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My New Retirement Lifestyle Cash Flow

Since I announced that I quit [1] my job and plan to leave the workforce at 29 [2], you have been very encouraging! So it’s only natural that you have lots of questions about how it is going to work.

I would like to hear more about your cash flow situation. Has your side income grown to the size of your “regular job” income? Do you have contingency plans in case business income turns south? –Million Dollar Journey [3]

The Old Income

Walking away from a job that had a six-figure compensation and benefits package sounds a bit crazy. However, once you break it down, I don’t actually have to replace anywhere near that much money. I estimated that in the end, over 2/3 of my salary was going to taxes and childcare alone! Just getting rid of the job is going to save me a ton of money.

In other words, the typical estimate of needing 80% of expenses in retirement, was nowhere close for me! In fact, mine is actually only about 30-40%.

The New Income

There are two components to replacing my lost income. New income and avoided expenses. Let’s talk about avoided expenses first, because it accounts for such a large portion of my old income.

Avoided Expenses

The great part about not working, is that I don’t need nearly the same cash flow that I used to have. Here are some of my huge savings categories.

  • Childcare. Our old childcare costs were about $27,000 per year. Now we’ll pay $11,000, avoiding $16,000 that I don’t have to earn.
  • Taxes. I estimated that just before leaving my job, taxes were eating up well over 35% of my income. That’s even after some of my creative ideas to shelter additional income [4].
  • Stopped retirement contributions. Since I was saving about 15% of our combined salary [5] recently, not having to contribute any longer freed up a big chunk of change.
  • Reduced job expenses. I will likely spend less on gas, work clothes, eating out, car insurance, etc. I didn’t add it in though, because I might spend it on my new leisure activities!

New Income

I plan to replace about 40% of my former income with a combination of business income and retirement money.

  • Minimum “draw” from my business income. I set up a minimum withdrawal described in how to handle irregular paychecks [6]. This is after setting aside a good chunk for taxes. I plan to withdraw about $23,000 per year from the business next year.
  • Withdrawals from investments and retirement. I created CDs ladders [7] that will redeem every 3 months with some money I pulled out of investments. In addition, I set up withdrawals from my Roth IRA [8], which can be done at any age if you follow the rules.
  • Alternative income. Credit card arbitrage [9], free money [10], and lots of other creative ideas bring in a fair amount of money per year. However, I don’t count on this money in my budget, as it’s more of a fun hobby than a reliable source of income.

Contingency Plans

  • Withdrawing less than I need to. The great part about the plan is that while I’m going to be using my business income for current cashflow, I don’t need to. I’m still well below the 4% safe withdrawal rate [11] on our retirement portfolio.
  • No dependency on the business income. If everything falls apart with the business (or I get bored with the business, which is actually a much more likely scenario), I’ll just live off the retirement money. And I’d save even more by avoiding the cost of our nanny all together.
  • Checking and double checking the numbers. I ran some possible scenarios (including the worst case of no income) through Firecalc [12] and they all passed with 100% certainty.
  • Option to go back to work. As a back-up plan, I officially took a one-year leave of absence from my employer. Just in case, the option will be there. Although I don’t expect to use the option.
  • Flexibility. Also, I actually like to work part-time, make money, and be creative. I can’t imagine not earning any money for the rest of my life. It’s just that now I’ll have the freedom to earn that money when I want, and how I want.

I’m Still Married

Oh yes, don’t forget about Scott. He’s still working. Not necessarily for the money, but for our awesome health insurance. While I used to make more than he did, the fact that he gets us great health insurance for almost nothing out of pocket makes it worth it for him to stay at work.

So how can I live off retirement money if he is still working?

I know what you are thinking, that doesn’t make any sense. Sure it does, lots of couples leave the workforce at different times… my mom retired, but my dad hasn’t yet.

For the record, I did give my husband the option, but he declined. (And actually that was our original plan.)

If he quit, how would it change the assumptions above?

I’d have to withdraw much more from our retirement accounts, and I’m a bit uncomfortable with the certainty of the money having to last 60-70 more years, as the data for that long isn’t very reliable. I’d prefer if we staggered out our retirements by a few years.

Maybe I’ll come up with a “new” dollar plan to count down until his retirement.


In addition to the risk of the business income disappearing, there’s a few others that I can think of:

  • Kids. Our kids could get very, very expensive. However, we’ve already saved for their college educations. In addition, we’re planning to have at least one, maybe two more kids.
  • Different choices. We may decide that we want to increase our standard of living significantly.
  • The unknown. The biggest factor is that I’m only 29. It’s incredibly hard to predict my expenses 10, 20 or 60 years out, since I really have no idea what the future holds.

There’s the new cash flow plan. If you see something I’ve overlooked, feel free to chime in!

Update: I’m done! See 29 Steps I Took to Leave the Workforce at Age 29 [13] for a recap of the last 13 years.