Good blog by a guy who retired in his 40s

[walkinwood]

I found this blog while wandering around the net.

This post announces his early retirement. He also wrote a bunch of posts explaining how he got there. I've also enjoyed reading his entries on retirement and following his progress from ER in 2007 to the current time.

I like his style of writing and he just states the facts without gloating or over-celebrating his achievement. He is less self-reliant in financial matters than seems to be the norm on our board. But, maybe he's a member here.

There went an hour of my life - but isn't that what ER is about?

Enjoy!

My Wealth Builder: Today is The First Day of The Rest of Life

 

[Spanky]

Thanks for the link. He does have very good points. However, I do not plan to have income streams that equal to my highest pay and join the management rank for higher income. Management, IMHO, is uninteresting and stressful work.

 

[Gone4Good]

I do not plan to have income streams that equal to my highest pay.

I saw that "goal" too. Mathematically the only way you can achieve that objective and still retire in your 40's is to have some kind of large windfall. Living below your means will never get you there.

So rather than a "goal" it seems more like a "hope".

 

[FIREd]

I saw that "goal" too. Mathematically the only way you can achieve that objective and still retire in your 40's is to have some kind of large windfall. Living below your means will never get you there.

So rather than a "goal" it seems more like a "hope".

I was puzzled by that too. Mathematically it didn't make sense for me either. But the guy seems to have a bunch a stock options, so that's probably where the windfall came from.

 

[Gone4Good]

I was puzzled by that too. Mathematically it didn't make sense for me either. But the guy seems to have a bunch a stock options, so that's probably where the windfall came from.

I think he said he had a 16% average annualized return on his company stock, which doesn't suck. And then if he had that leveraged with options . . .

 

[tuixiu]

Hah! I see "Millionaire Mommy Next Door" weighs in in the comments section of that blog. Man was that a controversial figure in here awhile back, that thread was epic.

 

[randy082054]

He could use a good proofreader.

 

[walkinwood]

I noticed that the blogger has checked out our forum & has positive things to say about it.

My Wealth Builder: Early Retirement Forum

 

[Kabekew]

Mathematically the only way you can achieve that objective and still retire in your 40's is to have some kind of large windfall. Living below your means will never get you there.

Hmmm, or just live below your means while you run your company intelligently and resist the temptation to expand beyond your core product line just because you make a bunch of money and you can! Stick it in the bank instead (well, your portfolio).

Or work your butt off to senior VP level (like my brother, he's 36) and reap the $500K bonuses he gets every year.

Or work your butt off in law school and get asked to join a high profile firm.

I think there's lots of ways that don't involve a windfall...

 

[Spanky]

I think there's lots of ways that don't involve a windfall...

True, there are many ways .. medical doctors in specialties, entrepreneurs, CEOs of major corporations, top athletes, movie stars, singers, anchors for major TV networks, movie producers, portfolio managers, hedge-fund managers, etc.

However, competition for those jobs is fierce and only a handful of people can make it.

 

[tuixiu]

I don't think even any of those exceptional cases like CEOs, singers, and major athletes can accomplish what he's saying. Remember he's talking about an income stream matching his highest level of pay, so the math is pretty much the same for someone making a lot of money versus little money.

If Joe basketball player manages a nice 15 million dollar per year contract during his best year he'd have to have to have 375 million saved up to pull from at the oft-used 4% SWR in order to meet the qualifications this guy is using. Not impossible but surely not very easy mathematically to accomplish at an early age.

 

[JustCurious]

Or work your butt off to senior VP level (like my brother, he's 36) and reap the $500K bonuses he gets every year.

Or work your butt off in law school and get asked to join a high profile firm.

I think there's lots of ways that don't involve a windfall...

Those things are possible, but I think they are unlikely to lead to significant savings, because those types of positions usually come with expectations of living large...big house, fancy cars, expensive entertainment, tailored clothing, nice watches, etc. etc. A senior VP making 500k bonuses who lives in a small house and drives a 10 year old Honda Civic and wears inexpensive clothes and who doesn't spend lots of money on entertainment is unlikely to remain in that position for long.

