Early retirement with 3 kids: How a North Carolina couple retired in 10 years

Root of Good (RoG) is the man behind rootofgood.com, a terrific financial independence blog.

RoG started blogging back in 2013 when he early retired. Fast forward nine years and the site has close to 300 entries!

Topics covered include monthly retirement updates, travel tales and tips, handling early retirement with kids, and day-to-day life as an early retiree.

I love seeing how people manage their money and RoG’s success and life story make him a great subject for a case study.

If you’re looking to become financially independent, RoG is a great role model to follow. And in this post I’ll break down who RoG is and how he got to where he is.

Who is Root of Good?

Root of Good (RoG) is a man in his forties who lives in Raleigh, North Carolina. He’s married to Mrs. RoG and they have three kids. Like couples of yore, RoG and Mrs. RoG have combined finances.

RoG has both an engineering degree and a law degree and worked as a civil engineer for ten years before early retiring in 2013.

Mrs. RoG—whose family lived as war refugees in Thailand before moving to the U.S.—has a law degree as well and worked at PwC and an investment bank before early retiring in 2016.

RoG and Mrs. RoG still live in their “starter home” (fully paid-off since 2015), plan on helping their kids with college, and are big fans of traveling and cruises (and doing it on the cheap through travel hacking!)

Root of Good’s journey to early retirement

RoG’s journey begins in 2001 when he graduated from NC State with a degree in Civil Engineering.

By taking extra credit hours per semester, RoG was able to graduate in three years instead of the typical four.

And by winning academic scholarships and research grants and working through his college years, he was able to graduate with a good chunk of savings instead of with debt.

Post graduation, RoG headed to law school at UNC Chapel Hill, avoiding the tight job market of 2001.

Mrs. RoG was working at this time before starting law school herself and the RoGs bought a condo for $70K where they lived during RoG’s law school days.¹

RoG graduated from law school three years later, in 2004, and the RoGs moved to Raleigh and bought their first home. The house was 1,800 square feet and cost them around $150,000—20 to 30% below similar houses as the city put the house up for auction.

In Raleigh, RoG began working at a small engineering consulting firm at a starting salary of $48,000. Mrs. RoG, meanwhile, worked on getting her law degree.

In 2005, shortly before Mrs. RoG graduated, the first little RoG was born. Mrs. RoG graduated and spent the next few months caring for her daughter before starting to work in November. Her job came with a starting salary of $38,000 and great benefits like free family health insurance and overtime pay.

The RoGs were also able to sell their rental condo for $95K in 2005 and they funneled this profit straight into their investment portfolio.

In 2006, the stork made another delivery and the RoG family expanded to four with the birth of a second daughter. Mrs. RoG took off five months (three paid and two unpaid) to care for her.

The RoGs, meanwhile, continued to max out their 401k and IRA while getting raises at work, and in 2007, the RoG family combined household income jumped into six figures for the first time.

Undeterred by the Great Recession, the RoGs kept funneling cash into their investment portfolio throughout 2007 and 2008, patiently waiting for the market to recover as they experienced their first year-over-year net worth decrease.²

The stock market finally bottomed in March 2009 and by 2010, the RoGs were solidly above the half-million dollar mark.

With the jump in net worth after the Great Recession, the RoGs could have moved abroad to lower their costs of living and move up their early retirement date.

Being away from family was a big deterrent, however, and so the RoGs kept chugging away in Raleigh, enjoying their proximity to their loved ones.

And while it might seem that the RoGs were just working and taking care of their growing empire of little RoGs, this is far from the truth.

Case in point, in 2010 they spent a few weeks in Argentina and Uruguay, leaving the little RoGs back home with family.

For the next few years, life flowed on, as it does, with the RoGs continuing to get raises at work, all the while maxing out their 401k’s and IRAs and directing growing sums into their investment portfolio.

The third and final RoG—the first boy after two daughters—arrived in 2012, and Mrs. RoG took a three-month paid maternity leave to care for him.

2013, unexpectedly, turned out to be a big year.

The good news was that the RoG’s net worth shot up over $1 million for the first time. The bad news was that RoG was abruptly fired.

Refusing to dwell on the negative, however, RoG turned his sudden unemployment into early retirement, using the newfound time to start the Root of Good blog.

In 2014, almost without meaning to, he made $12,000 through ads on the blog and some freelance writing.

Mrs. RoG, meanwhile, continued working for another couple of years.

She tried to retire in September 2015 but received some concessions from her employer in the form of a more flexible schedule, which convinced her to stick around… until February 2016, that is, when Mrs. RoG pulled the plug for good.

So by February 2016, the RoGs, with a net worth of $1,435,000, were early retired and ready to step into the next stage of their lives.

Root of Good’s journey in numbers

^*Note: the net worth column doesn’t include home equity; it only includes the RoG family’s investments and cash.

A combined $1,123,500³ in income, 70%⁴ of which was added to their investment portfolio, led to a $1,287,000⁵ net worth increase over eleven years. 61%⁶ of the increase came from additions and 39% came for “free”, just from the market going up over time.

