

So sometimes she can pick up a job while I'm finishing up another one. But in our peak month, we made almost $4,000. And how many hours did you, would you say, went into that? Maybe 25 a week. Wow. At the peak. Right now it's something where occasionally we'll log in right when Costco's about to open and see if there's anything worth doing.

if we're not doing anything else at 10 in the morning. Yep. So just another point here around, like, there's just so many of these types of opportunities out there. This is just one of hundreds of potential ways to make extra money on the side after retirement on the side to completely stem any problems about relying on the nest egg or whatever it is,

at least in the first couple of years, if that's something that is holding back your decision there. Right. I think numbers-wise, a lot of, of people who really don't like their job, they end up working longer than, longer than they really need to versus not working long enough. Everyone's scared of security, but there's so many ways you can make money now. Well, yeah, you said this pays like $30 or $40 a shop. So there is your water bill. There's your, you know, do a couple and you've paid your utilities for the

month. Do a couple more and you've paid, you know, your grocery bill and a few more and you've got all your gas covered and a few more and a few more. And, you know, all of a sudden, 25 hours a week and you made basically $1,000 a week. Right. In that month, you know, I think that what separates people who are able to retire early and able to amass this nest egg and 4% base and all of that is the people who go out and make it happen. You could have watched TV all. the time instead of going out and earning money shopping at Costco. You could have complained about it and said, you know, oh, well, there's no jobs. Nobody's calling me to see if I want a job. So I'm just going to sit here and do nothing. And you didn't. You had the nesting and you're like, hey, hey, people are

going to pay me to go shop at Costco. Hot dog, I'm going. And it's just, I mean, that was a pun, Scott. They sell hot dogs at Costco. And they do still serve hot dogs at Costco. with their limited food court. Their pizza is so good. Yeah. Yeah. And the one caveat on Instacart that I would tell you, that peak month, I had the benefit of our state opened a little bit earlier. And large beach houses are in the service zone.

So people would be showing up when their beach house, not want to go shopping and then pay really good money to have somebody else deliver all their food to them. There you go. That is a good thing to note. But yeah, I mean, there's... There's so many ways somebody could make $800 to $1,000 a month without a lot of effort. If they're retiring earlier, if they just want out of their job and want to take a break, there are lots of options that can go and bridge that gap. Yeah, but you can only do that if you have funds in the bank to cover your living expenses

while you go try something else, which is the whole point of financial independence. Okay, this has been really, really fun. This is a fascinating look at what happens after you retire. And it's not about sitting around on the beach all day long, although it could be if you want to. And I still enjoy doing that. So do I. We talked briefly about Costco being your biggest stockholding. Let's look at what else you have in your portfolio.

Currently, the portfolio is all public equity, stocks and bonds. right now I'm sitting at 80% stocks and 20% bonds. And out of all those holdings, about 60% are in mutual funds. Mostly index mutual funds. I've got a couple of active funds in areas that I'm just not that comfortable investing in myself. Okay. One of which being technology stocks. So I'm trailing the market by a little bit this year because of my lack of understanding of technology and technology stocks and their high valuations.

Okay. But I'm going to say, if you don't understand technology stocks, don't try to pick them. Because you're going to pick the losers. That's like the law of picking stocks. If you don't understand what you're picking, you always choose the ones that stink. That's true. And of course, the rule of buying what you know hurts a little bit when you really know banking and you went into this owning some bank stocks.

And you're saying you're trailing the market this year because you don't own tech stocks because you don't trust them and they've done well. Is that what's going on? Yeah, I'm just underweight in technology relative to, index fund, a little overweighted towards real estate and small caps. Okay, great. And how do you invest, what do you invest in real estate investment trusts? Is that how you're, you're, right now it's all reads. I actually had some money set aside that I was looking at some limited partnership deals, but when March hit, the deals that were out there on the public markets were just too good to pass up.

And then there's still liquid. I'm not dealing with the three to year lock, three to five year lockup of my funds. That's coming to, that's going to be coming to. in soon, and I'll be back looking at some limited partnerships. Great. And then so it sounds like 60% in these mutual funds or reeds or those other types of funds, basically, and then 40% in more, in just individual securities, mostly banking stocks. Is that right? Yeah, 40% or so is in individual stocks. And Costco.

The largest holdings, Costco, Disney, Bank of America, J.P. Morgan. Got it. Okay. Great. And then how much do you have in cash in your, in your, in your, your bank account in terms of your monthly spending? We keep, right now it's at about six months in cash and another year or so, isn't just the bond index, Vanguard total bond market index. Great. Love it. We always ask that because we get a wide range of answers from folks who are FI or very

close to FI, usually at or in excess of that six month mark. Right. That's a pretty comfortable mark. I just don't want to be looking at, I don't want to be stuck in a position where I'm forced to sell when something's really low and balancing that against how much cash do you hold, earning nothing. Yeah, I love that answer. Okay, I think it's time for our famous four. Robert, are you ready? I'm ready. Okay, Robert, what is your favorite finance book? My favorite finance book is the millionaire next door. It was really an eye-opening book that I got

a hold to in college that taught me wealth is the money that you don't spend. Love it. That's a great, great book. There's a couple of sequels to it as well with further research. I love it. I probably read Millionaire Next Door once a year or so, just because of it's refreshing. I love that book, and I think I've got the follow-up, the millionaire mind, on my bookcase still. Yep. All right, what was your biggest money mistake? My biggest money mistake or mistakes have always been housing, you know, really bad at buying my own house, just poorly timed. And when you move a lot for a corporate job, you don't get the mathematical benefit of staying in a house for at least 10 years where your appreciation can offset the expense of selling. I think people really need to realize just how much it costs to sell a house. You have real estate agent commissions, which is no small portion of the expense to sell. You have the taxes. Usually property taxes are paid in arrears. So you owe taxes for every day that you live there.