 

[walkinwood]

Those things are possible, but I think they are unlikely to lead to significant savings, because those types of positions usually come with expectations of living large...big house, fancy cars, expensive entertainment, tailored clothing, nice watches, etc. etc. A senior VP making 500k bonuses who lives in a small house and drives a 10 year old Honda Civic and wears inexpensive clothes and who doesn't spend lots of money on entertainment is unlikely to remain in that position for long.

I've known a lot of executives in the computer industry who do not fall into the stereotype you described. I have known only a few executives in other industries, and find that technocrats are often not flashy at all.

 

[Kabekew]

Okay, I didn't see the guy has retired already and is still "hoping to somehow achieve" his needed savings. I agree that's going to be really tough -- obviously it should have been the other way around.

True, there are many ways .. medical doctors in specialties, entrepreneurs, CEOs of major corporations, top athletes, movie stars, singers, anchors for major TV networks, movie producers, portfolio managers, hedge-fund managers, etc.

However, competition for those jobs is fierce and only a handful of people can make it.

Whoa, don't lump entrepreneurs with all those! Not "only a handful of people can make it" -- actually, anybody can become an entrepreneur, and you don't have to be chosen or lucky or earn the title.

And competition for running businesses among the general population is certainly not fierce, because most people are actually defeatists and think "only a handful of people can make it, so why bother." We entrepreneurs love that attitude though because that means less potential competition!

(Competition among entrepreneurs for good cash cows may be fierce, but you can typically segment yourself into your own smaller niche, distinguish yourself from the competition, and quietly make millions while your competitors do as well... I made mine before age 40 starting from nothing and I didn't just get lucky, it was all hard work, a lot of research and having a business plan before starting, and having the right attitude about spending, I think).

Those things are possible, but I think they are unlikely to lead to significant savings, because those types of positions usually come with expectations of living large...big house, fancy cars, expensive entertainment, tailored clothing, nice watches, etc. etc. A senior VP making 500k bonuses who lives in a small house and drives a 10 year old Honda Civic and wears inexpensive clothes and who doesn't spend lots of money on entertainment is unlikely to remain in that position for long.

That's a little sour grapes, don't you think? Yes my brother has an expensive downtown condo and the clothes and cars, but he spends much less than he takes in and told me he's got "low seven digits" saved already.

And why would he want to live in a small house and drive a 10 year old Civic? He climbed the ladder and achieved success in large part because he did spend a lot on entertainment, built friends and contacts that way, and appeared and acted successful (nice clothes, etc) before he actually was. He'd argue that's in fact how he stood out come promotion time -- in his image- and personality-driven line of work, nobody would promote some defeatist shlub who drives a 10 year old Civic.

 

[M Paquette]

A senior VP making 500k bonuses who lives in a small house and drives a 10 year old Honda Civic and wears inexpensive clothes and who doesn't spend lots of money on entertainment is unlikely to remain in that position for long.

I was going to say "You know Tim Cook?", but he's pretty secure in his job, having held it for 11 years. He rents because Silicon Valley real estate was too darn expensive, and the Civic is 12 years old...

 

[Gone4Good]

I don't think even any of those exceptional cases like CEOs, singers, and major athletes can accomplish what he's saying. Remember he's talking about an income stream matching his highest level of pay, so the math is pretty much the same for someone making a lot of money versus little money.

If Joe basketball player manages a nice 15 million dollar per year contract during his best year he'd have to have to have 375 million saved up to pull from at the oft-used 4% SWR in order to meet the qualifications this guy is using. Not impossible but surely not very easy mathematically to accomplish at an early age.

Yup.

 

[friar1610]

I saw that "goal" too. Mathematically the only way you can achieve that objective and still retire in your 40's is to have some kind of large windfall. Living below your means will never get you there.

So rather than a "goal" it seems more like a "hope".

I'm not sure that's entirely true. When I was looking at early retirement as a possibility, I ran across John Greaney on the web. IIRC, he retired at 38 or some ridiculously young age an did not have a windfall. Granted, he made a few lucky bets on stocks, but living cheaply was a definite part of his strategy.

Check out his web site: The Retire Early Home Page.

He also has few links to sites of other folks who have figured out how to retire early.

I don't claim to be one of the people who retired so early, having done so at 58, but there are folk out there who lived below their means, invested smartly and retired quite early without the benefit of a windfall.

