How Did You Get There and When Did You Start

[cscott711]

I was in the same boat when I switched but your portrait is too generous. It isn't just a matter of doing as well with less hassle. The odds are great that with actively managed funds you will do worse than with comparable index funds.

If that is the case then index funds should consistently rank as one of the highest percentiles for their category, correct?

 

[Onward]

If that is the case then index funds should consistently rank as one of the highest percentiles for their category, correct?

Over long periods (similar to what your investment time horizon is likely to be), yes. And they do.

 

[ocdokie]

Pure dumb luck.

Parents kicked me out when I was 17 to earn my own living (same with all other siblings). Went to work for the State in the mid-1970s and never imagined I would stay there 35 years, but did. Along the way, went to college at night and finally got a BA 20 years after graduating from high school. Hadn't had enough punishment, so went to law school at night and transferred to an attorney position, still within the State government. Paid for all schooling by continuing to work full-time -- no student loans.

Have no debt; house and car paid off, pay off credit cards every month, contributed max to employer's 457b plan while employed. While in law school, married DH, who is frugal and likes to live low-key; tiny condo instead of McMansion, Honda instead of Porsche, etc. He also maxed out contributions to his employer's 403b plan. Inherited some money from his parents.

Retired and started receiving pension of 70% of final annual salary at age 52. Now paying through the nose for health insurance because I moved out of state (cheap retiree health insurance only available in-state), but worth it to trade for a great climate and active outdoor lifestyle.

Now waiting for Medicare and SS, assuming they still exist when I'm finally eligible. When calculating whether I had enough to retire, planned on getting 75% of SS, so hope that happens.

The luck came in having good health and not falling prey to any number of catastrophes that have occurred to others through no fault of their own. Thankful for what I have and know I did nothing to deserve it.

 

[Nords]

While I'm sure most stories have similarities such as pay off bad debt, LBYM, budget, max out 401k contributions, I want to know what else you all did to get to your FIRE goal. I'm still forming my plan and want to see what others have done.
Am I too late at (almost) 30 to seriously consider retirement in my 40's? When did you start?

Save like crazy.

Here's another example of the process. The math works the same way whether you're in the military or not:
How many years does it take to become financially independent? | Military Retirement & Financial Independence

If that is the case then index funds should consistently rank as one of the highest percentiles for their category, correct?

Thank Goodness for Index Funds

A simple, low-cost 60 percent stock and 40 percent bond Core-4 index fund portfolio returned 4.5 percent annualized since 1999. A more broadly diversified index fund portfolio that included an extra allocation to small cap and value stocks performed 6.0 percent annualized over the same period. These returns beat a vast majority of comparable active money managers.

 

[traineeinvestor]

Parents who gave me a both an academic and a financial education. Witnessing some personal financial disasters early in life gave me a very focused awareness of the consequences of excessive leverage and failing to LBYM.
Choosing a career (law) that offered the possibility of earning a high income, maintaining a high savings rate and having a spouse with shared values has put me in a position where I could retire in 2012 (age 46) if I wished (although I am thinking about hanging on for "just one more year" for various reasons). I have no pension, SS or similar, so have to rely 100% on my investments for the next 50 years or more - nothing is guaranteed, but I'm reasonably confident that we will go the distance without being forced to degrade our quality of life.
Although investments have done reasonably well and have brought forward my retirement by several years (even with an awful 2011), high income and high savings have been more important.
It's not rocket science.

 

[Gumby]

I was fortunate that the work I found interesting and wanted to do paid very well (except for the USN), and that the young wife and I never lived up to our salaries.

 

[ESRwannabe]

While I'm sure most stories have similarities such as pay off bad debt, LBYM, budget, max out 401k contributions, I want to know what else you all did to get to your FIRE goal. I'm still forming my plan and want to see what others have done.

Am I too late at (almost) 30 to seriously consider retirement in my 40's? When did you start?

Retiring in your 40s is pretty hard to do. I think most people on this board have retired at age 50+. I think anyone can retire at 50+ if they are willing to work for it. Which is easier said than done. If you don't want to wait that long, then you may want to consider "early semi-retirement" (ESR) instead of full retirement in your 40s.

Its much easier to ESR as it takes a surprisingly large amount of money to replace work income. A reasonable assumption would be that for every $100k in stock investments you have, you could withdraw at most $3k per year. So, given that data, even a low-wage part-time job is equivalent to a large amount of savings. Say you make $15k per year at a relaxing part-time job. That would be equivalent to $500k in investments.

