Extreme Savers Retire by 40

[obgyn65]

I don't think I could have retired at 40, although I always have saved a large percentage of my income. Now I save a larger part of my income, but still not able to make the jump.

 

[captain3d]

Oh Oh we are good at this...

2005 44% (of take home saved)
2006 58%
2007 68%
2008 75%
2009 76%
2010 78%
2011 77%
2012 65%
2013 67%

Married no kids. Just got told that both of our, well paid, jobs will be eliminated in another month. I think we just got FIREd.

Feeling pretty pleased with ourselves given the unexpected work news.

cheers...phil (46)

 

[Semiretired2008]

Oh Oh we are good at this...

2005 44% (of take home saved)
2006 58%
2007 68%
2008 75%
2009 76%
2010 78%
2011 77%
2012 65%
2013 67%

Married no kids. Just got told that both of our, well paid, jobs will be eliminated in another month. I think we just got FIREd.

Feeling pretty pleased with ourselves given the unexpected work news.

cheers...phil (46)

I got to those levels my last few years of full time w*rk and when I initially semi retired - saw the writing on the wall and decided it was time to put it into high gear and prepare for it. I've been tasting full retirement for almost the last year - trying to decide if I will need a supplement in retirement (some form of PT w*rk) or just wing it and press on...

The numbers say I can just wing it (Firecalc, Fidelity, Vanguard, etc), but I have always preferred large buffers. The numbers are strong enough that I am not pressing it - I will probably take a year of two to decide... I am actually to busy to go back to work right now - downsizing is a job in itself...

 

[FRUGAL_1982]

Canadian version of ss

I currently save 33% of my net income. Unfortunately here in Canada, there is no 401K, and a company retirement plan is pretty much reserved for those a career making $75,000+. I have however led a very very modest life since out of high school. No tv, no cable, my computer does it all. I make under 35,ooo/year, but the for the past 12 years have managed to save 33% of net. At age 31, I plan to fully retire at age 35 with a paid off home. I have a home that I rent 2 rooms out which generates $10-12k/year. I only spend $9,000 a year for everything,(excluding house) which is far below the "70-80%" of income the so called experts say that you replace. My savings only has to last me until age 65 where I will collect CPP, OAS and GIS. At $100,000 with a withdrawl rate of 4% is great as the current investments are generating 6%, so my capitol will stay strong while I live off the rent and interest . Now that s what I call super saver. All with a very modest salary

 

[omni550]

Welcome aboard, Frugal_1982. Sounds like you'll fit right in with all of the LBYM folks here.

omni

 

[Chelhxi]

I currently save 33% of my net income. Unfortunately here in Canada, there is no 401K, and a company retirement plan is pretty much reserved for those a career making $75,000+. I have however led a very very modest life since out of high school. No tv, no cable, my computer does it all. I make under 35,ooo/year, but the for the past 12 years have managed to save 33% of net. At age 31, I plan to fully retire at age 35 with a paid off home. I have a home that I rent 2 rooms out which generates $10-12k/year. I only spend $9,000 a year for everything,(excluding house) which is far below the "70-80%" of income the so called experts say that you replace. My savings only has to last me until age 65 where I will collect CPP, OAS and GIS. At $100,000 with a withdrawl rate of 4% is great as the current investments are generating 6%, so my capitol will stay strong while I live off the rent and interest . Now that s what I call super saver. All with a very modest salary

It sounds like you have a well thought out plan. Just wanted to add, have you done any calculation about how much CPP you might receive? My understanding is, for those of us retiring very early, because you contributed so little, what you will get back will also be small. Personally, I'm not counting on any CPP at all. I don't trust the system enough. If I get any it will just be bonus money.

I hope you're making full use of RSPs and TFSAs. I really prefer Canada's tax-deferral or avoidance options, to those of the US. Not that I understand the US system that well. But my understanding is that they can't touch theirs until a certain age, with some restrictions. But of course, we can use ours whenever we want, if we're willing to pay tax on them.

Otherwise, welcome. I'm more a lurker than a poster, but am always happy to see other young Canadians on financial forums. I'm 36, planning for retirement at 45-50.

