In my March 2022 Financial Update post, I intimated that we had made several big life changes over the past month or so. These included quitting our jobs, selling our house, and moving from Minnesota to Florida! Of course, these decisions were considered over many months (if not years) with several iterations of the timing and overall plan. In this post, I hope to share more insight into how we came to these conclusions…if for no other reason than to help me process and organize things from my brain into written form. I’ll share what we’re doing, the rationale, and what it means for the FIby35 Household financially.
Rationale
Quitting our jobs
If you’ve been tracking my monthly financial updates for any length of time, you’d know that we’ve been getting closer and closer to our FI target of $1,250,000 of invested assets over the past several months. Market returns in 2022 have put a damper on that progress, but we’re still pretty close nonetheless, closing last month at just over $1,150,000 in net worth.
We began this process months ago, back in the final months of 2021 when the S&P was running wild. Our initial estimate (more for easy math than anything) was to quit halfway through 2022. Obviously, we have expedited that timeline even further with Mrs. FIby35’s last day being April 8 and mine May 6. While putting in our notice at work was a bit nerve-wracking for us both, it was actually the easiest decision out of all of this. The timeline was mainly driven by what we thought to be the optimal timing for listing our house for sale.
Selling our house
We built our home back in 2018 – at the time, it was going to be our forever home. In just under 4 years, our equity has jumped considerably – the housing market has appreciated nicely in our area with many newly constructed homes around us driving up comps. After meeting with two different potential realtors this winter, we determined that the best time to list was late March while housing inventory in our area was still low and to still achieve the overall timeline we were shooting for life-wise.
After just 3 days on the market, we accepted an excellent offer for well above list price. I’ll admit that the moment the listing went live was the most nervous I have been in a while. I was confident our house would sell, but until you receive an offer you really have no idea if you’re priced too aggressively or not. Receiving that first offer was a huge relief – the two more after that were just icing on the cake.
Moving to Florida
Since we’re due to be homeless in a few short weeks, the biggest question becomes, “Where are we going to live?” Of course, we had considered this long ago. It was probably the driving force in all this change, actually.
Mrs. FIby35 and I both grew up and have lived almost our entire lives in the Midwest. While summers are lovely, they just don’t last long enough. Winter activities like snowmobiling, snowshoeing, skiing, etc. don’t interest us at all, so we spend the majority of the year holed up in our house or at a local brewery. That seems unacceptable for the life we want to live, both for our physical and mental health. Sunshine State, here we come!
Financial Impact
Quitting our jobs
The financial impact of quitting our jobs is pretty obvious: we don’t have any more income! Having anticipated this big life change, we tried to frontload our retirement contributions as much as possible. We increased Mrs. FIby35’s 401k contributions and used her bonus in March to just about top things off. She ended up contributing $18,213 to her 401k, a little short of the $20,500 maximum for 2022. For her HSA, we will top off the remaining $67 to hit the $3,650 max shortly, losing out just a little on the tax benefit of contributing through payroll.
My retirement contributions will fall further short of our goals, though it’s through no fault of my own. I literally had no more money to contribute, as my net pay has been less than $100 each check this year. I will have contributed $11,750 to my 403b, $15,375 to my 457, and $1,721 to my HSA (including employer match). Again, we will top off my HSA to the $3,650 max out of our home sale proceeds.
As a public employee, I also have access to a pension…sort of. After leaving public accounting, I have worked about 3.5 years in government. Unfortunately, I would need 5 years to vest in the pension plan and I really was not willing to work longer to make that happen. Instead, I am able to roll over my pre-tax contributions over the years to an IRA and forfeit any future pension payout. Had I stuck around until vesting, the pension estimator calculated about a $250/month benefit starting at age 60. I think investing the $20,000+ cash out in my IRA for the next 28 years will provide much more financial benefit than that.
Selling our house
As I noted above, we did very well financially on the sale of our home. We have a little over $100,000 in equity currently, and sold for considerably more than we paid for it. We plan on keeping about 2 years of living expenses in cash* and using the rest of the proceeds to top off HSAs, IRAs, and our taxable brokerage account. The brokerage account will be the main vehicle we use to fund the next several years of our lives until we can access our retirement accounts penalty-free.
*not actually in cash. With a baseline budget of around $50,000 for the next few years, we will deposit about $80,000 in our online savings account and $10,000 each in I-bonds. I-bonds are currently earning over 9% interest!
In addition, Mrs. FIby35 has been diligently selling most of our stuff since she quit work. With just over two weeks until closing, our house is pretty empty. We will put a few bins of stuff in storage and keep some items to travel with us along the way, but most of our stuff is just GONE. Aside from making a few thousand dollars, there has been a huge mental benefit to releasing ourselves from the burden of most of our stuff. I’ve always been a minimalist at heart and this experience has reaffirmed that.
Moving to Florida
The obvious benefit here is the lack of state income tax in Florida. We could have chosen any number of states that have warmer weather than Minnesota, but only a select few also provide this tax benefit. This will be a huge boon for our financial future, starting as early as this year with Roth conversions of our IRAs. I plan on converting enough to reach the top of the 12% federal tax bracket for 2022 to help fund our lives 5 years in the future (Google “Roth conversion ladder” if you don’t know what I’m talking about).
Not necessarily a direct financial benefit, but Mrs. FIby35’s parents spend their winters in Florida. This will provide us with a home base until we have a place of our own; not to mention spending a lot more time with them!
Conclusion
Wait a minute…
We’re doing all this and we’re not at our FI number yet? How does that work?
It’s true, we may have to go back to work in the future. That was definitely not part of my ideal early retirement scenario. But we came to the conclusion that it was the right time to make these massive life changes given our overall financial picture and REALLY not wanting to go through another Minnesota winter.
Instead of early retirement, we’ve coined this period of our lives as “Funemployment.” We’ll be funemployed for a little while (duration TBD), but it’s of our own choosing and for the purpose of bettering our lives. We’ve chosen less stuff, more time with family and friends, and more sunshine. And you can bet there will be lots of travel.
Stay tuned for more details on our upcoming adventures!
