How Are Members Earning Money to Fund Early Retirement?

[jackontrack]

Meaning, how are people achieving the income needed to quit their jobs and fund Early Retirement?

I see that there are several investors on here, so I am assuming that most of you earn decent returns on your money in the market.

Does anyone have a side-gig? 2nd job? Online stream of income? High-Income job? OR, have people just drastically cut their expenses and live frugally?

I am working to free up time on nights and weekends to pursue something else. Not sure exactly what it will be, so I am trying to see what others are doing for some ideas.

 

[LOL!]

My spouse works. That means I can quit my job.

 

[Surewhitey]

We both w**k for now. We're socking away $10-12k monthly while spending appx. $6k. We've been doing this for some years now and are thinking of calling it quits for maybe a year or two to see if we keep going that direction or going back to w**k if it doesn't feel right.

We plan to move to Central America & live on $2k monthly (we've talked to many who live on less). We'll make that on our investments until we do something else. Will we eventually move back? Probably to TX & continue living simple & work, at least one of us. Just feeling like we need to do this & see what happens.

 

[jackontrack]

Saving $10-12k monthly? That's awesome. I'm trying to do something similar, however I am not lucky enough to make as much as you guys do.

I went from spending $8K monthly, down to about $3500, so I can pocket the rest.

What country in Central America do you plan on moving to? I was in Costa Rica recently for vacation and had a great time. Also, I know it's in South America, but Argentina is looking pretty good these days. Went there a few years ago and found Buenos Aires to be a great alternative.

 

[DblDoc]

Meaning, how are people achieving the income needed to quit their jobs and fund Early Retirement?

I see that there are several investors on here, so I am assuming that most of you earn decent returns on your money in the market.

Does anyone have a side-gig? 2nd job? Online stream of income? High-Income job? OR, have people just drastically cut their expenses and live frugally?

I am working to free up time on nights and weekends to pursue something else. Not sure exactly what it will be, so I am trying to see what others are doing for some ideas.

All of the above:

1) High income job
2) Work second job
3) LBYM
4) Save and invest everything over expenses

DD

 

[jackontrack]

Sounds good. If you don't mind me asking, what type of second job is it?

 

[DblDoc]

Sounds good. If you don't mind me asking, what type of second job is it?

A locums job as an ER doc out on the coast of WA.

DD

 

[Surewhitey]

Saving $10-12k monthly? That's awesome. I'm trying to do something similar, however I am not lucky enough to make as much as you guys do.

I went from spending $8K monthly, down to about $3500, so I can pocket the rest.

What country in Central America do you plan on moving to? I was in Costa Rica recently for vacation and had a great time. Also, I know it's in South America, but Argentina is looking pretty good these days. Went there a few years ago and found Buenos Aires to be a great alternative.

When I say saving, I really mean our networth is growing (4500-5000) / savings (6,500). Semantics aside, we have been talking to friends & f of f in Costa Rica, Playa del Carmen, Ensenada, & Panama (a little about Belize too). We're leaning to PDC as we've spent a lot of time there & are very familiar with the area / how to get around. If we do that, we'll likely visit Lake Chapala, Merida & Belize in the Mexico area. If we get adventurous, we'll go down to an area just north of San Jose in CR. Sounds like CR is the more expensive to live in, but they were doing it with 2 youguns for around $1200. They said a more comfortable lifestyle starts around $2-3k monthly. They just came back to the OC to sell their home and jump back in to it. Their "test run" was very successful and fulfilling.

So many places to see, where to go next is always on our mind. We are planning to do some volunteer work while in these areas too to give us some "meaning" in our travels.

 

[Animorph]

Ideally by just saving 15% (or 25% by a recent thread, or more if you want to ER faster) of everything you earn, regardless of how much you make. I had stock options that gave me a boost, but that's not a requirement.

 

[SteveR]

I think you will find that there are just about as many paths to ER as there are people on this board. Sure there are some basics as noted above by Dbldoc. The key is to make a budget that allows you to have an emergency fund before you start any investments. Few of us can make the kind of money some of the higher income folks pull in so you have to work within your own budget of income and savings to sock away the seed money to use for investing. IMHO, investing is the key to ER for the folks in the mid to lower income ranges. It is a multiplier for your money and you don't have to have a second or third j*b to have the money grow. It just takes some education and the will to keep adding to the pot and moving stuff around over time to rebalance so you don't get burned. The other major multiplier is living on less. That is really the key to me. Live below your take home pay and much lower if you can and save and invest the rest. Time will double and re-double your investments much faster than another job in most cases. Having a second income from a spouse is almost universal these days it seems so adding a third income stream might help but your time is also valuable so be careful that you are really coming out ahead; especially if you have to pay other folks to do what you could have done if you did not have that second job.

You don't have to be rich to ER. Many, many folks on this board have done so and do so every day. One just has to give up something today to fund ER in the future. There are many threads on the board about investing, living on less and even living on WAY LESS...not for the faint at heart. Keep asking questions and learning and then take action. ER is a journey of a thousand steps; give or take a few.

Good luck.

 

[W2R]

Meaning, how are people achieving the income needed to quit their jobs and fund Early Retirement?

I see that there are several investors on here, so I am assuming that most of you earn decent returns on your money in the market.

Does anyone have a side-gig? 2nd job? Online stream of income? High-Income job? OR, have people just drastically cut their expenses and live frugally?

I am working to free up time on nights and weekends to pursue something else. Not sure exactly what it will be, so I am trying to see what others are doing for some ideas.

(emphasis mine)

I went the route of drastically cutting my expenses and living frugally. I never had a high income job or side job while saving for retirement. (I moonlighted plenty earlier in life. At age 50 I divorced my ex and ended up with essentially nothing. So, I consider that to be the start of saving for retirement, for me.) It is a lot easier to be frugal when single.

