How to master your early retirement lifestyle: Part 1

40 thoughts on “How to master your early retirement lifestyle: Part 1”

  1. So you’re telling me if I spend less, make more, and invest the difference instead of buying things or putting it under my mattress, that I can retire? It seems so easy! Oh wait… it is. 🙂 Great introductory to FI.

  2. You’re not really even “giving it up” if you don’t miss it. I’m actually much happier as I get older with having less things to maintain and worry out. Own you stuff, don’t let your stuff own you.

    Good write up as usual, I prefer to use as conservative numbers as possible.

    1. Good point, Dividend Chimp. It’s like I’m not truly making compromises if I don’t actually miss those things that I’m no longer spending money on. 🙂

  3. Great summary! I am amazed at how much happier I feel (and I think Mr. SSC would agree) now that we have shed our more consumeristic lifestyle. I mean, we still spend a bit of money – but we have simplified, and it really helped us realize what is important in life, and what makes us happy. Deciding to work towards financial independence is one of the best decisions we have ever made!

    Sometimes I still have trouble thinking about shedding some comfy high paying jobs because the last 35 or so years I always thought the goal of life was “make more money!” But, after two years of working toward FI, I know myself and my personal goals even better than before!

    1. I’m right there with you Mrs. SSC – I’ve always thought of the high paying job as what I should be striving for. And in my ways I have achieved that goal for all intents and purposes, but I quickly learned that the money very often isn’t worth the stress and unhappiness. I guess it is another example of the pitfalls that are associated with the whole “Be careful what you wish for because you just might get it” phrase.

      It’s true!

  4. Man the idea of reaching early retirement seems so simple that everyone should be able to achieve. It comes down to living below your means and invest. Time is something that we cannot buy with money, so being able to free yourself from a regular 9-5 job means you will have more time to pursuit in something else. That’s power right there.

    1. Hey Tawcan – it’s true, it really is simple. It does take time, which is the most “difficult” part for most people to accept. But hard? Nah, not really. 🙂

      Thanks for reading!

    1. It’s ironic, isn’t it? It seems so much easier to just keep doing what you’ve always done…but the problem is if you keep doing what you’ve always done, you’ll keep getting what you’ve always gotten! 🙂

  5. Thank you for the FI 101! I am on board!
    Coincidentally, you made a comment about not missing the stuff you have given up, and I feel the same way about not only material things/shopping/eating in restaurants, but I also feel the same way about vegetarianism. People often ask me if I miss eating bacon (and then they proceed to tell me all the ways they enjoy bacon) but I do not miss it! And I enjoy all the wonderful healthy veggie foods that I eat and the health benefits that come with this lifestyle.

    1. Hi Gira – I went through a very similar vegetarian transformation. I’m not a hard-and-fast vegetarian, but I do choose the vegetarian option many times, and I can’t think of a single instance where I actually missed eating meat. I used to be a pretty big meat eater, too, but not any more.

      Thanks for reading!

  6. Have you read Dr Pfau’s research where he indicates that US was a special case and even developed countries like Holland would not support 4% over the same time period?

  7. You are absolutely right with the formula, but a couple of other things I think are important. first, you need to clear all consumer debt at the very least. That way you can truly calculate your spending rate on “normal” lifestyle things. Second, I think that if you can, just to be safe, keep your housing costs really low or have a mortgage/place to live paid off. Both will allow you to reach FI quicker. Based upon my calculations I still have a bit for FI, but get closer everyday.

    1. Good call, Jason – it’s true that debt is very much a part of this whole process. Debts will significantly push out all financial independence and early retirement plans, no doubt about it. Gotta take care of that first and foremost.

      Thanks for the note!

  8. Assuming you stick with the plan, Firecalc gives
    a 50 chance that u go broke in less than 30 years.
    a 62 % chance that you go broke in less than 40 years.
    a 68 % chance that you go broke in less than 50 years.

    That is living on 48,000 pretax dollars and paying for the added post work expense of health insurance.

    Not odds I would feel comfortable with.