So, my advice would be that if you don't want to wait for 50+ to get out of the rat race. Then you may want to aim for ESR in your 40s, and continue to work part-time at a job you like doing.

That's my goal.

 

[brett]

We started early. We never, ever paid a dime in credit card interest. For the first few years after we were married just about all of our furniture was either hand me downs or second hand. We would never consider going into debt for something like furniture or a vacation. It just went on from there. We tend to buy higer end items and keep them for a long time.

We retired early, have a good income and travel when and where we wish. Even after a financially successful carreer I still drive a 15 year old car because I like and it is well maintained. Recently bought DW a new, low mileage car. Four year old import with a full load. Half the price of new model. We would prefer for someone else to take the depreciation-we can use the savings for a nice vacation. We are about to downsize of large family home to something that we can lock up and walk away from without worry or concern about ongoing mtce.

Four of the best pieces of personal financial advice that I have ever rec'd:
-never borrow money to buy a depreciable asset or a vacation
-spend less than you earn, live below your income level
-it is not what you earn, it is about what you keep
-keep your personal finances private

 

[tightasadrum]

It's not real hard to figure out. In order of importance in my case:

1. Married someone who shares my goals of LBYM
2. Stayed married
3. Bought as much rental property through the years as I could stomach with excess cash and bonuses.
4. Maxed out a matched 401K invested in a few good companies and index funds. (Toward the end I was stashing over 15% of my pretax megacorp income into tax deferred accounts. If you don't see it, you truly never miss it.)

(I put #3 before #4 only because it allowed me to stop working (not my choice) for megacorp at 55 and take a far less stressful job for fun. In truth, could have stopped working for a salary far sooner than I did. But working, DW is 7 years younger, and still gorgeous , so I worked on a little longer. Plus DD was still in college out of state. Yes, I started late with the daddy thing.)

 

[obgyn65]

1. I have had a good paying job

2. never married

3. no kids

4. no debt, no mortgage

5. I have lived frugally most of my life

I want to know what else you all did to get to your FIRE goal.

 

[foxfirev5]

Lots of good input and plans here. As a simple plodder in the investment world I offer my own story, part planning, part good luck:

1. Marry the best girl around and have a family young. Enjoy all of it.
2. Save and invest something substantial out of each paycheck.
3. Do something that you really like. I can not imagine toiling at a job for even 10 years that I did not enjoy. The trade off is not worth it.
4. Contrary to popular opinion 401k plans are not less desirable than pensions. In full disclosure- I have small pension that was frozen in '94. However the assets in the 30+ year 401k and other plans far exceed and give a legacy and flexibility I would not have otherwise.

Establish your priorities and work a plan to accomplish them. Have fun.

 

[novaman]

I just turned 48 and have been in the FIRE zone for some time now. Looking back I'd have to say there were a number of important factors that allowed me to get to where I am today.

1- I was fortunate to know what I wanted to do (dentistry) and worked very hard as a young man to get there as quickly as possible.

2- I owned my own practice at a relatively young age (25)

3- I was born into a very middle class family and married a girl who came from poor circumstances so we were accustomed to living simply. We continued to live like poor college students until we were around 30 yrs old so we could pay off all our student and business debts as quickly as possible.

4- from the age of 30 on, we started putting money away as much as possible, and have consistently done so year after year.

5- we gradually raised our living standard, slowly adding the comfort and luxury items over time, but still shopped practically (e.g.- buy cars that are 2 years old)

While I've reached the FIRE zone, I continue to work mostly because I still have a child in middle school and one in high school, so that continues to anchor me in this phase of life at least for the next 5 years. Besides, I really enjoy what I do and can't see myself not having to do anything.

 

[NW-Bound]

In my case, I guess it must be our LBYM philosophy.

Surely, I have had decent paying jobs, but while the pay was good, it was not outrageous plus there are people whom I worked with at megacorps who are the same age or older and still stuck there toiling.

I was about to say that we also enjoyed continuous income, meaning having suffered no layoffs, when I remembered that I had a few years of no income, due to my voluntary action of quitting a cushy job to chase the end of the rainbow with a couple of start-ups.

Oh, and we have children too! And even supported them through college.

And I did not even know that much about investing (and still learning and fumbling as I speak). Being so busy with work and raising a family, I spent most of the 1980s and 1990s decades ignorant of the market, and had a lot, and I mean a lot, of my 401 contribution in lousy investment choices. And with my after-tax accounts, in 2000 when I made a decision to learn more about my financial situation, I spent a day opening up account statements that were unopened for several years (while I was working days and nights with the start-ups).

