Looking to retire by 31

[mattymcmatt]

Hi there,

I'm Matt from Canada. I'm currently living in China but will be moving back this year. My goal is to be able to retire in 4 years. I currently have $20,000 in student loan debt that I should have paid off by May or June 2009 and then I will start saving and investing like crazy.

It's nice to find these forums of people with like-minded goals.

Cheers

[Homer]

be realistic.... you probably need 3 years to pay off your loan and you can't retire without working very hard for 5 to 10 years.

The harder you invest doesn't translate to better return, like what warren buffet say: if you can work harder to get better return then everyone would be rich.

[Rich_by_the_Bay]

Welcome to the board.

Your plans certainly sound ambitious. Do you have a large inheritance you can rely on? By most people's plans (even with frugal spending habits) it would take millions of dollars to retire at your age without some other form of income or support (perhaps a large inflation adjusted pension, for example).

[mattymcmatt]

Thanks Homer for your good intentions, but I'm not going to listen to your advice. Try to think more positively. You can do it.

I wrote up more details about my situation the first time but when posting, there was an error and I lost it.

Anyways, I started this year with over $30,000 in student loan debt and since getting serious about this, I have paid off over $10,000 in the past five months. I have worked as a computer programmer before and when I move back to Canada I should be able to make $45-50,000 gross per year (an estimate based on what I was making before, plus there is a good IT economy in my city right now). I plan to live with a friend to cut my rent costs and should be able to live on about $750 per month (I've been tracking all my revenues and expenses for the past 16 months so I know my situation pretty well).

My strategy is a combination of this blogger - http://earlyretirementextreme.com/20...n-5-years.html and Derek Foster (a Canadian author who retired at 34 by mainly investing in increasing dividend stocks). I figure I could save about $30,000 per year which, if I get a 10% return, would allow me to cover my $750 expenses per month in a few years.

And if not, then I could always move back to China or another interesting place. Currently my monthly expenses here are under $300 per month.

I'm sure people can find flaws in this but it sounds pretty logical to me right now.

Anyways, that's the plan. Cheers.

[Homer]

well, since you are serious about it. can you show us how you can save 500k in 3 years? i like to learn. let me try to outline your progress. here is what i think you will do:

end of year 1: loan is paid off, net worth: 0$
end of year 2: 2500$ x 12 months=30k. networth: 30k
end of year 3: 60k+10% return on investment; networth: 67k
end of year 4: 107k+10% return on investment;networth: 120k
end of year 5: netwroth 150k
6: 200k
7: 250k
.
.
.

by the way, i am a software engineer graduated from Carleton U couple years ago, i am not sure why our calculation is so different. I want to retire early; and i save all my income. my monthly expense is 700$ a month

Quote:

Originally Posted by mattymcmatt Thanks Homer for your good intentions, but I'm not going to listen to your advice. Try to think more positively. You can do it. I wrote up more details about my situation the first time but when posting, there was an error and I lost it. Anyways, I started this year with over $30,000 in student loan debt and since getting serious about this, I have paid off over $10,000 in the past five months. I have worked as a computer programmer before and when I move back to Canada I should be able to make $45-50,000 gross per year (an estimate based on what I was making before, plus there is a good IT economy in my city right now). I plan to live with a friend to cut my rent costs and should be able to live on about $750 per month (I've been tracking all my revenues and expenses for the past 16 months so I know my situation pretty well). My strategy is a combination of this blogger - http://earlyretirementextreme.com/20...n-5-years.html and Derek Foster (a Canadian author who retired at 34 by mainly investing in increasing dividend stocks). I figure I could save about $30,000 per year which, if I get a 10% return, would allow me to cover my $750 expenses per month in a few years. And if not, then I could always move back to China or another interesting place. Currently my monthly expenses here are under $300 per month. I'm sure people can find flaws in this but it sounds pretty logical to me right now. Anyways, that's the plan. Cheers.

[Dawg52]

Quote:

Originally Posted by mattymcmatt Thanks Homer for your good intentions, but I'm not going to listen to your advice. Try to think more positively. You can do it. I wrote up more details about my situation the first time but when posting, there was an error and I lost it. Anyways, I started this year with over $30,000 in student loan debt and since getting serious about this, I have paid off over $10,000 in the past five months. I have worked as a computer programmer before and when I move back to Canada I should be able to make $45-50,000 gross per year (an estimate based on what I was making before, plus there is a good IT economy in my city right now). I plan to live with a friend to cut my rent costs and should be able to live on about $750 per month (I've been tracking all my revenues and expenses for the past 16 months so I know my situation pretty well). My strategy is a combination of this blogger - http://earlyretirementextreme.com/20...n-5-years.html and Derek Foster (a Canadian author who retired at 34 by mainly investing in increasing dividend stocks). I figure I could save about $30,000 per year which, if I get a 10% return, would allow me to cover my $750 expenses per month in a few years. And if not, then I could always move back to China or another interesting place. Currently my monthly expenses here are under $300 per month. I'm sure people can find flaws in this but it sounds pretty logical to me right now. Anyways, that's the plan. Cheers.

