Student, looking forward to early retirement

[SynapticFits]

So, hi everyone.

I'm a 25 year old student, set to graduate in 2013. I'm a big Mr. Money Mustache reader, but just found these forums a week ago and have been lurking ever since. Anyway, my optimistic goal is to be retired by 2023 (e.g., 10 years after I start working). I'm going into a pretty lucrative field (actuary), I'm frugal, and my spouse is on board with frugality/early retirement.

Actuaries start out making $50-$60k, with lots of growth potential ($5k+ a year, if you pass your exams). I can't really calculate future expenses yet, as I'm living with my parents to save money until I'm out of school, and I haven't really been on my own for a significant period of time. Plus, I don't think I have a decent way of estimating some significant costs that will arise, e.g. children, so we'll see how that goal evolves over the years.

Anyway, I didn't have any particular questions, just making an introduction. Hi there!

[travelover]

Welcome, glad you found us.

Statistically, what so you think your chances are of retiring in 10 years?

[LauAnn]

Welcome. It was at age 25 that I too made a conscious decision that I would lead a lifestyle that would enable me to retire early. I'm 10.5 months away from achieving my goal. As others will tell you, don't forget to live your life en route to FIRE.

[SynapticFits]

Travelover,

It's hard to tell how statistically likely I am to retire in 10 years, but based on some crude pro forma's I've done, it looks like I'll be able to put away about $40,000/year into investments. That will increase as my salary increases (actuaries have lots of upward salary potential as they accrue credentials). My spouse makes enough to pay for our future combined expenses, so all of my earnings minus taxes/401k will be investable. I'm planning to use the standard index fund stock/bond mix as the primary investment vehicle, probably 80/20 or 60/40 stock/bond, probably all with Vanguard. We're pretty frugal, and we could probably live off $30,000-$40,000/year, which is 4% of $750,000-$1,000,000, respectively.

But, there are a lot of 'ifs' in there, and it really seems too speculative to say for sure, given that I'm not even graduated yet.

[kumquat]

Welcome,

I'd ask why you want to retire from a carreer you haven't started yet? Ask yourself why you don't want a 20-40 year carreer doing something you like (and if you don't want to work as an actuary, I'm sure you can find other opportunities). When you are young, you have to earn a living and it works out best if you enjoy what you do.

It may optimitsic to think you can retire in ten years at 35 and try to live for 60 years from a portfolio of $750-1000K, possibly with new expenses (ie. children). To be honest, I wouldn't have tried to live childless on $35-40K at age 60.

Since you don't live independently, you may not be able to make a realistic budget when you don't have hard numbers from which to extrapolate. I'd wait until I'd done a few years living independently before I had a lot of faith in my expense numbers.

The 4% rule is for a 30 year retirement, 60 years might require different assumptions. As an actuary, you are far more capable than me of determining a 60 year SWR. I'd suggest you run the numbers.

That said, I can't fault you wanting to be frugal, get to FI, and live life on your terms, but I think it needs a bit more thought than you have given it shared with us.

That rant over, not wanting to rain on your parade, I'm sure you'll be FI (and ER if you determine that's for you) before your peers.

ENJOY

[SynapticFits]

Perhaps my terminology is a little misleading; I should be using FI instead of ER. Basically, I want to get to a point where my investments generate enough income to cover my expenses, and I don't need work to subsist. I am actually very excited about my career choice, and want to use FI to have the freedom to, for example, negotiate for a shorter work week or transition from full-time work to part-time consulting. And you're right--there's just too much up in the air to put any serious faith in the calculations.

[kumquat]

Now, to me, that's an admirable goal, and it may be achievable. Just don't short-change yourself during your youth to fund an old age you may not live to see, in other words spend enough to enjoy your youth, you won't get a second chance.

[marko]

I think you're looking at the wrong end of the equation.

You're 25 for cry-eye! Spend some money, have some fun, live a little. Life is waaayy too short.

If your job pays as well as you expect, there'll be plenty of time to build up that FI plan.

Go outside and play...come back here in 15 years. <grin>

Besides, we need you young'uns to pay down the deficit.

[Sarah in SC]

Glad to have you here and pleased you are starting a savings plan so early. Actuarial work is interesting and I think you will find it a low-stress and enjoyable field. I know several through my contacts in retirement plan administration.

Keep reviewing and refining your plan each year, adapting to the changes that are naturally a part of life like possible moves, maybe kids, family stuff, and shifts in priorities. Being flexible and frugal together is a winning combo, and your spouse being on board with the overall plan is a huge part of financial success.

I also enjoy MMM and think he makes a great case for enjoying life while saving/investing in your future.

[travelover]

When you move out of your parent's house, I'd be interested in renting your old room.

[Bestwifeever]

Quote:

Originally Posted by SynapticFits ...My spouse makes enough to pay for our future combined expenses, so all of my earnings minus taxes/401k will be investable....

Welcome to the boards. Do keep us posted about your progress. Completely agree with the above posters about enjoying the journey while saving for retirement.

Does your spouse live with your parents too or do you know your combined future expenses based on what she's now paying for food, shelter, clothing, transportation, etc.?

When you do have a job and a salary, you will each be paying half of the combined expenses, yes? Perhaps she will be able to increase her contributions to a 401K and IRAs?

[Amethyst]

Welcome, and best of luck in achieving FI and the freedom that comes with it!

A little surprising that no one has mentioned health insurance. If you both stop working for a company that provides it, be sure to have a solid plan for how to cover medical costs if you both choose to stop working, go into private consulting, etc. As an actuary, you probably have better insights than most people into the medical things that can go wrong with a person by age 50 or so.

Amethyst

[rescueme]

Quote:

Originally Posted by SynapticFits I'm a 25 year old student... ...my optimistic goal is to be retired by 2023 (e.g., 10 years after I start working).

