BiggerPockets Money Podcast
Episode: FIRE at 50: The 4-Year Journey That Made Early Retirement a Reality
Release Date: November 15, 2024
Host/Authors: Mindy Jensen and Scott Trench
Guest: Eric Reinhold

Introduction

In this compelling episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench sit down with Eric Reinhold to delve into his remarkable journey toward achieving Financial Independence, Retire Early (FIRE) at the age of 50. Eric, the founder of an architectural design business, shares how he leveraged his business to reach FIRE in just four years, allowing him the freedom to travel the world while maintaining minimal involvement in his company.

Discovering the FIRE Movement

[01:35] Eric shares the pivotal moment when he discovered the FIRE movement:
"I was catching up with a lifelong high school friend who mentioned he was retiring at 47. My jaw hit the floor. Retirement seemed so far off at 46, it wasn't even on my radar."

This conversation ignited Eric's interest in FIRE, leading him to reassess his financial goals and strategies alongside his wife. They initially targeted a FIRE number of $2.5 million, later adjusting it upwards to align with their vision of "chubby FIRE," a range between $2.5 and $5 million.

Building the FIRE Portfolio

[03:46] Eric explains how he and his wife approached their financial strategy:
"Once FI became the goal, we focused on fundamentals: keep investing, be mindful of expenses, and increase our income where possible."

Despite facing market downturns, particularly the significant drop in 2022, Eric remained steadfast. He emphasizes the importance of sticking to core investment principles and adjusting strategies as needed. Their disciplined approach paid off when they reached their FIRE number in June 2024.

Strategic Financial Adjustments

[05:25] Scott inquires about the tangible lifestyle changes Eric made after discovering FIRE. Eric responds:
"We made some aggressive changes once we found the FIRE movement. We set up a taxable brokerage account as a bridge to cover expenses until we could access our pre-tax funds."

Key adjustments included:

1. Establishing a Bridge Account: Creating a taxable brokerage account to cover expenses between early retirement and accessing retirement funds.
2. Utilizing Deferred Compensation: Taking advantage of a 457 plan to optimize their tax bracket.
3. Paying Off the Mortgage: Eliminating their mortgage allowed them to aggressively save from 2020 to 2024, simplifying their FIRE calculations by excluding fixed housing costs.

Defining "Chubby FIRE"

[07:27] Scott seeks clarification on Eric's "chubby FIRE" range:
"So it's two and a half to five million in assets that are liquid investable assets, not your home equity." – Eric Reinhold

Eric confirms that their FIRE calculation excludes home equity, ensuring they have a place to live without relying on selling their home. This approach focuses solely on liquid investments to sustain their desired lifestyle.

Investment Strategy

[33:07] When discussing his investment portfolio, Eric outlines a conservative yet balanced approach:
"Our current asset allocation is 80% equities, 15% bonds, and 5% cash. We're using VTI for equities, VGIT and BND for bonds, and a money market fund for cash."

Key Points:

• Equities Dominance: 80% in equities ensures growth potential while maintaining diversification through VTI.
• Bond Allocation: 15% in bonds provides stability, though market timing affected their returns.
• Cash Reserves: Maintaining 5% in cash offers liquidity and flexibility, especially crucial given their business income.

[35:06] Eric discusses their approach to withdrawals:
"As long as the business income supports our lifestyle, we're not drawing from the portfolio. This allows our investments to continue compounding."

This strategy minimizes sequence of return risk and promotes long-term growth of their portfolio.

Lifestyle During the FIRE Journey

[10:07] Eric paints a picture of their disciplined yet fulfilling lifestyle:
"Our living expenses are between $10 to $12,000 a month. During COVID, my business was making about $50k a month, which significantly boosted our savings."

Despite aggressive savings, Eric and his wife maintained a comfortable lifestyle without drastic sacrifices. They prioritized family experiences over expanding their home or escalating expenditures, ensuring they enjoyed the present while preparing for the future.

The Role of the Business in FIRE

[18:35] Eric elaborates on the business's role in his FIRE strategy:
"We're transforming the business from an active time investment into a passive income source, aiming to reduce our commitment to 10 hours a week."

By automating and restructuring his business, Eric ensures continued income with minimal effort, providing both financial security and personal freedom.

[24:25] Scott probes the integration of the business with their FIRE assets:
"We never included the business cash flow in our projections. If the business shut down on January 1st, 2025, our FIRE plan still works." – Eric Reinhold

This separation ensures that their FIRE status isn't contingent on the business, providing an extra layer of financial resilience.

Reflections and Advice

[12:44] Reflecting on his journey, Eric offers valuable insights:
"What was unhealthy was treating every dollar not invested as taking me further from FIRE. It created a toxic mindset focused solely on the number and date."

He advises future FIRE seekers to:

• Balance Saving and Spending: Design a life that allows for both saving towards FIRE and enjoying the present.
• Develop Spending Discipline: Equally prioritize how you plan to spend as you do how you plan to save.
• Avoid the Death March: Focus on sustainable financial habits rather than extreme sacrifice.

[13:08] Mindy concurs:
"That's exactly how we did it. You don't enjoy the journey if you focus too intensely on a number."

Defining Retirement Post-FIRE

[28:40] Scott asks Eric how he defines retirement while still working part-time:
"Do you consider yourself retired if you're still working 10 hours a week?"

Eric responds thoughtfully:
"Retirement for me is choosing what to work on that excites me and brings joy. Even if it involves some work, it's about autonomy and passion." – [28:40]

He emphasizes that retirement isn't merely ceasing work but redefining it to focus on personal fulfillment.

Future Plans and Lifestyle Adjustments

[39:36] Looking ahead, Eric shares his plans:
"We have an aggressive travel schedule for the next 12 months. My wife refers to this period as 'the period of hedonism.'" – [39:36]

Upcoming highlights include:

• Traveling the World: Prioritizing memorable experiences and adventures.
• Continued Business Engagement: Maintaining involvement in his business on a minimal basis.
• Creative Endeavors: Exploring new projects without financial pressures.

Investment Monitoring and Mental Health

[41:34] Eric discusses his evolved approach to investment monitoring:
"I developed some unhealthy habits, checking daily. Now, I resist the urge and do monthly check-ins, focusing on controllable factors like earning and investing." – [41:34]

This shift reduces anxiety and fosters a healthier relationship with his finances.

Conclusion

Eric Reinhold's journey to FIRE at 50 is a testament to strategic financial planning, disciplined saving, and leveraging business assets. While his path is unique and may not be entirely replicable, the principles of balancing saving with lifestyle enjoyment, maintaining investment discipline, and creating passive income streams offer valuable lessons for anyone aspiring to achieve financial independence.

Notable Quotes:

• "Retirement for me is choosing what to work on that excites me and brings joy." – Eric Reinhold [28:40]
• "What was unhealthy was treating every dollar not invested as taking me further from FIRE." – Eric Reinhold [12:44]
• "We never included the business cash flow in our projections. If the business shut down on January 1st, 2025, our FIRE plan still works." – Eric Reinhold [24:25]

For More Information:

• Eric Reinhold's Platform: TwoSidesOfFI.com
• BiggerPockets Website: biggerpockets.com

This summary captures the essence of Eric Reinhold's FIRE journey as discussed in the BiggerPockets Money Podcast. For detailed insights and personal anecdotes, listening to the full episode is recommended.