New Here, Retire Under 40

[ATC Guy]

Hello everyone...

This is my first post here. I am 22 years old and have a sort of obsession with retiring early. I just graduated from college and have a job right now making just under $50K. I am married and my plan right now is to save as much as possible over the next 4 years as well as getting my MBA. The job I currently have doesn't have too much upside potential.

After 4 years I'd like to get a job using my MBA and use the savings my wife and I have accumulated to get into rental properties. I really like to idea of using real estate as leverage for an early retirement.

My overall goal is to retire before age 40. This means to fully retire, to the point where I can stick a lump sum of cash into a CD or Treasury Bond and live off the interest for the rest of my life.

Any insight on my plan or advice for someone my age with a goal of extreme FIRE? Anyone else start trying to FIRE at my age?

Thanks!

 

[Sarah in SC]

I'd like to see more "we" in the discussion. How does your wife feel about the necessary delayed gratification that will be involved (ie, substantial financial sacrifice) in saving for an extreme early retirement?

Kudos to you for starting off on the right foot for savings, but I'd recommend a lot more research on investing. The idea of a lump sum in a CD or Treasury isn't really practical in the current and expected interest rate climate.

And welcome! I started saving at your age but really got my thinking together for a timetable when I was closer to 30, because by then we knew our expectations about kids, house, discretionary purchases, etc.

 

[laurinsane]

Congrats and welcome to the forum. Sarah sums it up. You are going to have to make a lot of sacrifices, but hey you're only 22 so rock on to your for starting young. I'm 27 myself and I'm planning on "retiring" extremely early as well.

Read a lot about investing. Real estate is great. I own a 2-family investment property myself. The can be a bit of a pain, but you definitely stand to make decent money in the long run. Get a good real estate broker and save a lot of money. Investment properties require 25% downpayment these days.

 

[ronocnikral]

does real estate investing require an mba?

my theory on mba's, if you invest your time you would for an mba into your actual job, you will be much better off. if you invest your money you would for an mba into something else, you will be much better off. unless you have some dream of always having an mba. this is of course, unless you are going to one of the top ten schools. in which case i would expect to pay lots of cash and lose the opportunity of earning and saving for 2 years, which is over 10% of the time you expect to be in the workforce. there is no magic bullet...

and i agree with sarah. case in point, the wife and i were setting up for a bridal show this weekend and walking around looking at all the booths after we were done. someone was selling mattresses and i said, "who buys a mattress at a bridal show?" well, this guy does! if momma ain't happy, ain't no one happy. and the new bed is pretty comfortable...

i'm 27 as well, and only my most optimistic calculations have me retiring before 40, although somewhat realistic. too much uncertainty around things like healthcare.

 

[Milton]

I agree. The MBA is increasingly common, and while that may mean that it is a de facto requirement for certain jobs, it is no longer a ticket to riches (especially a degree from a lesser known B. school). So unless you actually need the piece of paper to advance in your career, you might find that the time and effort required to obtain it might be better spent on your real estate or some other form of moonlighting (or just spending quality time with your wife).

P.S. Many people have done well through prudent real estate investing, but many others have had their fingers burned by using leverage injudiciously. Be aware that there are risks involved.

 

[ATC Guy]

My wife is currently on board with our plan, luckily we have similar viewpoints on this topic. As far as the MBA, it is to get a different higher paying job. The one I have now I will not be staying at. I am fine staying for the next 4 years or so but I'd like to then move on. There isn't much room for upward movement.

Investing has been a top interest of mine for awhile as well. As far as my lump sum in a CD or treasury not being a good idea, I think that you may be thinking too short term. Saying that because current rates (and probably rates for the next few years) are too low is a reason to not use these vehicles in 15 years or so seems ridiculous. That's like saying stocks have been down and because of that are unlikely to ever go up again in the next 20 years. It is inevitable in the long run that the economy will recover and thus rates will rise. Of course, depending on market conditions at the time I plan on retiring I would have to decide what is my best option.

Laurinsane,

How is that property working for you. My plan is to accumulate several multifamily investment properties and get them paid off as soon as possible, then sell them or live off the rental income. What do you think about having a management company handle the day to day operations? I would like to have a close watch on them but it would greatly reduce the burden of daily maintenance and tenant issues.

 

[Fireup2020]

Have you investigated life in the military as an option? Many programs offer bonuses you can invest along the way, healthcare is covered (while active & retired), many positive benefits and opportunities for those looking to FIRE. You can get your MBA while in, and the military will pay for it! (at least most of it anyway!) Also - can buy real estate along the way...

Careers & Jobs : Navy.com
Officer Careers - Opportunities in the United States Air Force - AirForce.com
MarineOfficer.com
GoArmy.com > Careers & Jobs > Overview=

 

[ATC Guy]

Have you investigated life in the military as an option? Many programs offer bonuses you can invest along the way, healthcare is covered (while active & retired), many positive benefits and opportunities for those looking to FIRE. You can get your MBA while in, and the military will pay for it! (at least most of it anyway!) Also - can buy real estate along the way...

