Our First Year of Early Retirement: Reflections & Numbers Breakdown

While June 2021 was technically my last month in the office, I was off on parental leave collecting some EI (employment insurance) during our little guys first year and had the fallback option to return to my part time gig if I wanted to once my EI was up. So, I really was in a different headspace then vs after letting my boss know back in July 2022 that I was not returning and thus technically “retired early” then. So for all shits and giggles, I consider July 2022 – June 2023 our first full year of early retirement even though my last day in the office was a year earlier than that.

Now that it’s been one full lap around the sun with no j-o-b let’s dig into a look back of the previous year!

Overall Thoughts Of Our First Year Being Retired

Honestly, it’s been amazing.  I cannot imagine going back to work and having a boss anytime in the near future. Gah. I am my own boss dammit. Maybeee someday I would consider a part time gig but the conditions would have to be ideal.  And I’m talking 5+ years from now if ever.

It has been so incredible to have two full time parents in the house.  I don’t even think I can put into words how much I love it.  We get to witness so many firsts right in front of our eyes.  I absolutely love this age range that our kiddos are in and love goofing around with them (and should have been a kindergarten teacher in my previous life).  Finn is reading and Parker is putting words together.  The best.

I came across this quote the other day from Dave at Strong Money Australia’s newsletter and it’s so incredibly true:

“To those with young children: If you live simply, invest, and create more freedom, your kids get their parents back.  That’s the best possible gift you can give them.”

We are trying our best to be present parents.  Holy, parenting is HARD! It’s the hardest job I’ve ever had, and I’m ready to quit every evening when it’s time to brush teeth, but I wouldn’t trade it for anything. I’m making it a goal this year to start reading again and to focus on parenting books.

Not having to go to work means we can design our days however we want.  Our calendar always has things on it and it’s up to us to decide if we want to go or not. It’s a little silly how “celebrity like” our kiddos are at our library haha.

Since we both were shift workers during our careers, we’ve become accustomed to the ‘Tuesday morning errands to avoid crowds and hibernate over weekends’ type of lifestyle. But it doesn’t get old. It’s nice to have local FI focused friends.  It’s so nice to run into friends and just hang with them until they have to get going.  It’s nice to randomly have friends pop over and they end up staying for hours.  It’s nice to run into your neighbour and it turns into a 30 minute chat about what’s been going on in their life.  It’s nice to not be rushed.  Creating this community has been so wonderful.

This year has definitely reminded us to prioritize friendships, relationships, and community.

Financially, we really have been feeling very zen with the decision to leave work.  Not once have we had any sort of “oh shit what have we done” moment.  2022 was a pretty crap year for the markets and for the months leading to the final decision not to return to work, our portfolio kept going down and it still felt right to pull the plug then even though it was hard to bat away the “hmmm is this going to be a repeat of the 1970s when it was the worst time to retire…” thoughts.

Throughout the year, I couldn’t turn the tracker brain off but very little of our time is spent looking at numbers.  We will continue to be mindful to stay below our 4% number for the next few years as we battle through sequence of returns risk and eventually implement retirement guard rails.

Our overall goal has been to simplify things.  It may not be the *most* optimized strategy, but that’s ok.  Everything is pretty much on autopilot at this point so there’s really isn’t too much time spent analyzing our finances.

Not once have we felt like we were “missing out” for the year. Looking back, I’m so glad we did not succumb to “one more year syndrome”. Time freedom is priceless.

10/10 would FIRE again.

Spending

Ok enough fluff, let’s dig into some numbers!

Overall, we spent a total of $45,145 this year.  This is more than our typical spend but we’ve also never travelled for 2 months before either.  If we split up our spending into fixed/discretionary, we spent $26,427 on fixed costs and $18,705 was on discretionary spending (58.6% / 41.4% split). It’s nice knowing that 41% of this $45k spend was on fluff that could get reduced if need be.

Here’s a further breakdown by category:

Fixed Expenses:

Discretionary Spending:

Back in Q2 2022 our liquid portfolio was sitting at $1,146,309 which would lead to a spend of $45,825 during this first year using the 4% rule so we were actually right on track.

According to StatCan, the 2022 Average Annual CPI increase was 6.8% for the year in Canada.  The 4% “rule” states one should be able to increase their retirement spending by inflation each year which would lead to a green light to spend $48,941 for this next year.

