People often wonder how I can take a run at retirement at 52. I call it taking a run at retirement as I honestly don’t know how things are going to work out. Some days feel great, others not so much watching the stock market go up and down almost a percent daily. I just know that I do not want to wait to travel with compression socks and flip-flops, LOL.
I will share how I was able to make it happen as it took some luck and heartbreak.
First and foremost, I never got married or had any kids (that I know of traveling, LOL) in my life. I also jokingly say that I got divorced three times before getting married when people ask why.
It is sometimes hard watching friends and family get married and have kids living the life we were taught to live by generations. Watching their kids play sports was the hardest part.
I can live without the getting married part based on my history and statistics.
I can recall so many instances that would have had me stuck in a shitty situation keeping it real for me.
OK, let’s get down to business and talk about residual income sources now that you know my history.
Residual income is the income that remains after subtracting all costs of capital.
Sources of residual income include:
– Real estate investing, such as leasing or renting out a property ✅
– Stocks and bonds that pay dividends or interest in my buckets are explained below ✅
– Royalties from intellectual properties, such as books, music, movies, or patents ❎
(I always said I was going to write a book or blog) “NAD – A legend in my own mind!” ✅
– Donations or royalties from advertisements on a blog or website (buy me a beer! LOL) ✅
– Compound interest paid on investment accounts or what I call buckets below. ✅
I have used all of these over my lifetime with some working and others tanking.
Let’s talk about the bad before getting to the good stuff. I worked for a company for 18 years that had a problem with cooking the books. I would put 10% of my pay towards my RRSP/401K and the company would match 6% for a lot of those years which worked out.
The problem was that I would put more money into the company stock throughout the years. I also received stock bonuses along the way making this account grow fast on paper, I thought!
“At its height, Nortel accounted for more than a third of the total valuation of all the companies listed on the Toronto Stock Exchange (TSX), employing 94,500 worldwide, with 25,900 in Canada alone. Nortel’s market capitalization fell from C$398 billion in September 2000 to less than C$5 billion in August 2002, as Nortel’s stock price plunged from C$124 to C$0.47. When Nortel’s stock crashed, it took with it a wide swath of Canadian investors and pension funds and left 60,000 Nortel employees unemployed. Roth was criticized after it was revealed that he cashed in his own stock options for a personal gain of C$135 million in 2000 alone”
Well shit, that was a couple hundred thousand stock dollars on paper, gonzo Malonzo! The amazing part is that I was able to keep my job for another 12 years and recover.
I learned so much from losing all of that money at a young age, and I needed to be aggressive to make it back.
I somehow stumbled across the bucket system:
It essentially means, pile money in different buckets to use at different times. My buckets were based on early retirement; “bucket one 55-62”, “bucket two 62-67” and bucket three “67-six feet under or in my case shot into space.
Someone call Elon, LOL!
I found an investment firm that would help me implement this strategy. The plan was to work until 55 but was laid off at 52 so “taking a run at retirement” as I already mentioned.
The hard part, filling the buckets so the power of compound interest can do its thing:
Bucket one 55-62: This was a house that I bought in 2003 when I moved to Atlanta. I left in 2010, and I was able to rent it to the same person for over ten years. He paid down the mortgage and then he eventually bought it. I bought into a 15-year mortgage so aggressively paying it down and selling it worked well.
Bucket two 62-67: I moved from Atlanta to Charlotte in 2010 and bought an acreage. It had a house in the front and a three-car garage in the back with a loft above. I was able to rent the front house to cover the mortgage. I lived in the loft and played around in the massive garage for free. I would spend a lot of money and sweat equity to prepare the property to flip which happened when I was laid off in 2015. This also worked out well for me too!
Bucket three 67-X: This was the traditional retirement fund that I cannot touch until I am sixty-two but shooting for sixty-seven. I can access it at any time after 59 1/2 depending on how the other buckets are doing. I can also decide when to take my social security and Canadian pension plan as I am eligible for both.
I plan to take Social Security at 67 to max out the return. Did you know that payday can be ~30% higher if you can wait until 67?
Another source of income is the condo I bought in Arizona during the recession in 2008.
As mentioned, I kept my job throughout the recession and recovery, and I was able to pay cash for the amazing AZ condo I live in now. I paid $52,500 for a one-bedroom that is now worth over $200K. How is that for a return on investment while renting it out!!
I do not plan to sell this condo, but it is another option for me to supplement my travels. It is currently on Airbnb for snowbirds and the proceeds help me get to bucket one.
Well, there you have it! I set up my buckets based on my timeline and the money needed to retire early. Bought and sold real estate and Airbnb my condo based on this strategy.
A solo slow traveler, vlogger, geo arbitrage, and a legend in my mind.