 

[FRUGAL_1982]

CPP will be a bonus for me. So far if I stopped working today, the payment would be $230/month. In dollar amounts 35 years from now that will have minimal purchasing power, but its up to ourselves to save. I know we have OAS and GIS, however I think OAS wont be around when I turn 65. By only keeping a certain amount in an RRSP I will be sure to get guaranteed maximum payouts from OAS and GIS as TFSA does not count as income according to the government and the rules of GI/OAS, I put all my RRSP into Back end load mutual funds, and have not paid a dime when ever needing to move some money as I keep them in the same series, I also use Brokerhouse through TD which saves a boatload in fees. I read forums and then jumped in head first, and its quite fun to use. I also make sure to stay single and I don't have any kids.....and lurking is fine, but hey, if you have ever have any comments on your own savings strategies I'd love to hear

 

[Meadbh]

Welcome, frugal! TFSAs are great, but I wish they would increase the annual savings limit. I've recently retired @ 56 and if things go according to plan, I will be stuck in a high tax bracket with OAS clawback after age 71 when I have to turn my RRSP and LIRA into a RRIF and take RMDs from it. (I suppose that's a good problem to have!). My accountant says I should start drawing down on my RRSP now to reduce those risks, but my FA says the benefits of deferred taxation will outweigh the loss of OAS. I've seen financial models on the Canadian Money Forum that suggest it's a wash. I suppose it all depends on the taxable income/dividends/capital gains mix coming from one's portfolio. I'm thinking that I will convert some RRSP to TFSA in 2014 to test the waters while I am in a low tax bracket. The problem is that I don't know how much I can withdraw while dodging a higher marginal tax bracket. I can look up the tax brackets, but I can't predict future investment income! What are your thoughts on this question?

 

[modhatter]

I currently save 33% of my net income. Unfortunately here in Canada, there is no 401K, and a company retirement plan is pretty much reserved for those a career making $75,000+. I have however led a very very modest life since out of high school. No tv, no cable, my computer does it all. I make under 35,ooo/year, but the for the past 12 years have managed to save 33% of net. At age 31, I plan to fully retire at age 35 with a paid off home. I have a home that I rent 2 rooms out which generates $10-12k/year. I only spend $9,000 a year for everything,(excluding house) which is far below the "70-80%" of income the so called experts say that you replace. My savings only has to last me until age 65 where I will collect CPP, OAS and GIS. At $100,000 with a withdrawl rate of 4% is great as the current investments are generating 6%, so my capitol will stay strong while I live off the rent and interest . Now that s what I call super saver. All with a very modest salary

I must be missing something. I was itemizing last night and got depressed, trying to figure how my son could live on $3,000 a month.
Even without cable tv, and a $15 mo cell phone, I could not get his expenses down below $40,000 a yr. He would have to buy his own health insurance policy, but house is paid for, and car is paid for. (live in suburbs-no bus) But knowing the huge costs of replacing a vehicle (used of course), health insurance, car insurance, house insurance, real estate taxes, federal income taxes, utilities, replacement costs of home appliances, ac, heater, water heater, medicine, food, etc, etc. etc. There is no fat in the budget, and I am over $40,000. Car only adds about $100 a month for insurance and maybe $50 mo. gas (but there is the replacement factor, plus tires and repairs)

I guess I haven't learned enough about frugal living. Would love to see your budget, and the one in the article who makes $34,000 a yr., and saves 65%. She must live in a shoe!

 

[FRUGAL_1982]

Welcome, frugal! TFSAs are great, but I wish they would increase the annual savings limit. I've recently retired @ 56 and if things go according to plan, I will be stuck in a high tax bracket with OAS clawback after age 71 when I have to turn my RRSP and LIRA into a RRIF and take RMDs from it. (I suppose that's a good problem to have!). My accountant says I should start drawing down on my RRSP now to reduce those risks, but my FA says the benefits of deferred taxation will outweigh the loss of OAS. I've seen financial models on the Canadian Money Forum that suggest it's a wash. I suppose it all depends on the taxable income/dividends/capital gains mix coming from one's portfolio. I'm thinking that I will convert some RRSP to TFSA in 2014 to test the waters while I am in a low tax bracket. The problem is that I don't know how much I can withdraw while dodging a higher marginal tax bracket. I can look up the tax brackets, but I can't predict future investment income! What are your thoughts on this question?