So how do I end up with two houses, a 7-figure portfolio, and also more travel experiences than most people? Did our consumption habits of not buying Starbucks coffee or spending time at the shopping malls or trading in our cars every 2-3 years really add up to that much? I truly do not know.

 

[NW-Bound]

I reread the OP's question, then was able to answer my own question above.

Yes, my financial situation is better than that of many people, but I am in my mid-50s. My wife and I had been working for many years. I am still working part-time now, and have not been making contributions to my stash, but the income kept me from drawing it down during the recent bad years.

Now, if one wants to retire in his 40s, as the OP asked, then it would be harder. One would need a very well-paid job, or lots of luck in the market, or stock options with a start-up, a successful one that is. Or one has to set his living standards quite a bit lower than his peers, so that he has a higher saving rate while working, and also to retire early without pensions and prior to SS eligibility.

 

[Nords]

1- I was fortunate to know what I wanted to do (dentistry) and worked very hard as a young man to get there as quickly as possible.
2- I owned my own practice at a relatively young age (25)
While I've reached the FIRE zone, I continue to work mostly because I still have a child in middle school and one in high school, so that continues to anchor me in this phase of life at least for the next 5 years. Besides, I really enjoy what I do and can't see myself not having to do anything.

When our daughter was about 10 years old, her pediatric dentist broke off from his group practice and went independent. I couldn't figure out why he'd want to burden himself with the huge hassle of running the overhead.

Our daughter's now 19 years old. Last year her pediatric dentist turned his practice over to his twin daughters, who just earned their own DDSs. Talk about a great graduation present and a self-sustaining estate plan!

 

[Kabekew]

Am I too late at (almost) 30 to seriously consider retirement in my 40's? When did you start?

I didn't really think about retirement until my mid-30's, and managed to retire two years ago at 41. But I put everything into a high risk/return venture -- my own business -- and was fortunate enough to sell it to a large company for enough to retire on.

That's one possible path. My younger brother also retired at 39 last year through something similar: he worked long hours for startups his whole career until one finally succeeded. Neither of us saved in 401K plans or had other investments. But like other people here, we always lived cheaply to get positive cash flow. Me because I needed it to launch and then keep growing the business, and him because he needed savings in case his latest startup failed and he was out of work again.

I'd think if you want to retire in 10 years starting from nothing, you'd need some similar high risk/reward scheme. The traditional 401K and stock/bond investing just wouldn't get you the yields you'd need, even if you had a super high-paying job and could put away $100K a year. If you really want to go for it, you'll need to invest in something riskier. A business, gold mine, real estate development, write a bestselling book, something other than just buying stocks and bonds I'd think!

 

[Nords]

I'd think if you want to retire in 10 years starting from nothing, you'd need some similar high risk/reward scheme. The traditional 401K and stock/bond investing just wouldn't get you the yields you'd need, even if you had a super high-paying job and could put away $100K a year.

You're skipping over a couple aspects of the EarlyRetirementExtreme plan-- very high savings rates and very low expenses.

At $100K/year Jacob was probably able to do it in under five years. 10 years? No problem.

» Frequently Asked Questions Early Retirement Extreme: Becoming debt-free is the first step to building a better world. Financial independence is the second. Doing what YOU want is the third. , and the "21-day makeover" on the left-hand column.

Or try this link:
How many years does it take to become financially independent? | Military Retirement & Financial Independence

... and plug your own numbers into Arebelspy's spreadsheet in the July update.

 

[deserat]

Started the day I graduated with a BBA in 1964. We pretty much saved about 1/2 of our combined PRETAX income for about 30 years. Now we're concerned that we will be punished for being 'hoarders' who should pay-up to help spread the 'wealth'.

+1000

 

[mh]

You're skipping over a couple aspects of the EarlyRetirementExtreme plan-- very high savings rates and very low expenses.

At $100K/year Jacob was probably able to do it in under five years. 10 years? No problem.

» Frequently Asked Questions Early Retirement Extreme: Becoming debt-free is the first step to building a better world. Financial independence is the second. Doing what YOU want is the third. , and the "21-day makeover" on the left-hand column.

Or try this link:
How many years does it take to become financially independent? | Military Retirement & Financial Independence

... and plug your own numbers into Arebelspy's spreadsheet in the July update.

One thing to note is that it's not entirely apparent at the moment whether Jacob actually "did it" (to my mind anyways) . He lived within the numbers for a few years but then did a "never mind" and went back to working. One could argue he is a example of how someone failed at accelerated early retirement.

