Extreme Savers Retire by 40

[Semiretired2008]

We like to talk about frugality - this article talks about people that take it to the extreme and I mean extreme. In my last few years of w*rking I was saving over half of my salary, but that was because of little to no debt to speak of - I could not have imagined doing it for 15 - 20 years.

Financial advisers have long recommended saving between 10 and 15% of your income for retirement. For a growing number of people around the world, that just isn't enough. Instead, these extreme savers have decided to save half or more of their income to get on the fast track to financial independence...

While it depends on how your investments perform, how long you expect to live, and what income you require in retirement, most extreme savers find they can retire within 15 to 20 years if they consistently save half of their income. "I think the most motivating factor that can encourage saving is asking yourself when you want to retire," Forrest suggests. "The math is so simple to calculate, yet most people are completely clueless."

How Extreme Savers Can Retire By 40 - Yahoo! Finance

 

[daylatedollarshort]

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.

 

[ronocnikral]

I've come to realize that a happy and fulfilling life, for me, will [unfortunately] require me to work for another decade or 2. Probably 2.

I think the important thing is one is able to balance their happiness today with tomorrow. Despite having 4x the investable assets as some of these "bloggers" the same age as me, I have a wife and kid(s). And couldn't imagine my life without them.

 

[heeyy_joe]

Retiring at 40 sure is a challenge! Facing 40 years of retirement would scare the heck out of me.

 

[daylatedollarshort]

By working until forty, many people would still probably get Social Security benefits and maybe a pension. If you are married and have two SS checks at 62 or later and a small pension or two, and live in a low cost of living area, you might need to only fund twenty years of retirement. And even for those twenty years many people might have an enjoyable second career like photography or teaching college classes part time.

 

[nun]

Well count me in as an extreme saver, I save 56% of my gross income.

 

[traineeinvestor]

I totally fail to undertand anyone who (absent emergency and genuine hardship needs) doesn't save a substantial amount out of each pay cheque. Even if you don't want to retire early or even have the option of retireing early, protecting yourself from the consequences of unemployment, injury or any one of the many curve balls life can through at you should be more than sufficient motivation.

And yes, if I stayed single I could have retired at 40.

 

[comicbookgujy]

I probably could have retired at 40 also if I stayed single.

I save about 50% gross and I'm not even trying to save. Just live on one of the 2 paychecks I get a month and put in 25% pre-tax 401k contribution and 10% after tax-contribution. Everything is direct deposit so I never see any of my bonus or raise so never tempted to spend as my salary increased 4x in the past 15 years.

 

[scrabbler1]

I saved 10%-15% in my "low" savings years, the 5 years I bought a car, paid off my student loans, or paid off my mortgage. I can't imagine that being a recommended "norm" for personal savings. Despite those "low" years and the one negative savings year when I bought my apartment, my average savings rate was 38% and exceeded 50% seven years, some of those years I worked less than full-time.

 

[joebloe]

The best comment in response to that article...'I had a friend retire right out of high school, he said he was going down to the welfare office and get signed up!'

 

[jon-nyc]

I was FI at 40 but concerns about access to health insurance kept me from pulling the plug.

While no one knows what the future will bring, the SCOTUS ruling on ACA gave me sufficient confidence to pull the plug at 44.

 

[Arifriekinel]

The best comment in response to that article...'I had a friend retire right out of high school, he said he was going down to the welfare office and get signed up!'

I love that one

A few of the other comments are depressing, though. I've gotten spoiled by the optimistic resourcefulness of people here and on other finance boards. I hate to see the people talking about how you have to live in mother's basement forever if you want to retire early. They treat things like they're impossible while still living a life.

 

[ESRwannabe]

I'm 38 and have saved over half of my w2 income for a few years. I should be able to early semi-retire (ESR) by 45 or so. I would consider this possible once my taxable investments bring in enough money from stock dividends that they can cover half of my living expenses. Part-time work would cover the other half.

