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So, how did you do it?
Old 12-07-2004, 10:51 AM   #1
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So, how did you do it?

Hi! This topic has probably been brought up before, but humour me It seems like this site is full of people who retired quite young so I'm interested in your stories. How exactly could you afford to retire in your 30's/40's.....?

I thought hubby and I were doing quite well but obviously not well enough to retire before our 40's (we are 35 and 32; no kids yet; net worth of $700K).

Thanks!
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Re: So, how did you do it?
Old 12-07-2004, 11:11 AM   #2
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Re: So, how did you do it?

- Military careers with COLA pensions and govt-subsidized healthcare
- Dual incomes for 20 years each
- Putting off kids (until our early 30s)
- Saving 25-40% of each paycheck
- Maxing out the tax-deferred investments
- Investing in low-expense mutual funds (index or with low turnover)
- Living a low-consumption lifestyle
- Buying quality used or cheap new
- Learning how to do our own home repairs & improvements
- Learning how to negotiate the price of everything
- Hobbies: Garage sales, pawnshops, classified ads, & realtor's open houses (instead of shopping malls)
- Eating right, exercising, countering stress
- Tracking expenses & knowing your goal

The pension & healthcare are a big help but they're not necessarily the most important factors. A military retiree has been researching military retirees for his PhD thesis and he's learning that over 85% of them go right back into the civilian workforce. Ironically this seems to be independent of the size of the pension.

I know that there are a lot more ERs without 20-year military careers. So in addition to the military's clear drawbacks, ER might be achievable just by doing the rest of the list.
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Re: So, how did you do it?
Old 12-07-2004, 11:12 AM   #3
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Re: So, how did you do it?

Double that over the next 10 years, and get a downsizing/early retire package and you have my story. Sounds like your on a decent track. And you could retire now, with the right lifestyle, so I would say you are working to improve your retirement lifestyle. I suggest that you set a target and check it every few years, so you don't get stuck in the few more years, a little better retirement trap.

Retiring in your 30's takes some combination of luck, self discipline, and self deprivation.
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Re: So, how did you do it?
Old 12-07-2004, 11:37 AM   #4
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Re: So, how did you do it?

Pure, dumb, luck.

Lucky to nab some good chromosomes (and a few wacky ones for balance). Lucky to be born in a country with boundless opportunities. Lucky to hit puberty just as the microprocessor was invented. Lucky to get my first job just as the longest bull market in history was starting. Lucky to buy a house in one of the hottest markets in the country. Lucky to get sick of my job and start a little software business just as some French guy invented HTTP. Lucky to sell the business just as valuations got crazy.

And, now, I'm hoping I'll be lucky enough to hold onto most of it in an era where our luck might be running out.
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Re: So, how did you do it?
Old 12-07-2004, 02:31 PM   #5
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Re: So, how did you do it?

Quote:
I thought hubby and I were doing quite well but obviously not well enough to retire before our 40's (we are 35 and 32; no kids yet; net worth of $700K).
I don't know what your yearly expenses are, but you may be closer than you think. If you did not include your home in your net worth, you can semi-retire today with a yearly indexed distribution of about $28K from your investments. Or, you can just cut down your work hours so that you are earning just enough to pay your bills. Let that $700K grow until you can live on a 4% distribution and completely quit working at that point.

I am in a similar situation to yours except I have one child and my wife and I are semi-retired now meaning we only work part-time in our own business. 99% of the time it's not even work for us anymore since our stress level is way down and we have time for other things we want to do.
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Re: So, how did you do it?
Old 12-07-2004, 02:40 PM   #6
 
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Re: So, how did you do it?

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Lucky to get my first job just as the longest bull market in history was starting.
Wab,

Actually not! - If you would have gotten your first job when the Bear market was starting, you could have purchased all those investments cheaper. - That is, if you got to keep your job.
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Re: So, how did you do it?
Old 12-07-2004, 03:27 PM   #7
 
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Re: So, how did you do it?