I have a lot to say, but as it is I'll keep my mouth shut, other than a few observations ...

Damn - what happened to today's 'youth"? (Of course, being 25, he's no "spring chicken". Does he live in France, where getting your Masters/Doctorate before you become a "producer" is normal?).

And regardless of being in a field that pays well at the current time, why does he think he will be able to live on a subset of his eary income for a half-century (or more) in the future? I don't get it. BTW, I worked with an actuary in the early 70's (in an insurance company, when computers were very basic in function/design). I understand the basic theory of the field, but to me, it's not something that can't be replicated within software, these days. If you can write the computations on a piece of paper (along with any variations you define), you can do the same with a bit of computer code.

I'll leave it at that, as just an observation of an old man who grew up in a different time, with different expectations of me...

[obgyn65]

Welcome to the forum, SynapticFits.

[Midpack]

Quote:

Originally Posted by SynapticFits Perhaps my terminology is a little misleading; I should be using FI instead of ER. Basically, I want to get to a point where my investments generate enough income to cover my expenses, and I don't need work to subsist. I am actually very excited about my career choice, and want to use FI to have the freedom to, for example, negotiate for a shorter work week or transition from full-time work to part-time consulting. And you're right--there's just too much up in the air to put any serious faith in the calculations.

I was also puzzled with your first post, I can't imagine wanting to retire after 10 years work (though I actually know someone who did, he's become an insufferable eccentric but evidently he's happy).

I am all for reaching FI as soon as possible, though I didn't come anywhere close to 10 years. We all have to strike a balance between saving for the future/FI and spending some money along the way to make life worth living while you are working. Too many people in our current western culture err (drastically) on the side of spending now with little thought for the future or FI. It sounds like you're erring on the side of FI, like most here, though your case sounds pretty extreme (nothing wrong with that).

I've always thought the ideal approach would be a first career with a focus on using your skills & experience to make as much honest money as you can, doing something reasonably (if not wholely) enjoyable. Once you reach FI, ideally you move on to an "encore" career at the job you've always wanted - something that you can't wait to get to work every day. Nothing wrong with a sabbatical between the first/money career and the second/joy career either if you like. I think I'm on this path, currently on sabbatical (1 year so far), though it wasn't entirely premeditated...

Anyway, best of luck and congratulations for having your head on straight at such a young age, it took me a lot longer...

[Michael108]

Quote:

Originally Posted by Amethyst Welcome, and best of luck in achieving FI and the freedom that comes with it! A little surprising that no one has mentioned health insurance. If you both stop working for a company that provides it, be sure to have a solid plan for how to cover medical costs if you both choose to stop working, go into private consulting, etc. As an actuary, you probably have better insights than most people into the medical things that can go wrong with a person by age 50 or so. Amethyst

Totally agree, potential health care costs make longevity risk extremely high for a 36 year old.

[ShortInSeattle]

Quote:

Originally Posted by Midpack I am all for reaching FI as soon as possible, though I didn't come anywhere close to 10 years. We all have to strike a balance between saving for the future/FI and spending some money along the way to make life worth living while you are working. Too many people in our current western culture err (drastically) on the side of spending now with little thought for the future or FI. It sounds like you're erring on the side of FI, like most here, though your case sounds pretty extreme (nothing wrong with that).

Agreed! That is a great philosophy.

Welcome to the forum S, and i think it's great that you are getting on track. Your 10 year timeframe sounds wildly optimistic to me, but for your sake I hope I'm wrong. i'm 13 years into my career (not counting my jobs during college) and despite being diligent savers we still have a long way to go. I second the advice to enjoy life and do work you love. Like you I'm very eager to reach FI soon, but it's not because I'm ready to stop working, instead I'd love to have the OPTION to stop.

So yeah, I get the eagerness.

SIS

[scrabbler1]

Quote:

Originally Posted by SynapticFits So, hi everyone. I'm a 25 year old student, set to graduate in 2013. I'm a big Mr. Money Mustache reader, but just found these forums a week ago and have been lurking ever since. Anyway, my optimistic goal is to be retired by 2023 (e.g., 10 years after I start working). I'm going into a pretty lucrative field (actuary), I'm frugal, and my spouse is on board with frugality/early retirement. Actuaries start out making $50-$60k, with lots of growth potential ($5k+ a year, if you pass your exams). I can't really calculate future expenses yet, as I'm living with my parents to save money until I'm out of school, and I haven't really been on my own for a significant period of time. Plus, I don't think I have a decent way of estimating some significant costs that will arise, e.g. children, so we'll see how that goal evolves over the years. Anyway, I didn't have any particular questions, just making an introduction. Hi there!

Glad to hear from someone seeking to work in the actuarial field. I worked in that field for 23 years until I ERed in 2008 at age 45. Back in the late 1980s and early 1990s this field was often ranked at the top or near the top in various job surveys (Jobs Rated Almanac IIRC). I did not pass many of the exams but still made myself vital to my company and department for many years. I worked FT for the first 16 years before switching to PT work at the same company, then finally retiring in 2008. It is still a good field to enter.

I have always been single and childfree, both of which contributed greatly to my being able to ER. I lived with my parents only briefly in the mid-80s but buying an apartment in a good co-op in 1989 and paying off its mortgage in 1998 were other big steps toward my being to ER. I did not see an ER future until I turned 35 (paying off the mortgage).

Pay down/off your debts so you can avoid paying lots of interest. Even if you have to work until 40 or 45 you will still be in terrific shape.

[Danmar]

i would echo the thought that FI is a great goal at any time. ER is more complicated and needs a lot more thought and planning. I would have thought that after putting all the time and effort into becoming an actuary you would want to be sure you got the well deserved significant financial payback? Anyway goodluck and welcome.