  9. This is a great series idea! Though I always think about the Trinity Test Site when people talk about the Trinity Study (it was about how atomic bombs affect retirement, right?!). 🙂 Speaking of which, our feared atomic bomb would be rising health care costs — that’s the big x factor for us, as we get older, since they are rising so astronomically quickly that even healthy people can end up paying obscene sums for routine tests. We’ll keep ourselves well insured, but no way of telling what the future holds on that front… so, another reason to pad the accounts a little!

    1. Hey ONL – yup, nothing wrong with padding the ol’ retirement account, that’s for sure. I agree that health care is a bit of a mystery at the moment. My wife and I will probably utilize services in Mexico any time that we can, which offers all the same services as in the U.S., but at a fraction of the cost. Believe it or not, full time RVers do this a LOT, and it works out well (especially for Dentistry). Of course, we’ll still need health insurance in the U.S., unfortunately.

  10. Very simplistic and ‘dreamy’ view with no regards to life’s hidden wonders – emergencies, disasters, mishaps and so forth.

    1. Thanks for your thoughts, Ravi. I think they are “hidden wonders” for a reason. Unfortunately, I cannot control emergencies or natural disasters. The only thing that I can do is remain flexible through it all. 🙂

  11. One of the most amazing things after I left corporate america in 2012 was Sunday evening. To NOT have to set that alarm clock (b/c I had to get in by 7am every day) was magical. It’s worth it folks!

    1. It’s funny that you say that because one of the things that I’m really, really looking forward to is…Sunday evening and knowing that Monday is just another day. Maybe I’ll go to a coffee shop and mooch off of their wi-fi. Then again, maybe I’ll hike. Or…nothing! It’s all my choice. 🙂

  12. Hey great post, very sensible advice. One additional thing to note about the Trinity Study is that it assumes your investment costs are $0. What I *think* this really means is, your actual (non-zero) investment expenses reduce your SWR. Or looked at another way, if you assume from the Trinity Study that you can take out 4% every year, and your mutual fund expenses are on average 0.5%, you really have only 3.5% to live off of each year. You lose .5% to expenses even though they do not show up as cash flow throughout the year. I think this is an under-appreciated point that really demonstrates why mutual fund expenses are so important. If I’m right about this, then using a 4% WR means that a 1% investment expense ratio reduces your potential retirement income by 25% (1/4th of your potential retirement income goes to Wall Street every year).

    Another thing to note is that although a typical retiree spends less as they age, this rule may not apply to an early retiree until they reach 70+. An early retiree should probably assume they will spend more out-of-pocket on health care as they get closer to 65, (even with insurance — there are copays and deductibles not to mention higher premiums), than they do when they are still in their mid-30s. For purposes of calculating my “number” for ER, I assume that my wife and I will spend the same as the average American every year in out-of-pocket expenses, which is currently much higher than I spend now. You could really go nuts and assume that you will spend the out-of-pocket maximum for your plan every year, but that’s probably overkill.

    1. Hey Brian – there’s no question that investment costs are incredibly important if you’re living entirely off of those investments. My wife and I are planning on 3.5% to start and will adjust as appropriate to the investment climate throughout the years. Minimize costs (all costs) and you’ll stand a better shot at making it all the way through. 🙂

  13. Hi Steve,

    Just read about your decision to retire by 36 years of age. Is everything going on as per the plan ?

    I personally want to retire by 32 and I do have my own plan. Let’s see if I get any success with it.

  14. 8 years ago the market was at 14000 and then crashed to 7000. We are looking at a 2.5% return for 8 years, NOT 8.2%. In 08′ there was a 47% haircut to the Dow. This is the same baseless thinking that is causing the coming pension collapse. The markets are not any risk free guarantee for retirement. The boomer generation got lucky that they happend to be able to make some good gains by sheer luck of being born during the growth phase of the US economy. As the system collapses there will be no “traditional” investing models to use. The markets will shake investors out and confuse even the so called experts, because what they will fail to understand is that money is always look for a home, even if it is the least worst place to park it.

    1. Hi Jeff – yup, nothing is a guarantee, and stocks will go down from time to time. But, that only makes them cheaper to buy, increasing our passive income earnings potential. Even though the market’s “crash”, still seeing a return over 2% ain’t bad!

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