So you're bringing that much money to the closing table. And hopefully you've escrowed those funds so that you're not coming out of pocket for that. But as you well know, when you sell for less than you bought it for, there's so much money coming out of your pocket. It seems like, you know, why am I going to even bother trying to sell this house? I mean, you're easily giving up 6 to 10% off the sales price when you sell between real estate agent commissions, then all the concessions or repairs and refreshments that you have to make to a house to make it appealing. The economy's been strong and interest rates have been falling or stable or falling for the last, I don't know, 10 years now here, as we're sitting here, recording this in 2020. When that happens, prices go up and that's where people have this illusion about buying is better than renting.

Nope. On average, you're going to have to live there seven to ten years, like you're saying, before it really, you know, in the context of long-term history, makes sense to buy versus rent. And even then that's an average. Sometimes it'll be worse and you'll have to live there longer. Sometimes it'll be shorter. But yeah, I couldn't agree more with the housing stuff. One thing I will say to your credit is it sounds like you never bought more house than you really need it. Housing is an expense and you can either rent it or you can buy it. in that, but it sounds like you made a reasonable choice with your houses, even though your timing or your decision to buy versus rent, you would have made a change going back.

Yeah, that's correct. Awesome. What is your best piece of advice for people who are just starting out? You know, there's really no one-size-fits-all path to financial independence. I mean, to me, it was finding a sales position, you know, find something where you can increase your income dramatically and not have to deal with a lot of the politics around what it takes to get promotions. I think there's three things that help people make money. You either need a unique skill set that's marketable. You need to be able to sell or you need to be able to lead and inspire people. And for folks that can combine two or three of those things together, they'll do really well. Wonderful. All right. Most difficult question here. What is your favorite joke to tell at parties?

Oh, this will be bad, but why did the banker fall asleep? I don't know. You lost interest. That one was for you, Scott. That was immortalizing. Okay, I'm struggling with my amortization joke here. All right. Moving on, where can people find out more about you, Robert? I write at stopironingshirts.com and you can find me, find me usually on Twitter.

I would like to point out that I wore this unironed shirt in honor of you today. Also, I appreciate it. Polyester. Don't ironed polyester. The pink-con t-shirt. It's still the summer here. Nice. Why the unironed?

There was just something small that I always did to save money when I was, the blog name was Stop Iron shirts. There was something small that I always did to save money. You know, the first couple of years, I took the shirt to the cleaners, and I couldn't figure out why I was paying somebody a dollar a shirt to go and laundry it and to iron it and said I could figure this out myself. And after multiple frustrating attempts,

I eventually figured out how to do it. You just turn on the shower on super high, right? Isn't that how you do it? Or is that more expensive than the cleaners? That's probably more expensive than the cleaners. You wash it, you take it out of the dryer before it is quite dry. Or you don't put it in the dryer at all. You hang it up and then you iron it with starch.

He's deferring his compensation. He does now put his shirts into the washer and dryer, Mindy, at that level. That's part for my understanding, right? You're talking about the good stuff with the shirts that you can. get washed, right? I mean, I wasn't paying for starch. And they were Costco shirts. Oh, there you go. Of course they're Costco shirts. Of course. Because when you're lending bunny, I don't think people care if you're wearing a Costco shirt or a, I don't even know what an expensive shirt is anymore. Neither do I.

Robert, this has been so much fun. Thank you so much for coming on the show today. We really appreciate your time. Thanks for an invitation. Okay, and we will talk to you soon. Yep, thank you. Okay, Scott, that was Robert from Stop Ironing Shirts. What did you think? I learned a lot from Robert. I've never heard of deferred compensation before with that.

That seems like a really interesting tactic. I think it's a very good option for those who know that they're going to be wanting to part ways with their employer or know that they're in a high-income tax bracket now and don't need the money. So I think it's a really interesting approach there. And I think the guy had, you know, a disciplined path and is now, and what is, his late 30s, he's going to enjoy the rest of his life without being dependent on wage income again. I mean, what a great outcome for him. Also not dependent on location.

He can live wherever he wants. He's enjoying surfing. Do we know anybody else who enjoys surfing? Oh, yeah, Doug Nordman. Nord's taught him how to surf. I think Nord says he taught everybody that I know how to surf. He taught me how to surf. He taught me how to surf.

And this is something that Robert really enjoys. let him go and surf. Who are you to tell him that he can't do what he wants to do with his life? He has done his, he's put in his time, he made his money, he saved it responsibly, invested it wisely, and now he's off to live his best life. He got money out of the way, and now he can live the life that he wants to live. And I could not be happier for him. That's right.

We hope that you enjoyed today's episode, and we would like you to share this, with somebody that you know that you've spoken with about early retirement and they bring up the concept, oh, well, I love my job. Robert loved his job too. And now he loves his life even more without that job. You can find the show notes for today's episode at biggerpockets.com slash money show 155. Scott, should we get out of here? Let's do it.

From episode 155 of the Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen saying Gotta go, friend, this has to end.