If you could quit your job today and pursue one or more of your passions, would you?
Is it really possible to quit your “real” job in your 30’s or 40’s? Imagine how much of the world you could see if you weren’t saddled to your desk working that 9 to 5. On a whim, maybe you take a trip to Hawaii because you have travel reward points to get free flights.
You also found an AirBnB on the beach for $75/night. You splurge for a couple of nights going out, but for the most part, you leverage the kitchen in your AirnBnB and spend $500 on food for a week. Tack on a few other miscellaneous expenses and your weeklong vacation to Hawaii costs less than $1,500.
Is early retirement possible? The math…
Within the financial independence community, FI for short, there are a few simple calculations used to figure out this whole early retirement concept.
The rule that is most popular is the 4% rule. I was first introduced to this rule when I stumbled upon Mr. Money Mustache’s blog. The article is named: The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”
In its most basic terms, the 4% rule states that you can safely withdraw 4% of your investments each year and your money will last around 30 years. Some studies show that your money will last even longer. The crux of the study is that over the long term, you will average at least a 7% return if you invest 50% in bonds and 50% in stocks. Accounting for 3% for inflation, the remaining 4% is what you can safely withdraw for your retirement income.
So how much do you need? A good bogey is to use 25x your annual spending. If you spend $40k/year, you will need $1 million to retire – that is if you plan to use the 4% rule…
Many people have tried to debunk this theory. Mr. Money Mustasche reviews some of the critical comments on his post, so check them out if you aren’t a believer.
Will you be bored if you retire early?
The key for me is knowing that early retirement doesn’t actually mean retiring. I still plan to work and hopefully not tap my investments for quite some time. I enjoy working, but I want it to be on my terms.
If your plan in retirement is to sit on your keister and do nothing, you most definitely will be bored in retirement. It is also highly unlikely you will achieve financial independence at a young age if you plan to sit around in retirement. Why? Because you need to be motivated to save and invest your money so that FI can become a reality.
Think about why you save your money. I save money to weather any life events that will come up so it doesn’t cripple my family financially. I save money so someday I can choose whether I want to continue working hard and sacrificing time away from family or retire. Saving money early and often in my twenties will provide the financial basis I need to choose a different, less stressful career down the road.
Let’s unpack that a little more.
I reviewed the math earlier, so we know mathematically early retirement is achievable. As a 29-year-old, what is my plan? My plan as of today is the following:
I plan to continue working in technical sales because I enjoy working with customers that are solving technology problems. I love seeing the different applications my customers work to develop solutions for.
One day I might see a large high-performance compute customer working on a server that will have more processing power than you and I would need in a lifetime. Later that day, I might go visit a start-up that is working out of their house, but they have a cool idea and they need help taking their idea from concept to productization.
The icing on the cake is when I do my job well and I provide solutions to my customers that help them tackle the problems they are working to solve by selling them something!
Continue working in technical sales but I will begin to explore new opportunities. During this timeframe, hopefully, my children are in school and my wife may look into going back to work. This is where we could really start to save big time and accelerate our path toward FI.
One long term goal I have to give back is to go into teaching. I haven’t decided if I want to teach at a high school or if I want to teach at a local community college. I’d love to share my passion for technology with young adults, and I’d like to share my knowledge for the different careers available to students that pursue a technology-based career.
Age 40 and beyond
I should be very close if not already at FI by age 40. I may need to top off a few more accounts – making sure college is set for the little ones and that we have enough in our taxable account to cover years of converting our tax-deferred accounts over efficiently so we bear the minimum tax liability. But for the most part, we should be FI. I honestly haven’t spent a great deal of time thinking about what I would do in early retirement.
Now, this could all change. I enjoy the line of work I am in now, and I could continue down this path long term. We’ll see what the future holds!
Have you thought about early retirement? If so, what is your plan to get there?