Fully Funded Lifestyle Change is different than FIRE (Financial Independence Retire Early) because it doesn't require “retiring”. A Fully Funded Lifestyle Change (FFLC) means saving up enough money to make a major change, such as starting a business, moving out of the country, or just simply spending more time with family.
If you consider that most people are approaching FIRE with the mentality that they will find something new to work on in retirement what they are really pursuing is the FFLC. If you aren’t grinding through a job just to reach FI, it’s likely that you would have the opportunity to retain the parts of your job that you like, and you, too, could pursue the FFLC instead of full-on FIRE.
Plus, the benefits would be to reach your goal that much faster and get to fully enjoy your life that much sooner.
What Drove Our Change in Mindset
Since our daughter was born, I have felt the need to change the way my life was structured. Sure, I’ve always had the plan to retire early from work and pursue other goals. However, I never really quantified it before meeting with our financial planner. Instead, I assumed when we reach 30x our expenses (3.33% withdrawal rate), my wife and I would have more than enough to never worry about money again. At that point, we could quit our jobs and live it up for the rest of our days!
Because of the new motivation of having a little one at home, I have come to realize that the time we have right now is more precious and valuable than time in the distant future. What if we could make a shift in our lifestyle? Allowing us a sustainable career that would provide the flexibility to enjoy time with our daughter, while also providing the income that we need to maintain our lifestyle. Yes, we would be sacrificing the years of completely not working. But on the other hand, if we’re enjoying our jobs, do we need to get out of them completely?
My wife works in our local school system as an instructional facilitator. In essence, she works with teachers on how to better present lesson plans, incorporate technology and analyze data to improve the students’ learning. This job is tailor-made for her and she is really enjoying it. In addition, she is able to walk to work and the school day is from 8 – [3:30]. It’s hard to beat that!
I, on the other hand, have a 45-minute commute which starts before our daughter wakes up in the morning. Given her bedtime, I see her for about an hour a day during the week.
Additionally, where we live in the Washington, DC suburbs, isn’t the ultimate location for us. We would love to travel the world while we still have a young family. Also, we want to build a homestead on our property at some point.
What Does it Take to Reach FFLC?
Talking with our financial planner, Harry, got us thinking about what really mattered and how to accomplish it. Also, having the numbers to back up the conversation and provide confidence in our opportunities and choices, really provided value and clarity.
Harry calculated that our current nest egg of retirement accounts and taxable savings is sufficient to meet 200% of our retirement spending goals, starting at age 60. I chose age 60 because we will be able to pull penalty free from our tax-deferred accounts at that time. That means we only need to conquer the next 29 years to get to that point! Additionally, we don’t need to save another dime to meet our goals in retirement.
The realization that we could spend all of our income for the next 30 years and still be fine in retirement is mind-blowing. Of course, if we did spend all of our income for that period of time, our expenses would have grown so significantly that retirement at that level of spending probably wouldn’t work. With that in mind and our current comfort with our spending, we can afford to reduce our income significantly. That provides a lot of opportunities for our family.
Looking at our finances, I determined that my wife’s income and benefits could more or less support our family. I figure I need to make about $20-25,000 per year to make ends meet. It would almost be hard to make less than that if I apply myself at all.
If we are able to change our careers to suit us and provide the current income that we need to meet our goals, we should be able to live happily for the next 30 years until we are able to pull from our retirement accounts. We won’t be able to sit on the beach 365 days a year at this point, but that sounds like it might get boring pretty quickly anyway. If our target is $75,000 per year, between the two of us we should be able to accomplish that easily, whether my work scales up and my wife’s scales back or vice versa. Finally, it’s very likely that we will still be earning more income than we need to live our lifestyle.
What If We Earn More Than We Need?
What would happen then? Well, given that we don’t need to save anymore, we will have flexibility there too. Maybe we save some of it and pull forward the ultimate retirement date by saving into a taxable account. Or, maybe we devote more of our earnings towards charitable giving. A distant third will be increasing our spending significantly.
We live comfortably now, but do keep a close eye on our expenses. I imagine we would enjoy spending a little bit more, or at the very least releasing the tight grasp on our wallets. I can’t imagine how we could increase our spending significantly, however, and I don’t think I would get the same level of enjoyment out of it either.
How Can You Calculate the FFLC Point?
All jazzed up about this idea yet? There are a few calculators out there to figure out the amount of savings you need to fully fund your retirement. Some of these calculators are a bit simplistic. But, I received immense value from having this discussion with Harry (in addition to running through my own financial planning software of course!) In essence, you are calculating a present value of the retirement number to fund your retirement spending needs. The other variables in the calculation are the rate of return and the years of growth. One potential pitfall here is the impact inflation will have on your retirement spending. The second is that the present value that you are calculating is actually a future value if you are still in the saving phase.
Unfortunately, I don’t have a robust tool available online that will help with this calculation. I’m sure there are calculators out there, or that some of the personalities in this community could create one. I may work on creating a Google Sheet that tackles this calculation. Please let me know if you've got one already in the comments below!