 

[Spanky]

I ran across John Greaney on the web. IIRC, he retired at 38 or some ridiculously young age an did not have a windfall. Granted, he made a few lucky bets on stocks, but living cheaply was a definite part of his strategy.

The point is not that a windfall is needed to retire early. John Greaney did not plan to have the goal of income streams that equal to his highest salary from his portfolio. The goal, IMHO, was to generate sufficient income to support living expenses.

 

[tuixiu]

Greaney was one of the first people I ran across online that got me going on this whole retire early thing. I think I started with him and the Motley Fool, followed to some other retirement board then after awhile found here.

Funny thing about Greaney is that he has all this time on his hands and still can't find the couple hours needed to update the style of his website so it doesn't look like something from 1997.

Even this board has a new look, although when I first hit it recently I thought I had accidentally landed on the Fresh & Easy website, maybe find some coupons or something.

 

[Dennis]

IMO? Well if you are willing to Take on a 2nd FT. Career on Investing and not just On a Part-Time Basis and you have a $100k Bankroll? You might get the job done..

Some problems I've seen meeting these Types?
1. They just don't STAY retired for long.. they miss the action, geto bored, etc..
2. Retiring requires alot more than just having Enough $... It's a new Career.. If you don't have a Retirement Career? Depression and Boredom Sets in..
3. And as one gets Older? We just aren't either That Brain Sharp as we were and Lack the Motivation to be aggressive as we were..When already has enough $ ..
4. Always Question One's Motives..Why does this Guy or whomever want to Share this Information? And if it works so well? Why not Keep doing it and make More $ to Give to Chairites? Help Cure Diseases? Save the Whales!
5. After Being in the Business of Serving Hundreds of Pro's on Wall Street? Any system that Works ? Isn't made available to the Public.. Just Like gambling Systems, Vegas and States will just Modifiy Regulations to Ban them.. Wall Street can't afford to have alot of Winners.. For How do you make your $ investing? From others , who are Sellers /Loosers... We need Loosers to support the winners..

But, what if? We only could buy Bonds and Force the Co.'s to pay a 5%-10% Yld or a 7% rtn? It cost them 7% to borrow the $ ( from issuing Bonds) to grow their business..or were regulated on profits like the Utilities?

75% of Wall Street would Loose their Jobs an most Investment Firms , CNBC and CRAMER would go out of business..

And this would be a Bad Thing?

 

[Gone4Good]

I'm not sure that's entirely true. When I was looking at early retirement as a possibility, I ran across John Greaney on the web. IIRC, he retired at 38 or some ridiculously young age an did not have a windfall. . . .

As mentioned by others, the point wasn't about retiring early, it was about replacing 100% of your peak earnings on a recurring basis at a very early age.

Just to show how nearly impossible this is I ran some numbers. Assuming our retiree earns 100% of his peak earnings every year of his 20 year working career, earns a 5% real return on his investments, and plans to withdraw 4% of his portfolio at retirement (a high WR for a ~38 year old retiree), our retiree would have to save 76% of his GROSS pay (before taxes), every year. Many people pay more than 24% of their earnings in taxes.

If we assume he gets even a modest 2% raise every year, he would need to save 96% of his gross pay.

While this might be an interesting mathematical exercise, the bigger question is why anyone would set this as a goal in the first place. If one is capable of living on a fraction of their pre-retirement salary, why would they need to replace 100% of their peak earnings anyway?

 

[tuixiu]

If one is capable of living on a fraction of their pre-retirement salary, why would they need to replace 100% of their peak earnings anyway?

Yup, I'm sure it's been mentioned in these forums before, this is the flaw in the oft-bandied about need to replace 70% of pre-retirement income. Everyone's situation is so different that it's a completely pointless number to state even as a general barometer.

 

[rayvt]

Agreed. At best, you only need to replace 100% of what your adjusted income was.

"Adjusted" means after subtracting out FICA, 401K & IRA contributions, etc. FICA is 7.2%, 401K is maybe 10%-15% ($15,500 max), IRA is $6000 max. Plus back out most of your income tax, since most of your post-retirement income will be either not taxed or taxed at a lower rate.

Plus, for us, moving to another state and trading my $13,000 real-estate tax bill for a $2500 one.