Six years ago, Tanja Hester and her husband, Mark Bunge, decided to get serious about saving for retirement. They both made a good living at jobs they enjoyed, but they also enjoyed spending money. They wanted to change their priorities so they could retire early — really early. Tanja chronicled their savings, investing and philosophy in a blog named Our Next Life, writing under a pseudonym.
Now, on the edge of 40, they’re retiring, and in October they revealed their identities.
The Our Next Life blog, which has built up a (mostly) supportive readership of fellow early-retirement enthusiasts and gets about 150,000 hits a month, lays out Tanja and Mark’s financial plan (taxes, health insurance, mortgage payoff, etc.), relates the personal side of their journey, and offers advice on how to follow that path, whether to early retirement or just getting a grip on your finances.
The couple is part of what’s known as the F.I.R.E. community (financial independence, retire early), whose followers aim to leave the workforce decades ahead of the traditional retirement age, or at least lessen their dependence on a job and the paycheck it provides.
For that reason, many F.I.R.E. disciples strive for passive income streams, such as living off investments, rental income or even licensing. One of the most famous early-retirement success stories is known as Mr. Money Mustache, who was able to retire in his 30s, thanks to a low-cost lifestyle, investing in index funds and “a rental house or two.”
Tanja and Mark’s “big reveal” comes at a time of concern about a retirement crisis in America. With pensions increasingly rare and Social Security under threat, people are responsible for their own financial security in retirement — and the future looks pretty grim for many. The median retirement-account balance is $2,500 for all working-age households and $14,500 for near-retirement households, according to the National institute on Retirement Security. And health-care costs are climbing: An American couple retiring this year should expect to spend $275,000 on health care through their retirement, which is up 6% from a year earlier, and those costs are expected to rise indefinitely.
Modern retirees should also expect to live much longer than previous generations — and should have the bank balances to reflect that. So Tanja, 38, and Mark, 40, who live in North Tahoe, Calif., could be looking ahead to an extremely long retirement of 40 or 50 years or even more.
Tanja and Mark don’t share their bank balances on their blog but did have a “magic number” they wanted to reach, the formulas for calculating those goals and many contingencies. They also had a drop-dead retirement date of the end of 2017. By then they wanted to have put away 15 to 16 times their annual “Phase 1” budget. (Their Phase 2 budget/401(k) pot is separate and not part of the magic number.) Fortunately for them, they hit the target, but they would have semiretired even if they hadn’t, Tanja says.
Read: Don’t forget about your later years: Planning for early and traditional retirement
MarketWatch talked to Tanja about how they did it and what’s next.
A lot of people dream of retiring early but don’t have the discipline or ability to do it. Why did you do this?
We were spending all of our time trying to get to the mountains, being outdoors and wanted more time to pursue our interests. For me there was an added element of seeing my dad go through a progressive genetic disability that I also have the gene for. He’s still healthy, and it’s not going to shorten his life, but I felt that I didn’t want to leave my best years at the office.
Your models for savings and future spending are pretty elaborate. How did you get started?
We first started thinking about saving more, and the complexities have layered in over time. We had a head start on 401(k)s — Mark especially did a really good job saving early on. Then we started putting money into index funds. Then we had an opportunity to buy a rental property, so we factored that in, and we had this rental income. And since we’re financially conservative we started thinking about contingencies. We wanted to pay off our house; that gives us the ability to downsize if we needed to free up cash or rent it out — that’s not our first choice, but it helps me sleep at night.
Read: The income streams our early retirement is (now) built on
Keeping your retirement plans a secret must’ve been really hard.
We’ve been planning this for years, and it’s felt like a weight we’ve been carting around. After we gave notice [at work] there was a tremendous sense of relief. But giving notice was really hard. We both love the companies we work for, and it felt like a big, heavy, emotional thing. Once we told people, they were genuinely happy for us and supportive. It was great.
Why retire now?
We are both political and social-cause consultants. Mark works in public-opinion research, [and] I do the media and communication side, and our jobs are tied to the election cycle. Since the market has been so strong, in a perfect world we would have liked to work a bit longer to pad our retirement accounts, but we know what a toll the election takes, and we just know we couldn’t work another election.
Was it hard to stay disciplined and save for so long?
Having a partner on the same page helps a ton, although you don’t need to have the same money habits out of the gate. In the beginning we were bad influences on each other. We liked nice meals, and treating ourselves. But we had the same vision for what was important in life and once we realized this was something we could pursue it became easier. For us the key was automating everything and taking the decision out of it. We have had our paychecks subdivided to go into savings and investments. We never feel like we have that money.
What are you going to do about health care?
Health care is going to look fairly normal as long as [the Affordable Care Act] survives in some form or if it’s replaced with something roughly equivalent. As of right now we plan to buy a silver plan on the exchange. I wouldn’t call it crazy affordable, but we’ve been able to project and budget for it. We live in California, and the state has had smaller bumps in increases, the state is healthier than average, and state lawmakers have signaled that if ACA goes away they will figure out how to cover people.
Read: Here’s a big roadblock for your dreams of early retirement
Also see: What the fate of Obamacare means for people who hope to retire early
What worries you?
We live in a place where we could have wildfires or earthquakes or blizzards. The deductible for earthquake insurance has been a motivator for keeping emergency funds on hand. The cost of health care does concern me. Costs are rising faster than the rate of inflation. We would not rule out health-care tourism, though it’s not our first choice. But we’re resourceful people, and we’ll be able to figure things out.
What helped me was realizing there’s no way to live without risk. Most people would say that the safer choice is to keep working and saving. But the health challenges that I’ve seen my dad go through make me realize there’s a risk of working — that is time I’ll never get back. It’s not a matter of safe vs. risky; it’s a matter of which risk do you want?
Read: There’s no such thing as a risk-free life
Why did you start blogging?
To chronicle the journey. I knew when I started that I would forget it all. ... I wanted to have a record of the experience. So much of the talk in early retirement was purely around finances and focused on tax avoidance and tax-loss harvesting and things that assumed everyone has the same world view. I realized I could create a niche of talking about the emotional and identity part of the journey. I wanted to present a different world view focused on generosity and gratitude that I didn’t see on other blogs. It’s been a snowball of constant inspiration.
How did you know the blog was gaining a following?
I could tell people were really engaged based on the number of comments the blog started getting about two years ago. And they weren’t just short comments like, ‘Great post. Thanks.’ They were — and are — really in-depth notes about their journey, or offering support to other readers. It has really turned into an incredible and supportive community.
What are you looking forward to?
Figuring out what I want to do when I grow up. It’s such a privilege to explore different interests. We’ll keep up the blog, ski a lot, travel, [and] there are some mountains we want to climb. We’re trying to keep it open and see what sparks our interest and get to know the versions of ourselves that aren’t always working. We want to find other ways we can replicate the things we’re good at.
Do you have any tips for people who would like to follow your lead?
Scrutinize your expenditures, and find ways to hide money from yourself and automatically bank the rest. Constrain lifestyle inflation.
Staying focused on the big vision helps. Before, we rewarded ourselves all the time with meals out or purchases or traveling in a higher style. Recently we went to Japan and were strategic in what we cut and spent on. Instead of staying at a luxury hotel and going out to expensive meals we stayed at the Courtyard [by Marriott] and ate all the really fantastic cheap food in Tokyo.
It’s important to remember you don’t have to have it all figured out. Go one step at a time. First get a handle on what you’re spending and how much is going to different categories. Make sure you have a clear vision of what you’re retiring to. Just thinking ‘I can’t wait to quit my job’ isn’t ideal motivation. Have a positive vision of what you do want.