Dumped my high maintenance non-working spouse, and found a low maintenance hard working woman

Sold the Cadillacs and the second home, and dropped out of the country club.
Moved out of the high rent district and into a small house in the country. Cancelled the cable, the gym,
the cell phone, all magazines and newspapers.

Sold anything which was not needed or not being used.

Dismantled my small manufacturing company and sold it off in pieces.

Note that I did not list making a bunch of money, nor
any early ER planning. I did make a bunch of money but
we spent most of it. The real planning did not start until
the decision to ER was already made. I could be the poster child for what not to do

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Re: So, how did you do it?
Old 12-07-2004, 03:51 PM   #8
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Re: So, how did you do it?

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The pension & healthcare are a big help but they're not necessarily the most important factors. *A military retiree has been researching military retirees for his PhD thesis and he's learning that over 85% of them go right back into the civilian workforce. *Ironically this seems to be independent of the size of the pension.
Fascinating work - especially the part about it being independent of the size of the pension. I'm starting to conclude that attitudes about early retirement may be self-fulfilling.

Most of our military friends (all officers with decent pay) seem to think that the military's COLA adjusted pension w/medical offered after 20 years is such a pittance that using it as the basis of an early retirement is not even worth considering. Thus, having concluded that work after "retirement" is a financial necessity they make no effort to maximize their current savings. This puts them in the position of having to work immediately after retirement - some to the point where they don't even take a vacation before starting civillian work after finishing their military career.

As for us, we're savings as much as we can without squeezing our current lifestyle too severely. My husband loves his job but has already told me it will be the last job he ever has. He has no plans to work ever again after finishing his military careeer. So we either make ER by our deadline, or its up to me to sprint to the finish line. Totally fair, and a much healthier attitude I think than planning on becoming an insurance salesman or consultant after hanging up the uniform.
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Re: So, how did you do it?
Old 12-07-2004, 05:15 PM   #9
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Re: So, how did you do it?

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He has no plans to work ever again after finishing his military careeer. *So we either make ER by our deadline, or its up to me to sprint to the finish line. *Totally fair, and a much healthier attitude I think than planning on becoming an insurance salesman or consultant after hanging up the uniform.
Nice attitude, Flowgirl. One of my friends about 15 years ago was a former bomber pilot, Lt. Colonel. His wife was used to the good life. He went to work for Mutual of Omaha. The disgust he felt showed in his face, his voice and his step. He finally gave up, got divorced and started work as a home repair contractor.

My father-in-law retired full colonel, got a Phd, worked a long time teaching, and now at 90 he still considers himself to be working.

With him, being on top is very important. I don't think he could stand the loss of status that he would perceive as being a necessary part of retirement. Got hooked on being called Colonel, and later, Professor. Cleary by now, money can't be an issue.

As they say, different strokes for different folks.

Mikey

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Re: So, how did you do it?
Old 12-07-2004, 05:17 PM   #10
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Re: So, how did you do it?

Quote:
... but humour me *
Do Canadians spell "honour" also? In general, do you follow British tradition in spelling?

Mikey
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Re: So, how did you do it?
Old 12-07-2004, 07:04 PM   #11
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Re: So, how did you do it?

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Pure, dumb, luck.

Lucky to nab some good chromosomes (and a few wacky ones for balance). * Lucky to be born in a country with boundless opportunities. * Lucky to hit puberty just as the microprocessor was invented. * Lucky to get my first job just as the longest bull market in history was starting. * Lucky to buy a house in one of the hottest markets in the country. * Lucky to get sick of my job and start a little software business just as some French guy invented HTTP. * Lucky to sell the business just as valuations got crazy.
I love Wab's 'attitude of gratitude' -- hey after all we're all incredibly lucky just to be here and alive! *But I suspect he's being a bit modest about some of the things he did that could help an aspiring early retiree. * *You do have choices and like catching fish, you can put yourself in a place where luck is likely to show up.