I would start withdrawing from my RRSP's at a low percentage until the time comes when you are 71. I don't know what kind of money you have or lifestyle you have, however if you start withdrawing now, you can minimize the tax by withdrawing $5,000 a year ($4,999.99) as they won't take the 10% off of that (10 percent based on your tax rate, could be higher) You only need to make it to 65, or 60 because the OAS and CPP will kick in, possible the GIS, so it's better to take smaller hits than to lose big chunks when you are older

 

[FRUGAL_1982]

I must be missing something. I was itemizing last night and got depressed, trying to figure how my son could live on $3,000 a month.
Even without cable tv, and a $15 mo cell phone, I could not get his expenses down below $40,000 a yr. He would have to buy his own health insurance policy, but house is paid for, and car is paid for. (live in suburbs-no bus) But knowing the huge costs of replacing a vehicle (used of course), health insurance, car insurance, house insurance, real estate taxes, federal income taxes, utilities, replacement costs of home appliances, ac, heater, water heater, medicine, food, etc, etc. etc. There is no fat in the budget, and I am over $40,000. Car only adds about $100 a month for insurance and maybe $50 mo. gas (but there is the replacement factor, plus tires and repairs)

I guess I haven't learned enough about frugal living. Would love to see your budget, and the one in the article who makes $34,000 a yr., and saves 65%. She must live in a shoe!

Are you Canadian or American? Reason I ask is the part you mentioned your son would have to buy his own health insurance, where in Canada it's free. Also mentioned was 'real estate taxes' however the house is paid for you said, so are you referring to property tax? Here's how my budget breaks down:

BUS PASS=35
MORTGAGE+PROPERTY TAX+INSURANCE=700
BELL CANADA=75 (cell and internet)
WATER BILL=100
GAS BILL=75-100
HYDRO=120-150
FOOD=150
ODDS N ENDS/TOILETRIES/CLEANING/ENTERTAINMENT ETC =100
TOTAL=1455-1505/month
TOTAL=17460-18060/YEAR

The rental of 2 rooms in the house generates 10000-12000/year. I get to write off 30% off Mortgage interest, hydro, gas bill, water bill and internet, which reduces greatly the monthly expenses. So the apx 18,000/year (in reality is about 15,000 after income tax time for writeoffs) minus the rental income of apx. 11,000/year leaves me spending about only 4,000/year. + 5,000 into TFSA totaling apx 9,000! My 32,000 salary gets bonuses each year, and I use the bonus to pay my RRSP and I put max into TFSA, this allows me to save 33% for additional savings, so I guess in all reality I am saving 50% of net income..... the 33% just into RRSP and TFSA, the other I have invested outside of tax sheltered investments (government bonds and 5 year GICs)

 

[Meadbh]

I would start withdrawing from my RRSP's at a low percentage until the time comes when you are 71. I don't know what kind of money you have or lifestyle you have, however if you start withdrawing now, you can minimize the tax by withdrawing $5,000 a year ($4,999.99) as they won't take the 10% off of that (10 percent based on your tax rate, could be higher) You only need to make it to 65, or 60 because the OAS and CPP will kick in, possible the GIS, so it's better to take smaller hits than to lose big chunks when you are older

I am not sure that's the case. As I understand it, in any province except Quebec, a withholding tax of 10% applies the the first $5000 withdrawn from an RRSP, and 20% to the next $10,000 withdrawn. It's all reconciled at the end of the tax season, taking into account the personal exemption and other sources of income.

 

[daylatedollarshort]

So the apx 18,000/year (in reality is about 15,000 after income tax time for writeoffs) minus the rental income of apx. 11,000/year leaves me spending about only 4,000/year. + 5,000 into TFSA totaling apx 9,000!

Good for you for figuring out how to live so low cost.

 

[modhatter]

Here is what I was looking at for my son's the other night. He has a disability that would make it difficult to do landscaping and mowing.
You don't calculate for home maintenance, which I have found to be pretty costly over the years (roofs, AC, Furnace, appliances, water heater, sprinklers, etc,) I always needed to hire someone for repairs. Actually the $400 a month I figured in is on the extreme low side, especially when considering car replacement, repairs & tires in with House maintenance.

