BiggerPockets Money Podcast - 551: Retired Early at 44 by Buying These "Boring" Investments

Episode Date: August 2, 2024

Todd retired early at age forty-four, just three years after discovering the FIRE movement. The most interesting part? He quit without reaching his FIRE number. That’s right. After realizing he couldn’t go one more day working his job, he quit, even without the perfect amount of money on the sidelines. Did he survive in the FIRE life, or did he eventually have to return to work to rebuild his portfolio? Stick around and find out! Although Todd made a good income, he spent most of it on his lifestyle. As his family’s sole provider, every expense took away from his income, leaving him with a respectable but by no means large savings rate. One day, as Todd surfed the internet at work, he stumbled upon a financial independence blog post, and the rest was history! He chased FIRE ruthlessly for three years and eventually was able to retire on his terms. If you’re looking to retire in your forties, quit your job, find financial freedom, or finally grow your savings, tune in for Todd’s advice. Even if you don’t have a high income, you can follow his cost-cutting, “boring” investing advice to achieve financial independence faster than you thought possible! In This Episode We Cover The “boring” investments that lead you to financial independence and early retirement Coming up with your FIRE number and whether the 4% rule still works Getting richer in retirement and how to build wealth WITHOUT working How cutting your expenses will fast-track your path to early retirement Quitting your job and why you MUST prepare for life in retirement BEFORE you walk away from your salary And So Much More! Links from the Show BiggerPockets Money Facebook Group Network with Other Investors on The Path to FIRE Through the BiggerPockets Forums Finance Review Guest Onboarding Join BiggerPockets for FREE Mindy on BiggerPockets Scott on BiggePockets Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Find an Investor-Friendly Agent in Your Area Find Investor-Friendly Lenders Property Manager Finder Apply to Be a Finance Friday Guest Subscribe to The BiggerPockets Money YouTube Channel  Apply to Be a BiggerPockets Money Guest Apply to Be a Finance Review Guest Email [e-mail] for the 4% Rule Article or Todd’s Contact Information See Mindy at BPCON2024 in Cancun! How to Retire Early (From Someone Who Did at Age 27) 00:00 Intro 01:09 Finding the FIRE Movement 03:24 Getting His Wife on Board 04:38 His FIRE Number  05:32 FIRE Movement Myths  07:37 Getting Richer in Retirement  11:55 Quitting His Job! 13:14 Prepare for Post-FI! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/money-551 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail] Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and today I have a very special surprise for you, my dear listeners. Today, we're going to share an episode from a YouTube series that I host that features stories of life after financial independence and life after fire. Today, we're featuring Todd Frank's story. Todd retired early at age 44, just three years after discovering the fire movement. The most interesting part, He quit without reaching his fire number. That's right, after realizing he couldn't go one more day working at his job, he quit, even without having the perfect amount of money on the sidelines.

And the best part is he did it the boring way. Listen now to find out how. Or you can hop over to YouTube.com slash bigger pockets money and watch the video. This episode is sponsored by Bam Capital, your path to generational wealth with premier real estate opportunities. see why over 1,000 investors have invested with Bam Capital at biggerpockets.com slash bam. That's biggerpockets.com slash BAM. Todd, welcome. Thank you so much for joining me today. Thanks for having me, Mindy.

Todd, let's jump right into it. Where did you first hear about the FI movement? It's a typical story. I was at work one day, taking my morning coffee, browsing the internet, came across a story about Mr. Money Mustache, went to his blog site. I don't think I worked the entire rest of that day. day, I just consumed as blog site and I was hooked right from the beginning. And like everybody else, it was the shockingly simple math post that really hit me upside the head. Wow, I don't have to wait

till 59.5 to retire now. So, oh, you're the first person I've heard say 59.5 instead of 65. So it sounds like you were already thinking about when you could exit the workforce. Right. You know, basically hitting that 59.5 mark, you know, when you could start withdrawing from IRAs, but didn't have any clue that you could do that before 59 and a half. So three years is kind of a quick turnaround. And it sort of reminds me of my own story with my husband. We did it in about five years. But the reason we were able to do it so quickly is that we had already been saving. It sounds like you were already saving as well. Yeah. I mean, for the most part, we were mostly doing the right things along the path. I started investing in 1986 when I was probably 14, 15 years old.

