OLTL Q4 2019 – Six Well-Lived Months in Early Retirement
Hello, my wonderful people! I hope that those having tough winters are bearing with it just fine. Enjoy a nice hot drink by the fireplace and know that spring is just around the corner.
We are snowbirding down south and will be back home next month. It’s been almost seven months since we retired from corporate. Early retirement is going well and the fun of raising our girl leaves us with little time to write, as you can see by the frequency of our posts.
Somehow we managed to get this quarterly post out as other life events continue to take priority. We’re really just letting it flow, knowing that parenting is our most important job right now.
We didn’t get a chance to write an OLTL post for the third quarter. If you really want us to write one send us a note and let us know, or put it in the comments.
Now that we’re in the early retirement phase in our lives, my passion for Enchumbao is evolving.
That’s how it should be.
Passion for things should change as time passes by, the same as our relationship with money keeps evolving.
We want to live the dream and not just savor it. It’s time to enjoy the fruits of our labor and with that, writing about things like savings rate, which are extremely important in the accumulation stage, don’t excite me as much.
That doesn’t mean that we don’t care about personal finances anymore.
We’re just in another stage of life. We still deal with finances but I’m more interested in learning about withdrawal rates, capital preservation, etc.
So our focus on personal finances has changed but the most important goal for us is to continue to enjoy the journey. We always preached to enjoy the journey while on the path to FIRE and we must continue to enjoy it even more now, in the absence of a 9 to 5.
Enjoy the journey we must, and many times it will be at the expense of going for months without writing on Enchumbao. And that’s perfectly fine. 🙂
Sometimes we’ll write and other times we won’t. There are valuable moments that we’re not willing to sacrifice by spending more time on a computer. We live for those moments.
We finally own our time. Our investments compensate us through dividends and capital gains. And that money is enough to cover our spending.
Our spending is not extravagant but it provides for an awesome lifestyle. We live the lifestyle of someone making around $100,000 a year but on much less.
With that in mind let’s dig into our spending and see how it aligns with our happiness.
One Life To Live is our quarterly recap on how financial independence plays an integral part in fueling our true happiness. We have one life to live, but are we making the best of it? Are we living in the most fulfilling way possible? We hope that our lifestyle answers those questions as we continue to optimize for happiness. Carpe Diem!
Since we missed a third-quarter post, let’s quickly review what we did as soon as we retired from corporate.
A week after we handed it our badges, we got on a plane and spent 48 summer days in Europe.
Our first European stop was in Helsinki, Finland for an overnight layover. Then we went to Minsk, Belarus, followed by spending some time in Lithuania and Spain. We were back in the States in September.
Winter in Florida
Early fall in Pennsylvania was surprisingly warmer than usual. There was no rush to leave but as November came with colder weather, we knew it was time to head south.
We drove to Florida for a second time. As Thanksgiving Day was approaching, we took off and stopped along the way at friends’ and family’s homes.
It took us over two weeks to get to our final Florida destination for December.
We wanted to be closer to the beach so we rented a condo in Venice for our first month in Florida for $1,300.
The condo was in great shape and it was only a 15-min walk to the beach and a 5-min drive to downtown Venice.
Now for the numbers lovers, we’ll proceed to discuss our spending, portfolio income,
Passive income and expenses
The following is a streamlined spending report that takes very little time to produce, therefore, giving us time back for more living. It stays within our theme of having one life to live and maximizing our time for happiness.
Spending for the fourth quarter of 2019 (October – December)
This is the spending on our first full quarter in early retirement!
Now that we are retired, I want to focus more on the overall spending vs. concentrating on the essential spending as we previously did for OLTL. That being said, we’re providing spending for all categories. This is how we spent during the fourth quarter.
|Food & Dining||$4,070|
|Health & Fitness||$1,007|
|Gift & Donations||$910|
|Bills & Utilities||$809|
|Auto & Transport||$430|
Our average monthly spending during our first full quarter in early retirement came up to $3,214. This is in line with our projected annual spending of less than $40,000 a year during our first year of early retirement.