We do have two extra rooms that he could rent out when I'm gone. I don't know what kind of a landlord he would make though.

But I admire your ability to get it down so low, and be able to save like that.
It is very commendable and smart.

My sons for Southern Nevada

Property taxes 200
Home insurance 65
Car insurance & tags 120
Health Insur 420
Electric 250
Water 100
Sewer/garbage 32
Landscape 150 (includes, lawn, cutting trees, fertilizing)
Food 350
Gas 60
Internet 70
Phone 20
Maintenance & Replace 400 (roof, ac, furnace, appliances normal home repairs & car replacement, repairs, tires.)
Misc other costs 300 (vets, clothing, gifts, lic fees, dentist etc) Medical co-pays 100 (including prescriptions in this)
Entertainment 100 (eating out fast food couple times a mo, buying a new game, Netflix etc)
Income Taxes 500
__________
$3,187. x 12 = $38,244.00

Like I said, I think that House & Car replacement/repair is low, so I am figuring $40,000 a year.

I think you said your house is in the city, so you probably don't have much outside landscape, sprinkler and watering expenses. Also your medical coverage is a real plus for you lucky Canadians.

Keep up the good work

 

[Elbata]

I wish we had done more of that in our earlier years. I love all of blogs and forums these days on simple living to achieve financial independence.

Here here. Through the internet my life has been turned upside down.

I remember thinking by reading the MSM how many millions I had to save, but at the same time, I did well if I saved 10%.

With the internet and sites such as this, MMM, ERE, and others, I'm learning that what I was taught before was a bunch of BS.

Same with health. I remember reading that it's standard to have a protruding belly as one gets older. Not only is that a lie, but extremely unhealthy.

 

[FRUGAL_1982]

correct, it depends on the personal amount of your income anyways. I don't know your numbers, but a slow withdrawl is better sooner than later

 

[FRUGAL_1982]

Here is what I was looking at for my son's the other night. He has a disability that would make it difficult to do landscaping and mowing.
You don't calculate for home maintenance, which I have found to be pretty costly over the years (roofs, AC, Furnace, appliances, water heater, sprinklers, etc,) I always needed to hire someone for repairs. Actually the $400 a month I figured in is on the extreme low side, especially when considering car replacement, repairs & tires in with House maintenance.

We do have two extra rooms that he could rent out when I'm gone. I don't know what kind of a landlord he would make though.

But I admire your ability to get it down so low, and be able to save like that.
It is very commendable and smart.

My sons for Southern Nevada

Property taxes 200
Home insurance 65
Car insurance & tags 120
Health Insur 420
Electric 250
Water 100
Sewer/garbage 32
Landscape 150 (includes, lawn, cutting trees, fertilizing)
Food 350
Gas 60
Internet 70
Phone 20
Maintenance & Replace 400 (roof, ac, furnace, appliances normal home repairs & car replacement, repairs, tires.)
Misc other costs 300 (vets, clothing, gifts, lic fees, dentist etc) Medical co-pays 100 (including prescriptions in this)
Entertainment 100 (eating out fast food couple times a mo, buying a new game, Netflix etc)
Income Taxes 500
__________
$3,187. x 12 = $38,244.00

Like I said, I think that House & Car replacement/repair is low, so I am figuring $40,000 a year.

I think you said your house is in the city, so you probably don't have much outside landscape, sprinkler and watering expenses. Also your medical coverage is a real plus for you lucky Canadians.

Keep up the good work

You're right. The cost of maintenance isn't in there. I only buy materials at a 'RE-STORE', which is a store run by habitat for humanity, where most housing supplies are 40-90% off as it is donated product. I bought a book for $40 a few years back made by Home Depot that has pretty much any house repair in there, so anything from plumbing to electrical I will try, and if it fails I get a family member to help, so I only buy material. I do live in the city, I can cut my entire lawn with an electric weedwhacker lol, so that's a bonus. My gas furnace and gas water tank costs include additional warranty, so if anything goes wrong they are covered by the local dealer for all costs (total is $15/month to have both covered) That's interesting for landscaping of $150, different property. I have zero trees (again, a small grassy area in front and behind the house). I shovel my own snow. My work has 100% employer paid benefits, so any prescription drugs and dental care is covered up to $10,000/year. As long as he lives on site, the people renting respect that, they know there will never be a 'when the cats away the mice will play' opportunity, and I have found them to be very clean when they know the owner is in the next room or on the next floor. That health insurance is very high, it is unfortunate.