My dad had me invest in the Growth Fund of America $1,000. He was a contractor, so I'd work for him on weekends and summers. So even if that young age, I was able to earn a little bit of money. And, you know, once I got my first job out of college, started contributing to 401K, probably started out at a 10% savings rate, you know, eventually maxed out the 401k, you know, maybe a 25% savings rate. And then once I discovered fire, you know, made some spending choice changes and then bump that up to probably a 50%, but that 50% at the very end probably got very little to do with

our growth. It was those years and years. You know those two decades of growth of just methodically investing and nothing extravagant. You know, Growth Fund of America, I kept with that eventually started investing in Vanguard and Fidelity and things like that. But no individual stocks, no real estate, nothing fancy, just boring mutual funds. You say boring. I say safe. And you are saying, I, I, I, I, but I know that you're married. Right. Can you tell me what the conversation was like when you discovered this Mr. Money Mustache weirdo and then you go home, I'm assuming you were just as excited to share it with your wife as my husband was to share it with me. Exactly. Helen and I are kind of the epitome of opposites attract. I'm a math,

science, numbers, brain. She is, you know, verbal, a voracious reader in the performing arts. She throughout her marriage has never had any interest, you know, in the financial side of things. I took care of all the bills. When we first got married, she worked. And then after we had kids, she became a stay-at-home mom. So I earned all of our income, you know, once kids came along. She was like, oh, that sounds great. Go do it. I feel bad saying I, but it really was kind of a solo journey in that, you know, I paid all the bills, made all the financial decisions of where to invest. and things like that. I think it's interesting that she's like, that's fine.

She didn't think you were crazy that you wanted to retire early? I mean, you found this at 41. You retired at 43 or 44. That's a little shorter than your 59 and a half timeline. No, she didn't think it was crazy at all. Like I said, she had 100% trust in me. So let's talk about numbers. Obviously, it goes without saying that engineers make a good salary.

Did you have a savings goal in mind, or were you just trying to max out your 401k? every year. Before I discovered fire, I don't know. I mean, I might have had a goal of five million because when you read the popular media sources out there, you know, the numbers are astronomical. You need to be able to replace 80% of your income the day you retire, you know, which, you know, in hindsight, it's silly. It's really about what you spend, obviously. So I didn't have a goal, maybe a vague goal of $5 million, but nothing specific. But I would just, I just knew I needed to put money away to reach that goal. You know, obviously, engineers make a good salary, and I did make a good salary over my

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but expenses had crept up over the years. I mean, not extravagant. I think when I discovered FI, I was probably making $150,000, $160,000 a year, spending $110,000 a year, which in the FI community sounds high. It was a lot of work to get that back down to, you know, $80, $60,000 over a period of time. So it did feel like sacrifice. I'm not going to lie. So that's one of the things I will agree with the myth.

If you're already in that, it's not a sacrifice. Now I don't think it's a sacrifice, but getting there did feel like a sacrifice. The other myth about the FI is the 4% rule. It's unsafe or you can't rely on it. And what I say about that is that's just a guideline. I honestly, anymore, I don't even track where we are percentage-wise, maybe 4% to 6%, but I can't tell you off the top of my head what our withdrawal rate is right this moment. How frequently do you check your portfolio?

once a month? I love that answer. You know, I do withdrawals once a month. I, you know, when it's time to pay the bills, like, how much do I, and it's not a consistent amount every month. How much do I need to withdraw? Where do I need to withdraw it from? I'm not really tracking the withdrawal rate. I kind of track where our net worth is and adjust from there. Do we need to tighten the belt some more? Can we go on this trip? You know, that kind of thing. One example is February of 2020, I was going to start a project of putting solar panels on our roof. And we all know what happened at the beginning of 2020, and I just like, okay, maybe I need to put the brakes on this project before we start it, not spend this $15,000 to do that and delayed it and the market recovered

a little bit. And what was it, August of 2021, we put the solar panels on. So you just kind of roll with the punches. That's the way I kind of approach it. It's not, for being a numbers guy, I really don't focus on the numbers. You know, I don't have five different spreadsheets anymore like I did when I discovered fire, you know. Okay, without getting into specific numbers, where's your portfolio now compared to when you retired in 2016? Is it up, down, or kind of the same? It's up. Probably about not quite 2x, what it was in 2016. Now, a couple caveats in there. I did do some part-time contract consulting work in that time period. So I did earn some money, maybe $150,000, $200,000 over that seven-year period. Not a lot. Helen does have a part-time job making maybe $4,000 to $5,000 a year.

So even making not much income withdrawing over that time period, it's gone up, you know, which is what you want. If it's going down, obviously you're breaking the 4% rule. Okay. So, well, I think that's interesting. And thank you for appeasing the internet retirement police by admitting that you did generate some income. I knew that.

I was going to ask you about that. Right. So you proved my point. Seven years ago, you retired or semi-retired. I call it retired because you don't work at that job anymore. No. So you retired seven years ago. You have made maybe two years of spending over the course of seven years.