By making extra principal payments through the years, the RoGs were able to fully pay off their house in eleven years, declaring mortgage-independence in 2015. The extra mortgage principal payments, however, aren’t counted as additions to their portfolio.

The only caveats to the above table are that the salaries column doesn’t include 401k company matches (they are included in the additions column) and that RoG’s salary doesn’t include the occasional annual bonus (though Mrs. RoG’s includes all bonuses and overtime pay).

What are the keys to the RoG’s success?

The RoG family’s household income started at $95,000 in 2006 and peaked at $138,000 in 2013.

The median household income in the US during this time was around $50,000⁷. So while the RoGs were relatively well-off, they were by no means “rich.”

And yet, they managed to retire in 10 years and have remained successfully retired since.⁸ How did they manage this?

The keys to their success, as RoG clearly spells out in various posts, were how the RoGs managed to:

• Minimize taxes
• Not overspend on their house or cars
• Have a high savings rate
• Be consistent

Let’s go over these one by one.

Minimize your taxes

In 2013, the RoGs had a household income of $150,000 yet paid only $150 in income tax. Black magic? No, just smart use of all the available deductions.

By maxing out both 401k’s and IRAs, RoG’s 457⁹, and Mrs. RoG’s HSA, the RoGs lowered their taxable income by $69,950.¹⁰

Maxing out the Dependent Care Flexible Spending Account lowered their taxable income by another $5,000, health and dental insurance premiums lowered it by $1,100, and RoG’s pension contributions by $4,200.

In total, the RoG’s family’s use of deductions lowered their taxable income by $80,250.¹¹

Then the standard deduction and personal exemptions¹² lowered it by another $31,700.¹³

And that’s how you turn a $150,000 income into $38,050.¹⁴

There was still some tax to be paid on this sum, but the 3 child tax credits worth $1,000 each took care of the majority of the tax bill, leaving the RoGs to pay only $150.

Don’t overspend on your house or cars

The RoGs bought their house on auction¹⁵ for around $150,000—20% to 30% less than similar houses in the neighborhood. Though buying a house on auction has its risks, the discount can make up for it if the house is in decent shape.

RoG described the house as a “30-year-old fixer-upper” but since the RoG’s have family that works in construction, the purchase made perfect sense.

It’s crucial to remember that the outlay on a house doesn’t stop at the sticker price. There’s also mortgage interest, property taxes, home insurance, and HOA fees, not to mention ongoing maintenance.

And all of these fees increase in proportion to the value of the home. This means that overpaying on a house penalizes you not only at the time of purchase but every year you own it as well.

My wife and I purchased our house last year for $375,000. Throw in an $8,000 property tax bill and another thousand in home insurance and HOA fees and it’s easy to see how an ill-considered home purchase can delay one’s path to financial independence.

Given the fairly low purchase price, the RoGs were able to pay off their mortgage in eleven years. Now all they have to worry about is coming up with $2,000 a year for their property taxes and $700 for their home insurance premium.

As far as cars, the RoGs bought new cars in college, a Honda Accord and a Honda Civic, and held on to them for 15+ years.

By keeping the cars for a long time rather than needlessly upgrading, the RoGs managed to save thousands over the years. Of course, you have to make sure you’re taking care of the cars for them to last, especially as they get older.

In 2016, the RoGs sold their sixteen-year-old Civic for $2,900 and bought a 2009 Toyota Sienna with 111,000 miles for $8,300 to have some extra space during roadtrips.

And to celebrate the new minivan, RoG mused about how to own a car for $50 a month:

Here’s the math behind my $50 car payment. Buy a gently used six to eight year old car with low to moderate mileage for around $8,000-10,000. Run the car almost into the ground and then sell it after nine or ten years when it’s 15-16 years old for $3,000.

The net depreciation (cost of new(er) car minus sale proceeds from older car) for those nine to ten years is $5,000 to $7,000 or about $50 per month ($6000 divided by 120 months = $50/month).

Have a high savings rate

In early retirement (2014 to 2022), the RoG family’s annual budget has ranged from as high as $38,991¹⁶ to as low as $23,802, for an average of $30,355.

In 2016, RoG did a detailed budget analysis and explained how they live a $100,000 lifestyle on under $40,000 a year.

No longer having a mortgage is critical—the RoG’s housing costs are about $6,000 a year, which includes their property tax, repairs and maintenance, and utilities (gas, electric, water, sewer, and trash.)

For comparison, my wife and I currently spend around $35,000 a year on housing as we’re paying down our 15-year mortgage.

The rest of the RoG’s budget is pretty straightforward. About $6,000 on groceries, $600 on dining out, $10,000 on vacations, $2,200 on health insurance, $500 on internet and cellphone plans, $2,000 on entertainment, gifts, and electronics.

Not having to work plus a $10,000 vacation allowance (good for five to ten weeks of travel) definitely sounds like a $100,000 lifestyle to me.

By keeping expenses low while working, the RoGs were able to maintain a high savings rate and funnel as much money as possible into their retirement funds.

And by maintaining those low expenses in retirement, the RoGs are able to ensure that they’ll never have to un-retire.