 

[daylatedollarshort]

Here is what I was looking at for my son's the other night. He has a disability that would make it difficult to do landscaping and mowing.
You don't calculate for home maintenance, which I have found to be pretty costly over the years (roofs, AC, Furnace, appliances, water heater, sprinklers, etc,) I always needed to hire someone for repairs. Actually the $400 a month I figured in is on the extreme low side, especially when considering car replacement, repairs & tires in with House maintenance.

We do have two extra rooms that he could rent out when I'm gone. I don't know what kind of a landlord he would make though.

But I admire your ability to get it down so low, and be able to save like that.
It is very commendable and smart.

My sons for Southern Nevada

Property taxes 200
Home insurance 65
Car insurance & tags 120
Health Insur 420
Electric 250
Water 100
Sewer/garbage 32
Landscape 150 (includes, lawn, cutting trees, fertilizing)
Food 350
Gas 60
Internet 70
Phone 20
Maintenance & Replace 400 (roof, ac, furnace, appliances normal home repairs & car replacement, repairs, tires.)
Misc other costs 300 (vets, clothing, gifts, lic fees, dentist etc) Medical co-pays 100 (including prescriptions in this)
Entertainment 100 (eating out fast food couple times a mo, buying a new game, Netflix etc)
Income Taxes 500
__________
$3,187. x 12 = $38,244.00

Like I said, I think that House & Car replacement/repair is low, so I am figuring $40,000 a year.

I think you said your house is in the city, so you probably don't have much outside landscape, sprinkler and watering expenses. Also your medical coverage is a real plus for you lucky Canadians.

Keep up the good work

If you post these expenses on the simple living, early extreme retirement and Mr Money Moustache forums and ask for ideas on how to lower them, you will get many suggestions on where to cut, if that is your goal.

If your son has a disability would it be easier for him to live in a condo or townhouse and let the HOA do the groundskeeping? We aren't disabled, just lazy, and that is our plan for retirement.

 

[daylatedollarshort]

Here here. Through the internet my life has been turned upside down.

I remember thinking by reading the MSM how many millions I had to save, but at the same time, I did well if I saved 10%.

With the internet and sites such as this, MMM, ERE, and others, I'm learning that what I was taught before was a bunch of BS.

Yes, what we realized is the annual expenses number is more important for us than the savings number. Especially the recurring expenses, because every $100 a month less in expenses means needing ~$50K less in retirement savings.

Shopping at a grocery store in a lower rent area 15 minutes away instead of 2 minutes: $120,000 savings over 40 years.

Getting rid of land line: $24,000 savings over 40 years.

We just kept finding things to cut like that and it added up to a huge reduction in what we needed to save for retirement. Just replacing a lot of disposable products with reuseable items saved quite a bit, and it is better for the environment as well.

 

[modhatter]

Yes, what we realized is the annual expenses number is more important for us than the savings number. Especially the recurring expenses, because every $100 a month less in expenses means needing ~$50K less in retirement savings.

Shopping at a grocery store in a lower rent area 15 minutes away instead of 2 minutes: $120,000 savings over 40 years.

Getting rid of land line: $24,000 savings over 40 years.

We just kept finding things to cut like that and it added up to a huge reduction in what we needed to save for retirement. Just replacing a lot of disposable products with reuseable items saved quite a bit, and it is better for the environment as well.

I agree on the shopping. Where we are now there is a Food4Less store fairly near by. There prices are definitely cheaper, but not a place I would care to buy meat or fish. What I noticed is that their dry food, like salad dressing have an expiration date which is much closer than what it would be in a regular supermarket. But as an example a bottle of Ken's salad dressing that normally sells for $3.49 in a regular grocery store is $1.79 there. But you better use it up in about 4 months, or it's expired.