My own story is similar to Wab's, but I do remember consciously thinking about ER since reading Terhorst in 1989 (ER'd at age 42 in 2001), and heeding his advice about taking more risk investing in private equity as a way to hasten a bigger payoff. *In my corporate jobs, *I consciously took more risk by transferring into sales where there was a higher payout, but more need to bust my tail to make commissions. *In my investing, I made a point of taking risk, investing in startups, and learning about things like offshore thai and malaysian mutual funds back in the 80s.

Later on I rode the dotcom boom, but my payout was because I was there early (in 1994) looking for it, and then because I had a plan (Thank you Terhorst, again), We *knew how much we needed to have in the nestegg, and when we got there, *sold without fear or second guessing (things went up for a good six months after the last sale, but I never regretted it because we'd made our number.)

So if you were trying to get to ER today, there is no substitute for luck, but you can be luck's assistant, too. *How would I help luck find me? Lots of possibilities:* Get into higher risk, higher reward work situations, get an overseas transfer, sign up for Chinese lessons, (I did Japanese lessons in the 80's, times change), invest in a friend's offshoring company, learn about med-tech or nano-tech, develop a smart saving and investing discipline, figure out a personal philosophy of integrity and diligence and gratitude that helps people with opportunities see you as someone they trust and want to invest in or place responsibility in.

Do all that, and luck will still be essential, but maybe you can tip the odds in your favor, and while you're waiting around for luck to find you, it gives you something you can 'do' to feel proactive!

ESRBob
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Re: So, how did you do it?
Old 12-07-2004, 08:54 PM   #12
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Re: So, how did you do it?

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- Saving 25-40% of each paycheck
*
net or gross?
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Mostly net!
Old 12-07-2004, 09:32 PM   #13
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Mostly net!

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Net or gross?
For most of our careers, our only withholding was fed/state taxes and SS/Medicare. After we had a kid we added another $40-$50/month in medical/dental deductions. Back then the TSP wasn't open to the military.

So the savings rate was out of the net, but the net was pretty close to the gross.

Another way to think of it was living on O-4 paychecks with O-1 spending habits. And most of my troops drove far better cars than I ever did.
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Re: So, how did you do it?
Old 12-07-2004, 10:24 PM   #14
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Re: So, how did you do it?

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learn about med-tech or nano-tech
Proteomics is where the big money may very well be for the next 10-20 years (maybe longer). Now that the human genome has been "decoded" we need to figure out what it means. That will require taking the codings and turning them into proteins and figuring out how they fold and whole lot more. If you can figure out the general protein folding problem (or even a chunk of it) then there is big money from the drug companies. There are a number of companies in the Bay Area doing work in this area (it's more than just the folding problem) and I have a friend from grad school at one of them. It requires lots of biology or some biology and lots of computer science.

Quote:
Do all that, and luck will still be essential, but maybe you can tip the odds in your favor, and while you're waiting around for luck to find you, it gives you something you can 'do' to feel proactive!
You can work on tipping the "luck" in your favour but don't count on it - keep up the hard steady slogging.
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Re: So, how did you do it?
Old 12-07-2004, 11:29 PM   #15
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Re: So, how did you do it?

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You can work on tipping the "luck" in your favour but don't count on it - keep up the hard steady slogging.
Well, some of my costliest mistakes were from erring on the side of caution. * *I underestimated several fortuitous opportunites that were well within my grasp -- one would have certainly made a 2x difference in my wealth, another probably 50x. * And there was even one in which my top-of-the-head risk/reward calculation was off by a billion dollars or so, but I don't get too excited by all of the alternative universes that I extinguished by choosing one path over another. * I'm happy with the way things turned out.

I'm not sure I could have made it by pure slogging, though. * My approach was to slog until I had a sufficient cushion to take risk, and then exit when the reward was sufficient. * I left plenty on the table with no regrets, but I certainly would have regretted never taking risks.
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Re: So, how did you do it?
Old 12-08-2004, 05:54 AM   #16
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Re: So, how did you do it?

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Do Canadians spell "honour" also? In general, do you follow British tradition in spelling?