So you're still getting money somewhere and it's not income. And yet, even after pulling money out of your portfolio, it is still more than where you started. Like 1.6x more than when you started. I think that's a really powerful underline of the 4% rule, which I am very fond of. of however I will say that yes so many people are like oh it's they're so nitpicky about it read the original 4% rule article email mindy at biggerpockets.com and I will send you a copy if you can't find it online sometimes it could be a little difficult to find I do think that this is all just making my point again Todd's doing it right Todd's pulling from his retirement income he's able to

live off it comfortably he is not stressed out about his portfolio because it's still going up. One other comment about when I retired, you know, there's this talk about one more year syndrome. Yes. I actually did the one less year syndrome. I mean, when I retired or retired, semi-retired in 2016, I retired on a six to seven percent withdrawal rate. I was so burned out. I just did not want to work at that job anymore. My goal was to take a sabbatical and do some part-time consulting. So I didn't even hit my FI number when I retired. And I grew into my FI number by doing some part-time work. Maybe that's Coast FI. I don't know. And I was worried. I'm not going to lie, when I pulled the trigger, I was shaking when I resigned from my job. Like, what are you doing?

Nobody does this, you know. I was very conservative on my spending the first few years, you know, eventually figured out, this is going to work. We're going to be fine. The one more year, you don't, you can do one less year also. And it does work. I can attest. Oh, I love that. So I know a lot of people in this space and everybody's got a different story. There, people who have retired well short of their 4% rule number and have gone back to work. But they had a little sabbatical and they're like, you know what? Early retirement maybe isn't for me. That's okay to have this goal tested out and be like, ah, this isn't what I want and go back and do something else. I know people who have retired well short of their 4% rule number and have

continued to stay retired saying, I'll figure it out. because early retirement is for me and money is just a math problem and I can do math. I love that you, I don't love that you were a little worried about it. I get the whole I don't want to work here anymore thing. All of these different types of financial independence I think are kind of funny to me. Coastify, lean, fide, fat five, barista fai. As long as you are conscious of your money, I think you are leaps and bounds over the general population of America who is like, I'll figure out how I'm going to pay this bill. I'm just going to keep swiping the card,

swipe on the card. And I haven't talked to anybody ever in this whole space who was like, you know what, I regret pursuing financial independence. This is the worst thing I ever could have done. No, I agree. Yeah, well, you have to because I'm right. 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 taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your

finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch's subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in a needle. Achieve your financial goals for good with Monarch, the all-in-one

tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsored jobs helps you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored posts. The best part? No monthly subscriptions or long-term contracts. You only pay for results.

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and basically comes down to the 4% rule again is like everybody, I listen to Blum, blogs, watch podcasts, all of that stuff. All the examples out there, here's the 4% rule, but we don't actually follow it because we have, you know, side hustles, jobs, whatever. So there really is not a lot of real world examples out there of people following the 4% rule. So I was nervous. I kind of felt like there was nobody else I could walk through this journey with and bounce ideas off of because nobody really seems to actually do it. It's kind of funny. So I was nervous about that. I was not nervous about leaving the job. I had some friends I missed. Of course, I made new friends in doing volunteer work and stuff like that. I did not miss the job. But I say, I love to work. I hate having a job. So, Todd, what is your biggest FI takeaway that you would tell our audience?

Couple things. I think it was J.D. Roth that said this. So I'm going to steal this. The math is easy. The numbers are easy. It's the emotions about FI that are difficult. Having the confidence to do something. that nobody else does. And what I'll say to that, if you had the discipline and skills to get to the point of FI, post-Fi, you'll figure it out, you'll adapt, you still have the discipline and same skills to make it work if things go south. You know, the other thing is once I discovered FIRE at 41, I wanted to retire that day. Those three years, and like I said, I did one less year. I just couldn't wait any longer. I pulled the trigger. And that's the emotional part of it again, is it was difficult for me to be patient to get there, let the numbers work. So my advice is do focus on the numbers, but really think about the emotional side about it. How, what am I going to do after I

fire, you know, that sort of thing? Take care of your mental health and the emotional side of it first. That would be my advice. Oh, I could not agree more, Todd. That was fantastic advice. Todd, thank you so much for your time today. It is always fun to talk to you. All right, that was Todd Franks. story. I am so excited to be able to share this with you. We have a lot more of these fire videos on our YouTube channel, which is YouTube.com slash bigger pockets money. And if you have an interesting fire story, an interesting money story, or you'd like Scott and I to take a peek at your finances, you can apply at biggerpockets.com slash guest or biggerpockets.com slash finance review. Thanks for listening. BiggerPockets money was created by

Mindy Jensen and Scott Trench. This episode was produced by Eric Knutson, copywriting by Calico Content, post-production by Exodus Media and Chris Mickin. Thanks for listening.