I'm sure there are plenty of extreme retirements out there, but I would want to pad the old savings a little. But good luck with your plans and keep us up to date.

[mattymcmatt]

Quote:

Originally Posted by Homer well, since you are serious about it. can you show us how you can save 500k in 3 years? i like to learn. let me try to outline your progress. here is what i think you will do: end of year 1: loan is paid off, net worth: 0$ end of year 2: 2500$ x 12 months=30k. networth: 30k end of year 3: 60k+10% return on investment; networth: 67k end of year 4: 107k+10% return on investment;networth: 120k end of year 5: netwroth 150k 6: 200k 7: 250k . . . by the way, i am a software engineer graduated from Carleton U couple years ago, i am not sure why our calculation is so different. I want to retire early; and i save all my income. my monthly expense is 700$ a month

Sure Homer. I'm not sure where you get the 500K from though.

As you see, there would be 120K in capital at the end of year 4. If you stop working then and earn 10% (through dividend and/or capital gains - but hopefully mostly through dividends) then you would be earning $12,000 per year. If your expenses are $700 per month then you only need to withdraw $8400 of that. Also, you would be under Canada's minimum income for taxes so you pay no tax on that income you take. You can still leave 30% of the gain for the year in your investments to accumulate for future years.

If you think it's far-fetched to get 10% in dividends, then take a look at a stock like RioCan - a relatively safe, dividend paying stock with a long history of increasing dividends. Today it has a yield of 6.4% which means to earn $700 per month you would need to invest a little over $130,000. But also, since you would add to your position over four years and re-invest the dividends until then, the money you invested would probably come in at under $120,000. If you want to live in a developing country like China where your expenses are under $300 per month then you would only need $56,000 in capital.

You should definitely not invest everything in one stock though. It's just an example to show how it is possible to retire early if you are very frugal. Also, try to get Derek Foster's book from the library. It has good ideas and advice that are geared towards Canadians.

Cheers.

[Homer]

it is possible to get 10% return, however, it is not possible to live on 12k for the rest of your life. you need to buy a house, car, life insurrance, child's education.

to me, i need 30k pretax to live if i retire.

Quote:

Originally Posted by mattymcmatt Sure Homer. I'm not sure where you get the 500K from though. As you see, there would be 120K in capital at the end of year 4. If you stop working then and earn 10% (through dividend and/or capital gains - but hopefully mostly through dividends) then you would be earning $12,000 per year. If your expenses are $700 per month then you only need to withdraw $8400 of that. Also, you would be under Canada's minimum income for taxes so you pay no tax on that income you take. You can still leave 30% of the gain for the year in your investments to accumulate for future years. If you think it's far-fetched to get 10% in dividends, then take a look at a stock like RioCan - a relatively safe, dividend paying stock with a long history of increasing dividends. Today it has a yield of 6.4% which means to earn $700 per month you would need to invest a little over $130,000. But also, since you would add to your position over four years and re-invest the dividends until then, the money you invested would probably come in at under $120,000. If you want to live in a developing country like China where your expenses are under $300 per month then you would only need $56,000 in capital. You should definitely not invest everything in one stock though. It's just an example to show how it is possible to retire early if you are very frugal. Also, try to get Derek Foster's book from the library. It has good ideas and advice that are geared towards Canadians. Cheers.

[retire@40]

Quote:

Originally Posted by mattymcmatt ...As you see, there would be 120K in capital at the end of year 4. If you stop working then and earn 10% (through dividend and/or capital gains - but hopefully mostly through dividends) then you would be earning $12,000 per year. If your expenses are $700 per month then you only need to withdraw $8400 of that. Also, you would be under Canada's minimum income for taxes so you pay no tax on that income you take. You can still leave 30% of the gain for the year in your investments to accumulate for future years. If you think it's far-fetched to get 10% in dividends, then take a look at a stock like RioCan - a relatively safe, dividend paying stock with a long history of increasing dividends. Today it has a yield of 6.4% which means to earn $700 per month you would need to invest a little over $130,000. But also, since you would add to your position over four years and re-invest the dividends until then, the money you invested would probably come in at under $120,000... Cheers.

Not to burst your bubble, but if you think you can earn 10% year after year for the next 50 to 60 years and be able to withdraw 7% as a SWR to meet a $700 a month budget, you are not living in the same world as most people here.

[plex]

Actually, if he stays single with no dependants, it is foreseeable that his costs could be quite low. He could get a very small house/apartment with low utility costs, the equivalent of about $100/month, spend the equivalent of $100/month on food, use public transportation to get around occasionally and pay for minimal entertainment. All this would probably be well under $8k a year. (I actually have lived this way as a student for 7 years now, in the U.S. It would be quite comfortable if I actually had the time to sit back and enjoy it, thanks to w*rk and sch**l, which is even worse than w*rk because you have to pay them to feed you useless information.)