Mikey
Yup! "Honour, colour, neighbour, etc. :

Thanks for everyone's replies. Keep 'em coming since I want to be like all of you when I grow up! Yes, the house is included in the networth....we do plan to downsize one day after the kids (who aren't even here yet :P ) fly the coup! Luckily, we have no debt, not even a mortgage, so we manage to stash a good chunk away every month in our retirement plans and in after-tax investments.
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Re: So, how did you do it?
Old 12-08-2004, 07:50 AM   #17
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Re: So, how did you do it?

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Well, some of my costliest mistakes were from erring on the side of caution. * *I underestimated several fortuitous opportunites that were well within my grasp -- one would have certainly made a 2x difference in my wealth, another probably 50x.
It's sometimes difficult to tell exactly what some faceless other on the other side of the message board means. So, what do people mean by taking more risk? Yes, you must take some risk to get any reward but how much do they mean when they say "take more risk"? I certainly hope that they're not saying to put the life savings of a 60 year old down on a single number on the roulette wheel. If any are posting here who've done that (or similar) successfully there are then likely to be many more who've done it and lost - none of those are posting here.

Quote:
I'm not sure I could have made it by pure slogging, though.
I'm pretty sure that I can but even with it there are risks - market returns, housing market, job situation, etc. I've taken my share of risks - worked at a startup back home, moved to another country, left my reasonably secure job for a smaller riskier company, etc. None of them have payed out big. I've gotten some gains from them but no big score. The experiences from doing them have given me skills that have made me more money through employment but that's just increasing my gains from slogging. I've got some friends who've won (at various levels of "won") the stock option lottery but no such luck for me.

Quote:
I left plenty on the table with no regrets, but I certainly would have regretted never taking risks.
There's a wide gap between "never taking risks" and "putting it all on red". We may be pretty close to the same point somewhere in the middle but describing it from different ends.
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Re: So, how did you do it?
Old 12-08-2004, 08:23 AM   #18
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Re: So, how did you do it?

When I talk about taking more risks, it is mostly about getting oneself out of a comfort zone and being more proactive, creative and adventurous about how to make money. *I did 'invest in myself' in terms of self-funding startups, at least initially, *but these were not huge bet-the-farm numbers, though they were big enough to get my attention very focussed at the time.

So I'm not advocating 'putting it all on red' or worse, 'putting it all on number 19', but you may well need to chuck in a safe job and salary at some point to roll the dice on a new opportunity, or eat into your savings for living expenses while you go out and earn zero for awhile in a startup.

My experience hiring in my startups was that we could either get brand new people straight out of college with essentially nothing to lose, or people who had achieved a certain financial security and were in a position to take risks. *In between, there were many people who were living paycheck to paycheck and simply couldn't *think about joining us. *In the first venture, that cost them big time. *In the second, they came out ahead not joining us! *So it is always a roll of the dice... *

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Re: So, how did you do it?
Old 12-08-2004, 09:42 AM   #19
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Re: So, how did you do it?

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So, what do people mean by taking more risk?
Well, people make risk/reward evaluations every day. Some are no brainers, like "this roulette bet is very unlikely to pay off in the short-term, and almost certainly won't pay off in the long-term." Others are tougher calls. When I was 20-something, I had a couple of job offers. One was from a local company that paid a pretty good salary. The other was from an out-of-state company that paid a lower salary, but lots of stock options. I mentally assigned the options a value of zero because I had no way to value them, and I took the local job. The rejected offer was from Microsoft in 1987. Whoops.

I made plenty of similar mistakes along the way, choosing the predictable upside and limited downside over unknown, but potentially large upside. Once in a while, you need to make a bet that you think has reasonable odds of paying off even if you can't calculate those odds, and resist taking the sure thing.
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Re: So, how did you do it?
Old 12-08-2004, 09:50 AM   #20
 
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Re: So, how did you do it?

Hey Mikey, noticed your "being on top/loss of status"
comment. I understand the possible angst involved
as I was the "Top Dog" for many years. It's all in your point of view.
I used to be a "Captain of Industry" but I'm still
Captain of my Destiny, sometime poet, philosopher,
pontificator, and all around good guy. That's enough status for me

JG
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