I am a 33-year-old that is actively saving and building toward a passive income stream enabling me to either retire early or shift to a nonprofit career instead of my current job in tech.
I have about $200,000 in taxable investment accounts, $120,000 in liquid savings, and own my home with a $240,000 mortgage and about $300,000 in equity. My 401(k) and Roth are both maxed each year and have a combined value of $70,000 right now.
I currently make around $120,000 a year, and my long-term partner adds about $40,000 to shared income, but we are not married and file separately.
I have a dividend portfolio providing $5,000 a year in passive income, with a goal of growing that to $15,000 in the next few years. I want to achieve financial independence by 40, which I am currently defining as more than $20,000 in passive income and my mortgage paid off.
I also have some chronic health issues that require regular and expensive medical care — a gold or platinum plan under the ACA is essential.
My question is: how do you advise calculating the passive income needed for early retirement, in my 40s instead of 60s? What asset level would be considered “safe”?
I expect to have some income after leaving tech, whether from consulting or nonprofit work, but want to be effective in securing my passive streams.
Appreciate any input, and thank you!
A curious investor
See: I’m a 39-year-old single dad with $600,000 saved — I want to retire at 50 but don’t know how. What should I do?
Dear Curious Investor,
Financial independence is such a great goal for anyone to have, and I’m so glad to hear you’re already diligently planning for the income streams you’ll need in this early or phased retirement.
Before we get to that though, I’d like to start off with your healthcare, as that will be a critical factor in how comfortable you are when you leave this job. We don’t know what the future will hold for health insurance in this country, so we can only operate under the assumption that it looks similar to what it is now. That being said, although you said a gold or platinum plan is essential, punch in the numbers for the policies available in your area but look at your options as if you were already 40 or 41 years old (as opposed to trying to see what’s available to you at your current age), said Tanja Hester, a MarketWatch contributor and author of “Work Optional: Retire Early the Non-Penny Pinching Way” and the new book “Wallet Activism” coming out in November.
Hester, who retired at age 38 and is familiar with navigating the healthcare system as a financially independent individual, said sometimes, people find they don’t actually need …….