Early retirement

Early retirement means different things as well as ages to different people, even to the FIRE followers who inquired about this too. We are also republishing this as we received a couple comments about our recent Fidelity post. Some people may want to retire by the time they are 60. Others by the time they get social security at age 67 (if it is even still around in the future). Or some people may want to retire at 50, 40, or 30 or some other age.

The fact is, if you want to retire in your 30s or 40s, that is no comparison to retiring in your 50s or 60s. If you retire at say 35, you need enough money/investment to last 40+ years. And if you retire at 65, then you only need 10+ years of investments. Comparing early retirement in your 30s to a “standard” retirement in your 60s is no comparison. Then again ,some people (many?) can’t even afford to retire in their 60s.

Many people just want to stop working (or retire) at some point in their life before they die…even 80!. They obviously need even less…if their health holds out and allows them to work that long. Every person would have their own definition of what early retirement means to them.

I remember exactly the first time when I verbalized I wanted to retire early. I was on vacation in Las Vegas, on the way to the Grand Canyon, and I said it aloud to my travel companions that I wanted to retire by 40. I was 25. Of course I said it in jest as I did not want to “rub” anyone the wrong way with such outrageous statement. As I have said in the past, I strongly dislike discussions of money and the focus on it, and a statement like that can sure be offensive to some people. So I said it jokingly.

But deep down I wanted to hit that goal of early retirement and I knew I would invest my money towards it. I was going to try to do everything I could to hit that goal. I did not want to not make the attempt to at least try, and have a fear of failure. While of course I always had some doubts I could do it, especially some years more than others, and in truth part of me never really thought it would happen, but I guess sometimes things do work out…at the age of 40.

Over the years I have learned a lot about finances, saving, and investing. I even started on that path of learning in my early teens, when I bought my first stock Genicom. I read investment books, followed the markets, read the newspapers (even the NY Times when I was a teenager!), and tried to soak in an as much knowledge as possible. I was trying to become as knowledgeable as possible and an expert in the field. While I failed to become an expert in investments (unlike computers/SEO), apparently I was able to learn enough.

There were a lot of financial mistakes made, as well as losses, including some investment losses in shady companies that resulted in class action lawsuits. But luckily I had more “wins” then losses through a combination of studying, taking some investing risks, and of course luck. As really, at the end of the day, a part of investing is luck.

But early retirement is about many different steps to take and things…not just investing. My mom set the example of working hard to support us kids. She kept a roof over our heads, paid the bills, kept food on the table, cut coupons, and even kept the house functioning/clean, etc. as well. She lived simply, frugally, and did not want for material goods or flashy items. It was about living simply, and being happy with small things in life. Even though her income wasn’t much, she was always living “beneath your means” and preaching it.

She set that example of hard work, and her example of working hard and my desire to prove myself probably caused me to work hard too and invest aggressively. Too hard and aggressive as a matter of fact, until my body gave out in a panic attack caused by following stocks so closely and working too hard.

I think there are some keys to having any hope of retiring early. Much of it is what we report on this blog. Some of the most important steps we have listed below, but of course there are others. Some of these concepts also overlap in some capacity, such as materialism, lifestyle creep, and others.

It is investing your money so it works for you. How many people have their cash in some savings account pay .5% interest, in which they are technically losing money as the rate is lower than inflation. Let your money compound.

Pay yourself first. Make sure you take some of your check each week/month and plow the money into your investment and/or retirement accounts.

Live simply, non-materialistic life especially early in life so your money has more time to grow and work for you. Then, as the years go by and your investments grow and throw off dividends/income/etc. you can always adjust that lifestyle a little if you are able too.

Do not be all about materialism or keeping up with the Jones. If you love stuff then that will make your goal much more difficult (if not 100% impossible). Now of course some people can both (stuff and early retirement), generally the pursuit of material items will make the goal of retiring early (which is already incredibly difficult if not impossible) even more challenging.

As you make more money, stay aware of Lifestyle creep or inflation. As you get more assets, wealth and income, try to keep your lifestyle fairly consistent, with your lifestyle type increasing at a slower rate than your income.

While it is very hard to do (borderline impossible), it can be done. Heck even if you try and do not hit the goal, once again you can always say you gave it your all and did not fear failing. And even if you fall short of what it takes to retire early, you are bound to have more savings and investments than you have today.

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