Side note: In our quarterly net worth update posts, we state how much our annual spend could be if we had retired right then and there instead of Q2 2022 (based off our current net worth and the “4% Rule”) .  We don’t actually use this figure when it comes to our spend goal for the year though.  It’s just something we like to track and it helps to determine if our current portfolio can support our spend goals for the year.

Income

Ok, here’s the fun part.  So we spent right around 4% of our portfolio but was that the same amount of money being drained from our accounts?  No!

I don’t even know how this happened, but somehow we made $30,377 this year. This figure does not include any dividends paid out from our taxable/non-registered accounts! That means 2/3 of our spending for the year was covered by income and we only dipped into our portfolio by $14,768.  Wild hey!?

This comes from a wide variety of sources including (from highest to lowest):

• Canada Child Benefit: $7,481
• Renting out our house while traveling: $5,669
• Coaching: $3,250
• Last remaining 2.5 months of EI: $3,213
• Affiliates: $2,116
• Company RSUs paid out: $2,040
• Tax refund: $1,808
• Alberta Affordability Plan: $1,200
• Gifts: $1,140
• Canada Climate Action Incentive: $1,077
• Selling random crap online: $1,022
• Home Ins and Car Ins Refund for adjustment to policy while abroad: $360

I’m going to guess this upcoming year will see an income figure that’s less than half of what’s listed above as quite a few of these are one-off type income streams that we do not expect to be repeating. Our CCB will be slightly less this year as 2022 was a high bonus year for me, no plans for a longer trip where we’d rent out our house, easing up on coaching, no more EI, no more RSU, AB Affordability Plan was likely a one time thing, etc.  I’m thinking $15,000 is likely a stretch for this upcoming year.  But the following year it will go up quite a bit once CCB ramps up.

Overall Withdrawal Rate

Putting it all together…

Overall we spent $45,145 but we earned $30,377 for a net out of pocket spend of $14,768.

Our portfolio started off with $1,146,309 which means we withdrew 1.28% during our first year of early retirement.  Holy, that’s low.  If we did include our dividends from our taxable/non-registered account that we are no longer DRIPing we’d be sitting at a withdrawal rate well under 1%.  We need to figure out how to spend more or earn less… I suppose that’s a good problem to have?  It’s nice knowing if we have a major car/house repair pop up we can fix the issue and not have to bat an eye.  I’m sure there will be future purchases in the next few years that we will start to feel “justified” to be able to spend on (i.e. a pop-up tent trailer) when we feel to urge to splurge.  But for now, with young kids in tow, we’re very content with the way we’re designing our days.

And at the end of our first year, our liquid portfolio is now at $1,305,646 for an overall net gain of $159,337.  This is more than any salary either one of us have ever had… and we were draining from the portfolio for the year.  Compound interest truly is amazing.  This is a year-over-year improvement of 13.9%.  Pretty wild…!

Are we banking on gains like this again for next year? Absolutely not. Are we going to ramp up our spending? Nope. We will continue to base next year’s spend off our original starting portfolio + inflation.

That’s it for today!  Any questions for us as we reflect back on our first “official” year of early retirement? We’ll check back in a year to see how we compare to this years current spend goal of $48,941.

Support This Blog

If you liked this article and want more content like this, please support this blog by sharing it.  Not only does it help spread the FIRE, but it lets me know what content you find beneficial.  Writing is NOT my strong suit and it honestly takes me hours to write each post so the more encouragement the better!  Engaging in the comments below keeps me motivated.  You can also support this blog by subscribing to receive emails anytime a new post is published.  Thank you FImily!

We believe in stacking up life hacks to keep your enjoyment levels to the max without depleting your bank account.  Here are some ways to further educate yourself and save thousands of dollars over your lifetime by making some simple adjustments:

• Investing Newbies: Check out our free Investing 101 Series.
• How much are you paying for your phone plan?  Canadians, learn more about Public Mobile, and see how we are paying $3/mo for our cell phone plan.
• How much are you paying for internet?  Canadians, learn more about the various Independent Service Providers out there to see who services your area so you can lower your monthly bills.
• How much are you paying for home insurance?  We were able to reduce our rates by 25% by switching over to Square One Insurance.  If you live in BC, AB, SK, MB, and ON, check out Square One for your home insurance, landlord insurance, and/or tenant insurance.  Use this link to receive an extra $15 off your quote.  (Note that you must use this link to start the process to get the $15 off even if you prefer to pay over the phone.)

Sharing is caring!