Health & Fitness
Nothing really grabs my attention from our spending other than health insurance expenses. This is our first time without subsidized corporate health insurance.
After we left our corporate jobs, we went abroad and bought travel insurance. We had a gap of a few days from the time we left our jobs to the time we got on a plane to Europe. We didn’t mind since by law, we had 60 days to enroll in COBRA after the last day of work and it’s retroactive.
After we returned from Europe, back in September, we enrolled in short-term health insurance to cover the gap from the time we returned to the U.S. until January 2020, the time that our insurance would kick in under the health exchange.
The cost to carry health insurance for a family of three was $188 a month during the fourth quarter. This type of insurance is very limited. You can only enroll up for a year. If you have any sickness, you’re disqualified and can’t apply, not good!
This sums up our spending for the fourth quarter.
You can click here to see our most recent annual spending post.
December is always a great month for dividends. Since we invest in mutual funds and ETFs most of our dividends come in quarterly. Our dividends kept increasing by a decent amount because we continued to invest while working.
Now that we are retired from corporate work, we aren’t adding any more money to the pot. The pot, however, continues to grow thanks to compound interest and the market returns.
Our dividend income for Q4 was $18,970. Now, that we’re no longer working for a financial firm, I feel that we can talk more openly about how we invest.
The biggest income distributions came from VPMAX, VITPS, VWILX, VBTLX, and VTPSX. As you might notice, some of these are managed funds.
We have a few managed funds in our portfolio and we’re not part of the “I’m 100% in VTSAX” crowd. Not that there’s anything wrong with investing 100% in VTSAX when you’re starting to invest.
As our portfolio grows larger and larger we tend to look for more diversification and capital preservation.
It makes perfect sense. Someone with a $1,000 invested is not going to think about investments in the same way as someone with $10,000, 100,000 or even a million. Your investment knowledge should widen as your investments grow.
Or is it that your investments grow as you become a more savvy investor?
While working for Vanguard, we had the chance to attend a presentation by the VPMAX management team. Besides learning about their investment strategy, we were pleased with their investment philosophy. They invest with a long-term perspective which aligns well with our goals. Stocks are held for a very long time, think decades.
We’ve been buying VPMAX in our 401(k)s for at least 9 years. VPMAX distributes dividends once a year. The dividend total, distributed in December, was $9,494. This is one of the reasons why our dividend payout in December is bigger than usual. This money is tax-free for now but also can’t be touched.
Freedom Fund Portfolio Returns
We currently have two goals for our entire portfolio:
- The Nuestra Casa Fund holds the funds for our future home in a warmer area, once we decide where to settle in time for Chica Libre schooling.
- The Freedom Fund provides the income needed to live life on our terms.
Freedom Fund Portfolio performance
Our FF portfolio returned 5.88% for the fourth quarter.
Our portfolio continues to increase faster than we can spend it in early retirement. That won’t always be the case but we’re prepared for a downturn by holding a conservative allocation of 60/40.
We decided to execute an equity glide path (thanks ERN!) starting with a 60/40 allocation and then slowly shifting to 90% equities in 10 years, with the possibility of going 100% equities in 15 years.
At the ten year mark, we’ll reassess if we stop at 90% equities or go all in. It will depend on how much of our net worth is invested in equities and fixed income.
In 15 years so much can and will change. I’m sure we’ll find other investment opportunities along the way. We’re just getting started! 😉
Net worth update
What makes up our net worth?
Only income-producing and real estate assets make the list.
2019 net worth
Our net worth continued to increase even as we stopped contributing to accounts. We didn’t need to withdraw for expenses in 2019 so it will be interesting to see how withdrawals and market returns affect our net worth moving forward.
That’s it for now folks. I hope you’re meeting your financial goals and remember to live a little. Now off to spend more time on activities that we enjoy with our little girl. 🙂