Careers & Jobs : Navy.com
Officer Careers - Opportunities in the United States Air Force - AirForce.com
MarineOfficer.com
GoArmy.com > Careers & Jobs > Overview=

I'm actually in the military right now. My wife and I would like to be more stable and start a family after our commitment. I do plan on getting my MBA while I'm in.

 

[Milton]

FWIW

I am fine staying for the next 4 years or so but I'd like to then move on. There isn't much room for upward movement.

I don't know what your specific job is, but generally speaking the military tends to have reasonably good opportunities for promotion (always assuming that one is willing to work hard and complete the required courses etc.). Advancement opportunities in civilian life tend to be rather more of a hit-and-miss affair.

 

[ronocnikral]

i'm tempted to leave my 6 fig salary job to go the military...i still have a couple of years to get in...lay down 20 years, a little cola adjusted pension and the health care piece of the puzzle is solved. if i was absolutely certain they won't change the rules, i'd have the recruiter over for dinner.

 

[REWahoo]

...lay down 20 years

There is the rub.

 

[ronocnikral]

There is the rub.

touche...but i'll exchange less risk for a couple more years in the workforce. prance out of the private sector with $300-400k NW and a small pension. enter military life, 20 years elapses and walk out fairly certain it's all done before 50. i know the grass is always greener, but that option has mass amounts less of uncertainty.

in all seriousness, if i were the OP, i would consider staying in the military. that's the best bet to retiring as close to 40 as possible. maybe not the most luxurious...but it will get the job done!

 

[Eager Beaver]

I'm reading this thinking to myself, "did I post this"??

I am 22 years old

Check

and have a sort of obsession with retiring early.

Check

I just graduated from college and have a job right now making just under $50K.

Check...

After 4 years I'd like to get a job using my MBA and use the savings I have accumulated to get into rental properties. I really like to idea of using real estate as leverage for an early retirement.

Check!

My overall goal is to retire before age 40.

40 is a bit ambitious, but check!

I am married

Here is where I can't relate... married at 22? I am petrified of such commitment right now!

However, as a fellow young dreamer obsessed with the same goal, I will share with you my limited insights gleaned from about a year of on and off research on the subject.

First off, with RE. I am sure you are familiar that 'Leverage' is a fancy word for 'risk'... and betting the farm on an extremely RE heavy portfolio is asking for trouble over the time frame of your retirement (40+ years, hopefully). There is nothing magical about RE that makes it more profitable than any other investment, it simply takes a different skill set to turn a profit. One should expect a higher return from RE than stocks and bonds, but only because you are putting in extra hours into landlording (as compared to 0 hours in index funds) that should be compensated. If you retire as a landlord, you are not truly retired, though you may find that 10-15 hours a week is not bad (and remember, all bad things in RE happen at once!). If you factor in a managing company, after you pay them you should see returns comparable to stocks in the long term, depending on your lending ratios. I guess my point is (pardon me if this sounds preachy) that RE is no magic bullet with no advantages in an efficient market, but if the industry matches your skill set and risk tolerance then it is what you should choose.

Another issue is variability. When planning for such a long time frame, you NEED extremely flexible strategies. Putting 1,500,000 into CDs and TIPS ladders for the rest of your life sounds simple and safe, but there are far too many factors to consider outside the inflation and economic risk. You must create a model for your own personal inflation risk, because in the next ~60 years your desires and lifestyle WILL change, or at the very least your wife's.

My best lessons have been to not be overconfident, and understand that there are more risk scenarios branching out than I can adequately plan for in the next 18 years. To plan for a 40+ year retirement with even a 95% confidence interval requires SO much money that it just isn't feasible to earn it in 18 years. The best I can hope for is to be 80% confident, including plans B, C, etc... and even then its expensive (but doable). So you and I will likely come across the 'one more year' syndrome, where one more year at work results in adding 1 - 2% to your confidence with diminishing returns... so you need to decide before that point at what confidence level you will feel comfortable with cutting the cord.

Of course, with a military pension things are a bit different, and the cutoff point is much more clear. But the point is still valid, you need a concrete plan and need to stick to it, and make it flexible enough to be able to adapt to lifestyle changes.

Congratulations on finding a SO with the same goals! FIRE becomes so much easier when you can take advantage of economies of scale, especially with housing and food! Consider her your most valuable asset to FIRE (Certainly is the best ROI)

 

[bow-tie]

Hello everyone...

This is my first post here... Any insight on my plan or advice for someone my age with a goal of extreme FIRE? Anyone else start trying to FIRE at my age?

Thanks!

Have you and your DW talked about youngins? One of you may want to stay home after the kid(s) arrive... or other factors that accompany the wee ones.

 

[Bestwifeever]

This thread has some more responses:

http://www.early-retirement.org/forums/f30/retiring-richer-than-when-you-were-working-51115.html