Assuming all this though, there is a potential gigantic cost that is being left out that definitely will pop up later, health care. You are going to need some way to get some decent health care coverage. Perhaps you are in a country that covers this though, if you are/were in the U.S. though, this alone would be almost as much or more than all your other expenses combined.

Also, you won't be able to implement this until your dividend stocks come out of the inevitable downswings that occur.

[maldini]

I can't figure out if this is serious, or if Matty is just having a laugh at everyone.

There is enough serious answers in here to make me question my most basic math skills though

As a comparison to Matty, I am 40 years old, have around $1.9M in assets ($1.4M in investments and $500k in fully paid for home), $0 in debt and I am looking at at least 8-10 more years of working before I can support a modest lifestyle with some travel and health care.

[Homer]

I am not sure how much you need annually to retire, but 2million is more than enough even if you put that money in the government bond. with 3.5% return, you get 70k cash!

you need to get out of the Rat Race, unless you want to get more toys like yatch, house, hummer

Quote:

Originally Posted by maldini I can't figure out if this is serious, or if Matty is just having a laugh at everyone. There is enough serious answers in here to make me question my most basic math skills though As a comparison to Matty, I am 40 years old, have around $1.9M in assets ($1.4M in investments and $500k in fully paid for home), $0 in debt and I am looking at at least 8-10 more years of working before I can support a modest lifestyle with some travel and health care.

[maldini]

Quote:

Originally Posted by Homer I am not sure how much you need annually to retire, but 2million is more than enough even if you put that money in the government bond. with 3.5% return, you get 70k cash! you need to get out of the Rat Race, unless you want to get more toys like yatch, house, hummer

here are my details from last year when I first joined. Take a look through them.

http://www.early-retirement.org/foru...rum-30406.html

[Homer]

i saw you need 68k to retire, but i also stated that you get 70k at 3.5% return, obviously you can get 7% return easily. so that 140k annual return.

why do you still plan to work for 10 more years?

Quote:

Originally Posted by maldini here are my details from last year when I first joined. Take a look through them. http://www.early-retirement.org/foru...rum-30406.html

[haha]

Quote:

Originally Posted by maldini I can't figure out if this is serious, or if Matty is just having a laugh at everyone. There is enough serious answers in here to make me question my most basic math skills though As a comparison to Matty, I am 40 years old, have around $1.9M in assets ($1.4M in investments and $500k in fully paid for home), $0 in debt and I am looking at at least 8-10 more years of working before I can support a modest lifestyle with some travel and health care.

Well Maldini, Matty is here to show how with a little positive thinking you can not only retire today, but live expansively until you are as old as Methuselah.

Lessez les bon temps roulez! Be not a nattering nabob of negativity!

ha

[maldini]

Quote:

Originally Posted by Homer i saw you need 68k to retire, but i also stated that you get 70k at 3.5% return, obviously you can get 7% return easily. so that 140k annual return. why do you still plan to work for 10 more years?

the 68k is after tax, not before tax.

I am going to work until my models tell me I won't run out of money. If that's 10 years, so be it. If its 7 years, all the better but with the large inflation upgap this year, coupled with the pull back in the market, I think I am looking closer to 10 years.

[Homer]

but your investment will be doing 7% at least, so your annual return will be 130k, that's more than 68kcash you would need.

i think you will get more than 3.5% return because you invested in the stock market, or why not put all the money in the bond instead.

according to my model, i need 40k a year, and i need 500k and 13% return.

Quote:

Originally Posted by maldini the 68k is after tax, not before tax. I am going to work until my models tell me I won't run out of money. If that's 10 years, so be it. If its 7 years, all the better but with the large inflation upgap this year, coupled with the pull back in the market, I think I am looking closer to 10 years.

[maldini]

Quote:

Originally Posted by Homer but your investment will be doing 7% at least, so your annual return will be 130k, that's more than 68kcash you would need.

How are you getting 130k out of $1.4m with a 7% return?

Quote:

according to my model, i need 40k a year, and i need 500k and 13% return.

You are modeling 13% return during retirement?

[Homer]

1) i am using 1.9 million, why would you keep your house if the house value doesn't go up? if your house's value stay the same, i would rather sell it and rent.

2) yeah, i am modeling at 13%,thats my biz, so lets just assume i can get 13% return. sp is 10% return in the long term. i think with a little bit of intelligence: i would buy stocks when the fed is increasing rate, and sell my holding when the cutting rate(when the economy is falling)

Quote:

Originally Posted by maldini How are you getting 130k out of $1.4m with a 7% return? You are modeling 13% return during retirement?

[maldini]

Quote:

Originally Posted by Homer 1) i am using 1.9 million, why would you keep your house if the house value doesn't go up? if your house's value stay the same, i would rather sell it and rent.

I am not expecting my house value to stay the same. I expect it will track the general real estate market of my area.

Our goal is to remain in the same house. We may eventually downsize in the same town once we get older which will provide us a modest injection of cash along with a more important lowering of expenses but we tend to treat that as a security blanket, not as a "must do to retire"

Quote:

yeah, i am modeling at 13%

I wish you the best of luck.