 

[NW-Bound]

Is the Jacob experience a "sustainable" one? He discontinued the experiment, but I suppose someone else without an ability to do a "never mind" could keep on living in such austerity.

Yes, one can, but does one want to?

 

[ARB57]

I was blessed in a variety of ways. I had a little common sense to learn from my mistakes, a single-mindedness to save, save, save...no matter how painful...and some terrific employment opportunities.

I was 27-years-old and had to borrow $200 from my parents to buy tires...because I had nothing (no money.) It was then, that I decided that change was in order. I took my prized possessions (a Les Paul Custom electric guitar and Martin D-35 accoustic guitar) down to the local music store and sold them. At that point I said, "never again." Having no money was something that I wouldn't tolerate, if it was within my control.

Even when I earned little money...I saved every penny that I could. I was blessed with some great job opportunities beginning in the early '90's and the savings began to mount. I can't say that I've been much of an investor over the years (I'm trying to do a better job of that now,) but I've been a saver. I've learned a lot from folks on this board, and others, and have put a plan in place that will allow my money to work for me. Until now though, it's been about saving and preserving capital.

I retired at 55. Everybody has a different story and I'm enjoying reading and learning, from all of them.

 

[Koolau]

While I'm sure most stories have similarities such as pay off bad debt, LBYM, budget, max out 401k contributions, I want to know what else you all did to get to your FIRE goal. I'm still forming my plan and want to see what others have done.

Am I too late at (almost) 30 to seriously consider retirement in my 40's? When did you start?

I guess I'm not the person to ask as I retired at 58. Full disclosure, I was financially independent long before that and could have retired comfortably (with reduced-already-modest pension) at 51.

My retirement ideal was to live "better" (as in spending MORE) in retirement than before. I was willing to do what it took to live where I wanted and to do the things I wanted in retirement. At least, after 6 years, it's all working to plan (and then some).

You've received tons of good advice so far. I don't know that I have much to add to that.

But to your particular question. I think Nords put you onto some possible scenarios to be able to retire early (like early to mid 40s in your case). I could never accept that lifestyle myself, so I guess the real question is "how badly do you want to retire in your 40s?" If you are willing to live a reduced lifestyle now and in the future, there ARE ways to do it. But, be advised, unless you are rather lucky (very high salary now, successful startup, inheritance, lottery, etc. etc.) retiring in your 40s will be bare bones. Some think it well worth doing that. We have "heros" often cited in this forum who did that (and then wrote blogs and/or books about it). Personally, that was not for me. I never hated my j*b that much nor required the freedom that retirement brings in my 40s. Still, I could have done it - had I been willing to accept the consequences. As I often say, YMMV. Good luck. Check back often and let us know how you are progressing.

 

[CyclingInvestor]

I knew I wanted to retire early as a child, and had a very linear progression towards retiring at 48. My salary (as a programmer) rose at a moderate, steady pace for 27 years. I LBYMed, maxed out 401k contributions from the early 80s, saved some on the side, bought and paid off a house, kept almost everything in stocks, and by 46 I had enough (I did extra padding for 2 years).

Progress seemed slow at first, but really accelerated at the end.

 

[NW-Bound]

I did not remember exactly Jacob's expenses, so read through the link that Nord provided above. Jacob spent something like $5K to $7K, but his wife paid the other 1/2 of the common living cost. By himself, it would have cost Jacob more, but of course it would not have doubled.

I just recalled this RV'er whose blog I followed for a while, before this article mentioned his lifestyle and launched him to a readership of 1M+ on the blogosphere.

He's a musician in his early 40s who is spending $11K/year living full-time in a small 21' motorhome. His relatively small MH has a stealth factor that allows him to blend in and park in places that larger MHs would stand out and get chased away. He gave up performing, but still does musical arrangement for the TV industry. This independent and remotely-performed work allows him to roam the country, and in comfort of the little MH. Said he made more than $11K/year, but he did not need to spend more.

The $11K budget even includes the premium for a high-deductible health insurance. In case any wants to duplicate this lifestyle, I would like to mention that Chinook, the maker of his small but high-end MH, has ceased operation, but a maker of equivalent small MHs called Roadtrek is still in business. Costs of a new small MH like this can run around $100K, and I guess good used ones may be around $30-40K.

PS. The picture in the article was of his first and older RV. He has since upgraded to a newer Chinook as I described above.

 

[Moemg]

I started seriously saving at 33 when I became a single Mom after a divorce . It was a wake up call . I did save enough to put both through private colleges and fund my retirement . Of course remarrying a saver after six years alone really helped .