Escape the 9-5 Faster with the Boost-Glide Path to Financial Independence

Can you take cues from a rocket launch to enjoy the benefits of F.I.R.E. on an accelerated timeline?

It’s Monday again and the vast majority of you are dreading heading back to work.  You plop yourself into your chair and then phone rings, a billion emails fill up your inbox, your to-do list grows and grows.  Just when you can’t take it anymore, you get a request for a conference call…  You can barely suppress the overwhelming urge to go all “Office Space” on the printer.

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It’s then you realize you need to take action to escape this drudgery as soon as possible.  You pull up your browser of choice and pound in “How to retire early?”  or “Financial Independence” and you come across the Financial Independence Retire Early (F.I.R.E.) movement.  You dive in and start soaking up the ideas and techniques.  It all sounds great.

Then you run the numbers…

Based on your current net worth you have over 20 years until you can reach Financial Independence (FI)! (For most it’s even worse as the average savings rate is less than 7%)

The funk you were in becomes a full blown depression.  A 20-year sentence seems interminable.  Like swimming across the ocean, or climbing Mount Everest, blindfolded and and in flip flops.

But perhaps there is another way…

The Boost-Glide Path to FI

The conventional path to FI consists of living frugally to maintain a high savings rate until you’ve amassed 25 times your annual spending.  This may be a long arduous journey that seems like climbing Mount Everest.

If conventional FI seems like mountain climbing, then envision the Boost-Glide path as a ballistic missile launch, with a Boost Phase and a Glide Phase.

The Boost Phase

At the moment of launch, the rocket booster propels the missile into low-earth orbit.

This stage is the same as the conventional path to FI.  Maximize your savings rate to build your next egg.  Work your tail off in your current career.  Cut out unnecessary expenses.

During this stage you would invest aggressively using primarily equities and you would sustain this approach until you reach approximately half your FI number (roughly 12.5 times your annual spending).

The Glide Phase

Once into orbit, the booster separates from the reentry vehicle, which glides until it reaches its target.

You’ve toiled and toiled and now you have accumulated half of your FI number!  Much like the missile you now separate from your booster (your career).  You don’t have enough to retire completely, but your nest egg has become large enough that the power of compounding can carry your the rest of the way to achieving your full FI number (your target).

The key now is to avoid touching it.  To do so, you need to earn or generate enough income to just cover your living expenses.  You could certainly earn more, but you must at least cover your expenses.  This could be part time work, this could be passive real estate income, or any of a number of hobbies that can move from the back burner to the front burner.  Any combination to cover your expenses without raiding your retirement.  If your nest egg is held within a 401k or IRA then you would continue the Glide Phase until at least an age of 59 1/2 .  Carry onward to 62 and then you can start to receive a portion of your social security (approximately 70% of your benefit at the time of this writing).

This strategy relies on a few key factors:

• The magic of compounding – the average annual return for the S&P 500 over the past 90 years is approximately 10%.
• Maintaining an aggressive asset mix during the Glide Phase – since you do not have to touch your investments for quite a while, you can accept more volatility.  Further, if your investments were strictly in CDs, bonds or other relatively low return vehicles, then the time to reach FI may become extraordinarily long.
• Maintaining income to cover living costs until conventional retirement age (this sure doesn’t sound like escaping the rat race but stay with me here)

So how much time can the Boost-Glide Path shave off your FI timeline?

Let’s look at the numbers for the Heartland on FIRE household:

• Our current portfolio balance is around $280,000
• I am assuming an average annual return of 6% (before inflation… me being somewhat pessimistic compared to the past 90 years)
• Average inflation of 2%.
• We are maxing out our 401k contributions and receiving 4% match from our employers, equaling roughly $44,500 per year
• For simplicity, I am holding taxes equal (they probably wouldn’t be*)

*Taxes likely would be less with the Boost-Glide Phase since you would have lower taxable income during the Glide Phase and you would not be withdrawing from your nest egg until later than with the conventional FIRE approach.

Here’s how our portfolio balances would look over time with both approaches:

Based on the above assumptions, we would reach 50% of our FI number (12.5 time our spending) in about 10 years. The Glide Phase takes us to our full FI number in 28 years.  The Conventional FIRE approach of keeping the hammer down would get us to our full FI number in 20 years.

As a result we would be able to leave our current careers about 10 years earlier than with the Conventional FI approach!!!

“Hey wait! Don’t the numbers show you need to delay retirement 8 years with this option?”

Yes, the major trade off here is that you technically would be delaying your “traditional” retirement.  Let’s think this through though.

The goal with this approach is to allow us to intentionally spend our time on things that matter to us or eliminate things that drive us crazy.  It is not to sit on a couch and rot. This scenario would have us leaving our current careers at age 44 and I can’t imagine sitting around and doing nothing at that age.

Perhaps we will choose to make an income from something we are passionate about?  I could finally open that micro brewery I always wanted**, or dive deeper into real estate.  The options are nearly limitless.  Or maybe, like my wife always says “I just want to work part-time in a lower stress job”  You do you.

**To Mrs. HoF:  I’m kidding…

Mostly**

Honestly, if you are working on something you truly are passionate about, then you very well may turn that passion project into a successful venture.  You could wind up earning even more than you did in your original career!

If you love what you do, then:

1. Congratulations!
2. I could probably learn a thing or two from you
3. This option is probably not for you
4. Keep on keeping on!

If you don’t absolutely love what you do then this approach may be a great fit for you.  It’s hard to quit a career cold turkey, and this approach would allow you to secure your retirement, free yourself from being a slave to your current job, and give you the time and incentive to develop or grow your passion project, if you are so inclined.

One additional major benefit with the Boost-Glide Path is that you are essentially giving yourself a low risk trial run for retirement once you hit the Glide Phase.  If the market tanks, or if your passion projects crashes and burns, you are still relatively young and should be able to jump back into your old career.  It would likely be much harder to reverse course if you waited another decade.

So next time the case of the Monday’s sets in, maybe it’s time to think about trying to launch yourself into a different trajectory.  Sooner, rather than later.

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