I've been saving about half of my money in 401k/Roth and half in a taxable brokerage account for about 12 years. The plan is that if I ESR then I will stop making retirement investments. However because they have been built up along the way those investments will be able to grow on their own such that when I hit 60+ I can completely stop working.

I've never disliked working, its the rigidity that bothers me. Working takes up seemingly all of my time, and its never ending. That's what I don't like.

Employers are too inflexible. I would gladly trade in a proportional amount of income for another day or two off from work each week. The only way I see that I can do this is by getting myself to such a position of financial strength that I have a "take it or leave it attitude" towards working. I am a worrier, so it is taking a lot of time to get there.

I will get there. Its been getting easier.

 

[scrabbler1]

I'm 38 and have saved over half of my w2 income for a few years. I should be able to early semi-retire (ESR) by 45 or so. I would consider this possible once my taxable investments bring in enough money from stock dividends that they can cover half of my living expenses. Part-time work would cover the other half.

I've been saving about half of my money in 401k/Roth and half in a taxable brokerage account for about 12 years. The plan is that if I ESR then I will stop making retirement investments. However because they have been built up along the way those investments will be able to grow on their own such that when I hit 60+ I can completely stop working.

I've never disliked working, its the rigidity that bothers me. Working takes up seemingly all of my time, and its never ending. That's what I don't like.

Employers are too inflexible. I would gladly trade in a proportional amount of income for another day or two off from work each week. The only way I see that I can do this is by getting myself to such a position of financial strength that I have a "take it or leave it attitude" towards working. I am a worrier, so it is taking a lot of time to get there.

I will get there. Its been getting easier.

I ESRed in 2001 when I was 38 years old. (I never called it that, though. I just considered myself semi-retired.) I learned at that time how powerful leverage is. When I asked in 2007 to further reduce my weekly hours worked from 20 to 12, leverage once again worked in my favor.

Both times, however, my remaining wage earnings were enough to cover my minimal expenses (the second time barely; I was not adding much if anything to my savings).

I hope you can generate similar leverage to ESR soon.

 

[ESRwannabe]

I ESRed in 2001 when I was 38 years old. (I never called it that, though. I just considered myself semi-retired.) I learned at that time how powerful leverage is. When I asked in 2007 to further reduce my weekly hours worked from 20 to 12, leverage once again worked in my favor.

Both times, however, my remaining wage earnings were enough to cover my minimal expenses (the second time barely; I was not adding much if anything to my savings).

I hope you can generate similar leverage to ESR soon.

Thanks Scrabbler1.

There are a couple of things that have me very encouraged.

My taxable dividends can cover roughly 30% of my living expenses right now. So I am over the hump, I just need 20% more for my goal. It has gotten a lot easier as the savings have gotten larger. The investment returns play a large roll now and it isn't based strictly on my savings anymore.

I'm also hoping that Baby Boomers will have a positive affect on the part-time employment market soon. I believe that a lot of them would like to continue working part-time and because of the size of that demographic the employers may be more willing to accommodate them. That will hopefully open up opportunities for everyone.

The last thing that will hopefully be beneficial for me is the health care legislation. I believe that it will make it easier for me to buy my own health insurance when I ESR.

 

[FIREd]

We reached FI in our mid 30's by saving an average of 50% of our gross income over a period of 10+ years (annual savings rates varied from 25% to 65%). But our comfortable income didn't require us to be extremely frugal.

 

[Karloff]

I'm 38 and have saved over half of my w2 income for a few years. I should be able to early semi-retire (ESR) by 45 or so. I would consider this possible once my taxable investments bring in enough money from stock dividends that they can cover half of my living expenses. Part-time work would cover the other half.

I've been saving about half of my money in 401k/Roth and half in a taxable brokerage account for about 12 years. The plan is that if I ESR then I will stop making retirement investments. However because they have been built up along the way those investments will be able to grow on their own such that when I hit 60+ I can completely stop working.