Also, there produce is a lot cheaper, but sometimes questionable, but more often it's oK. We already cut out cable tv, and regular phone. Got a Ooma for house ($4.95 and a $15 mo. cell phone)

Frugal_1982, that $15 mo. for your furnace insurance is sweet. We have something similar here, but the monthly cost is closer to $45 a month.
Yes, the medical is a real problem here in the states. Especially when one needs medical care. (sounds kinda funny doesn't it) And dental is similar to ransom money. I have a tooth that broke off and is below the gum line now. Have to see oral surgeon for that. He wants $1,450 to extract it. (Been thinking, if I could just find the right set of pliers, maybe I could do it myself. ) The Novocaine would be the tricky part. Which reminds me. There's a hilarious Dentist sketch from the old Carol Burnett show that you should see if you haven't.

<iframe width="420" height="315" src="//www.youtube.com/embed/Q9T8i4FkNVo" frameborder="0" allowfullscreen></iframe>

Dental is not included in our medical. Maybe large corporations have it with their plans. Don't know, as we have always had to buy our own.

Your resourcefulness with your Home Depot book, and Habitat for Humanity purchases is again commendable. My son is on the timid side and not likely to very demanding. He had a room mate once, who really took advantage of him, and would up not paying his rent. Maybe others would be better. He is just afraid to say anything unpleasant to anyone.

 

[daylatedollarshort]

I agree on the shopping. Where we are now there is a Food4Less store fairly near by. There prices are definitely cheaper, but not a place I would care to buy meat or fish. What I noticed is that their dry food, like salad dressing have an expiration date which is much closer than what it would be in a regular supermarket. But as an example a bottle of Ken's salad dressing that normally sells for $3.49 in a regular grocery store is $1.79 there. But you better use it up in about 4 months, or it's expired.

Also, there produce is a lot cheaper, but sometimes questionable, but more often it's oK. We already cut out cable tv, and regular phone.

I get meat and frozen junk food for the kids at a regular grocery store on loss leader sales, and most of the rest of the shopping at a Food4Less type store. The produce is actually better the warehouse store than the corner store and about a third of the price.

Since DH stopped the megacorp job, one of the ways we made the budget come out the same was spending more time but less money on groceries.

 

[FRUGAL_1982]

I agree on the shopping. Where we are now there is a Food4Less store fairly near by. There prices are definitely cheaper, but not a place I would care to buy meat or fish. What I noticed is that their dry food, like salad dressing have an expiration date which is much closer than what it would be in a regular supermarket. But as an example a bottle of Ken's salad dressing that normally sells for $3.49 in a regular grocery store is $1.79 there. But you better use it up in about 4 months, or it's expired.

Also, there produce is a lot cheaper, but sometimes questionable, but more often it's oK. We already cut out cable tv, and regular phone. Got a Ooma for house ($4.95 and a $15 mo. cell phone)

Frugal_1982, that $15 mo. for your furnace insurance is sweet. We have something similar here, but the monthly cost is closer to $45 a month.
Yes, the medical is a real problem here in the states. Especially when one needs medical care. (sounds kinda funny doesn't it) And dental is similar to ransom money. I have a tooth that broke off and is below the gum line now. Have to see oral surgeon for that. He wants $1,450 to extract it. (Been thinking, if I could just find the right set of pliers, maybe I could do it myself. ) The Novocaine would be the tricky part. Which reminds me. There's a hilarious Dentist sketch from the old Carol Burnett show that you should see if you haven't.

<iframe width="420" height="315" src="//www.youtube.com/embed/Q9T8i4FkNVo" frameborder="0" allowfullscreen></iframe>

Dental is not included in our medical. Maybe large corporations have it with their plans. Don't know, as we have always had to buy our own.

Your resourcefulness with your Home Depot book, and Habitat for Humanity purchases is again commendable. My son is on the timid side and not likely to very demanding. He had a room mate once, who really took advantage of him, and would up not paying his rent. Maybe others would be better. He is just afraid to say anything unpleasant to anyone.

leave the pliers out of it lol. The best thing is for house maintenance, its your own home, so it doesn't have to be perfect the first time, you learn as you go. I don't know the American laws but in Ontario, if you share a common area (kitchen or bathroom) with the homeowner, the renter has no legal rights and can be evicted at any time for any reason.