Be consistent

Anyone can be financially responsible for a week or a month. The key to early retirement, however, is to be financially responsible for a decade.¹⁷

From 2004 to 2014, the RoGs earned a combined $1,123,500 in income and sent $787,000 (70%) into their retirement accounts, including their 401k, HSA, IRA, and standard taxable brokerage account.

And as Mr. Money Mustache’s The Shockingly Simple Math Behind Early Retirement post shows, a 70% savings rate should get you to retirement in about 8.5 years.

Which is pretty close to what happened given that the RoG’s savings rate was likely closer to 65% once we factor in 401k matches and bonuses.¹⁸

Consistency isn’t particularly sexy, though it is powerful and absolutely critical in reaching early retirement.

How do the RoGs manage and invest their money?

The RoGs have their investments spread out among their various accounts—401k, 457, IRA, HSA, as well as their standard brokerage account.

Their goal is to maintain a certain asset allocation when considering the accounts as a whole. In other words, the funds in these various accounts form one big pool of money which the RoGs want to split among various assets with a specific percentage for each asset.

Their allocation is modeled on Paul Merriman’s Ultimate Buy and Hold (UB&H) portfolio.

Here’s what the RoG family portfolio looked like in 2016:

The UB&H portfolio has outperformed the S&P 500 over the last 50 years, but the S&P 500 has done better since 2010. The UB&H portfolio also has higher volatility and comes with the additional need of periodic rebalancing to ensure that each asset class is at the desired target percentage.

No one knows what the future might hold. If international stocks outperform U.S. stocks, the UB&H portfolio will have higher returns. If U.S. stocks outperform, the S&P 500 will have higher returns.

For simplicity, my wife and I have most of our money in VTSAX. As Cliff Asness said, “The great strategy that you can’t stick with is obviously vastly inferior to the very good strategy you can stick with.”

However, we might change our allocation in the future. The White Coat Investor, for example, also recommends owning at least three asset classes.

The RoGs manage their own investments and use low cost mutual funds. This saves them the large fees that money managers and financial advisors love to charge.

Every so often, RoG will rebalance the portfolio to ensure that it remains close to the target allocation.

How do the RoGs cover living expenses?

The RoGs keep a year or two of living expenses in cash.

Part of their living expenses come from dividends. Since early retiring, the RoGs have transferred the dividends from their taxable accounts into their checking accounts. These dividends combined for about $11,000 in 2022.

In 2022, the RoGs also made $12,422 in bank account¹⁹ and credit card bonuses (travel hacking!), $11,589 in blog income, $6,029 in consulting income²⁰, $4,900 in tradeline sales, and $1,000 in YouTube earnings.

The cash stash, dividend earnings, and various other sources of income ensure that the RoGs aren’t forced to sell shares to fund their retirement.

Instead, their money stays invested and keeps growing and pumping out dividends while their annual expenses are covered by their sundry sources of income.

Finally, in order to be able use their retirement funds (i.e., 401k, 457, IRA) to cover living expenses before they turn 59.5, the RoGs are using the Roth conversion ladder to convert these retirement accounts into Roth money that doesn’t have an age restriction for withdrawals.

What have the RoGs been doing in retirement?

The RoGs have been up to all sorts of fun.

They’ve taken roadtrips all over the US, international trips to Cambodia, Thailand, Vietnam, Mexico, Bahamas, Netherlands, Germany, Austria, Czech Republic, Slovenia, Spain, Portugal, and Italy—and other countries I’m likely missing—not to mention lots of cruises.

Being early-retired sure is a hassle.

Check out RoGs travel / monthly updates if you’re curious for more.

Where can I learn more about RoG?

You can find RoG at rootofgood.com or on Twitter.

To get a year-by-year breakdown of the RoG’s journey to early retirement, read Zero to Millionaire in Ten Years. Early Retirement at 33: An Overview is another great read and provides further background and detail.

RoG also writes a monthly update that includes income and expenses for the month as well as what the RoGs have been up to, plus a net worth update. Check out his update for December 2022 or all the updates going back to October 2013.

And for the highly curious, you can read through the blog archive dating back to 2013.

Some of my favorites include $150,000 Income, $150 Income Tax, The Role of Luck in Early Retirement, 5 Lessons Learned in 5 Years of Early Retirement, and Living a $100,000 lifestyle on $40,000 per year.

The RoGs have also been covered on CNBC, Forbes, and Business Insider.

Summary

I’m a big fan of Root of Good. Ordinary salaries, three kids, and still retired before 35. That’s inspiring.

As RoG says, marry someone who shares your outlook on finances, live in a modest neighborhood and drive modest cars, and maximize your savings while minimizing your taxes.

Do this for ten to fifteen years and you’ll be sitting on over a million dollars. Almost guaranteed.

An amazing life full of travel and fun and family can be had for under $40,000 a year. It’s just a matter of prioritizing what’s important and refusing to waste time and money on trivialities.

As my dad likes to say, people don’t have an earning problem; they have a spending problem.

So, as I did with APL, I tip my hat to the RoG family and to all the people who are giving the middle finger to overspending and conspicuous consumption and choosing instead to chase their dreams and inject their life with meaning.

That’s how you fill this world with light rather than gloom.