I've never disliked working, its the rigidity that bothers me. Working takes up seemingly all of my time, and its never ending. That's what I don't like.

Employers are too inflexible. I would gladly trade in a proportional amount of income for another day or two off from work each week. The only way I see that I can do this is by getting myself to such a position of financial strength that I have a "take it or leave it attitude" towards working. I am a worrier, so it is taking a lot of time to get there.

I will get there. Its been getting easier.

+1. I am in a very, very similar position, at 35, and share your goals, fears and strategies. Best of luck to you!

 

[Karloff]

Both my wife and I are 35. No debt whatsoever. No kids (that may or may not change in the future,...) We have been saving around 40% of our after-tax salaries for a few years, even though neither of us makes more than $50K a year (I saved $9K the first year I moved to the US on an $18K annual salary!), and I am hoping to work part time once I reach 40. The other half would hopefully come from dividends, investments, interest, etc.

It really is as simple as that article (and so many other that need no further introduction here) puts it: live frugally, live simply, stay out of debt, save as much as you can, don't listen to the media...

And I don't feel like we are depriving ourselves of anything!

 

[HighRoller]

Seems to be a lifestyle choice. I guess I could have retired between 40 and 45 if I didn't mind just getting by but to be honest, I would have never even considered that. As it turned out I was lucky to have a very good paying job and I was saving about 50% of my "take home pay" for the last 6 to 8 years of my working career but not as a sacrifice to lifesystle.

 

[dtbach]

If you work at something that is at least semi-gratifying I see no reason to be so extreme that you feel you have to ER at 40. Life is a journey not a destination. I didn't mind the extra decade it took to retire in that I had some excellent vacation trips, experiences with friends, fun hobbies, etc, along the way. If you die at 41, all the sacrifices to retire at 40 is wasted.

 

[kmt1972]

If I had been somewhat smarter with my investments and if I did not get married and have children then I could have done ER at 40. On the other hand my main motivation for ER is to spend more time with my child so in that scenario I would have the financial means for ER but would not have done so.

 

[Sparkie67]

We 'semi' retired at 43. Last year I worked 4 days. I don't mind working as such, I just didn't want to be tied to it, and to have to go. I see my life not as work 45 years and retire, but doing what I need to do to free up my time to do things when I want.

Life's too short to sacrifice the majority of it to someone else in exchange for money. Use less money, sacrifice less life.

 

[RobLJ]

We 'semi' retired at 43. Last year I worked 4 days. I don't mind working as such, I just didn't want to be tied to it, and to have to go. I see my life not as work 45 years and retire, but doing what I need to do to free up my time to do things when I want.

Life's too short to sacrifice the majority of it to someone else in exchange for money. Use less money, sacrifice less life.

That essentially is a summary of Thoreau's argument in the "Economy" chapter of Walden (the second chapter of the book, after "Where I Lived and What I Lived For."). Reducing your standard of living frees up valuable time, at least for the life well lived. I never forgot reading the book as a high school junior.

 

[Sue J]

Before DH retired we were saving close to 35%. Even after DHs retirement we still save around 25% of our total income for the month, mostly from my part time job. I don't make much but it all gets saved and usually ends up in a Roth IRA.

Our 28 year old son works in IT. No spouse or kids, no debt. He's saving and investing over 40% of his income. He's also in the same DB pension system that DH is retired from but he probably can't retire from that until 52 (32 years) if he stays there that long.

He spends a lot for a nice apartment, fast internet, eating out, electronics and "finds" at thrift stores. He enjoys saving and investing which he learned from only one of his parents. He learned about thrift stores from the other one.

 

[kmt1972]

Before we were 30, my wife and I saved around 45% of our income. After 30 our income went up, taxes went up as a percentage of our income, and spending increased. So after 30 we saved around 50% of income. I think we make good but not the best investment decisions though.