Then, after I was financially independent and just waiting to qualify for retiree medical care before retiring, I unexpectedly inherited some money. So I'm spending more these days. Life is full of surprises.

 

[Chelhxi]

Job pays well for the location but not particularly high paid. I can easily make $40,000 a yr working one job and can easily live on $20,000. That plus interest etc on investments and a decade or two of work = early retirement. Husband in the same situation helps.

 

[brewer12345]

OK, I will bite. DW and I have had full time careers the last 16 years. From the start we maxed out our 401k/403b and before the kids arrived we saved a bunch extra in taxable accounts. A bit over 8 years ago DW quit her job and set up her private practice. She never netted more than 15k in a year, but all of it went to a solo 401k. Shortly after DW bailed on her job! I started making 6 figures (just). My salary has bumped around between 100 and 150k since then. We managed to max my 401k out of salary and aggressively pay down the mortgage.

I had a few very good years, including one year when my bonus was double my salary at the time. 95% of that money got socked away.

We are now in a position where I still max out my 401k (and get a generous employer match) and DW's business earnings do into her solo k, but the portfolio's performance is really what dominates the year to year moves. I expect to ESR within 5 years, by which time I will also have earned a (small) pension.

So we were helped by a few years of outsized earnings, but most of the money came from very steady saving in retirement plans.

 

[RunningBum]

Cutting expenses has a double goodness. Not only does it leave you more savings for retirement, but it also means you need less of a nest egg for your retirement expenses.

Be careful on the 2nd job. One co-worker I know tried the Amway route. His work suffered, a lot. While I was getting big pay raises, bonuses and stock options, I don't think he was getting much of any of that, and eventually he was let go because of job performance reasons. I ER'd, and while I don't keep in touch with him, I'm betting he hasn't.

 

[RunningBum]

Also, the way I increased my savings was to keep my expenses stable and put raises and bonuses towards retirement savings. Early on I wasn't able to save much, but over the years I had a pretty large % of my income going to savings.

 

[rescueme]

I think you will find that there are just about as many paths to ER as there are people on this board.

I agree.

I could go on and give you my/our "life history", but I doubt if you or very few members of the board would want to follow it - especially the younger members who have a different set of standards along with a different upbringing than DW/I had, many years ago, based upon the postings I have read here - by members much younger than DW/me.

I'll just say that I never looked at a paid position as a "career", but looked at it as a job - that would maximize my income based upon the time I spent on it (no, I never did anything that was illegal ).

The other thing is that I put my job above my needs, and in most cases before the "needs of my family". Even though my family gained (in a financial sense) from the sacrifices of time lost - both for them, and for me, what we both gained in financial freedom in the end was worth it.

Like I said, most younger folks would not make the sacrifices that my DW/me made along the way. Not to say that younger folks are wrong; rather to say that we just followed a different path.

Not all people today are willing to make that sacrifice, nor take the extreme market risk that we did in investing (albit during a very good period of market returns - which we did not understand until many years later).

As another poster on another board likes to say - "there are many paths to Dublin"...

 

[tryan]

Rents.

 

[robbridg]

We both make pretty good salaries. We are living below our means and savings as much as possible while still enjoying life. We are investing as aggresively as we feel comfortable. No pensions for us.

 

[Sarah in SC]

Living below our means and making decent money. No kids is a huge reason we can save more than some of our peers.
And as Rescueme said, we are totally unwilling to put job ahead of life/relationships/travel.
So maybe we take a less stressful (ie, less well-paying) job so we can have more time off and no overtime. It is all about trade-offs. Live for today and tomorrow, as best you can.
I'd never take a second job--when would I have time for the good stuff?

 

[FUEGO]

Get a decent job right out of college after getting a degree in a good field. Get a DW (or DH as the case may be) with a similar mindset, and get them to get a good job too. Work hard, bank most of your raises. Keep an eye on your expenses, but don't deprive yourself to the point of frustration, because life is a marathon, not a sprint. Save a lot and put it in investments that will grow over time and keep the investments tax efficient. Set up your savings and investments to occur automatically so it is effortless (other than lowering your income).

These strategies have worked for me well. I am on track for FIRE before age 40.

 

[Surewhitey]

These strategies have worked for me well. I am on track for FIRE before age 40.

So Fuego,
Couple questions...what amount of $$ do you plan to have to FIRE before 40? We're doing the same at 41 & 47 with $950k to work with. Also, what was your best decision regarding tax efficiency investing?

Thanks,
S

 

[FUEGO]

So Fuego,
Couple questions...what amount of $$ do you plan to have to FIRE before 40? We're doing the same at 41 & 47 with $950k to work with. Also, what was your best decision regarding tax efficiency investing?

We plan on having at least a million, probably more than a million. Just how much depends on how long work remains bearable and what margin of safety we want (4% vs 3.5% vs 3% withdrawal rate) and what luxuries we want ($2000 for travel or $12000 for travel). A moving target I guess you could say. We have enough right now to just about pull off a bare bones ER without any frills and with something like a 4% withdrawal rate, but work isn't bad enough to make us want to quit at this point (age 30 right now).

As for tax efficiency, we max out our 401ks (x2), my 457, and max out the Roth IRAs (earlier it was Traditional IRAs). Some years we are eligible for HSA, and we max it and invest it (instead of reimbursing ourselves). Max out the state tax deduction on 529 plans for our kids' educations. With what is left at the end of each year, we put it in tax efficient mutual funds or ETFs with low costs and low turnover. This way we avoid most capital gains distributions. I manage the taxable account to limit gains and to realize losses so I get a $3000 write off in recent years ("tax loss harvesting").

 

[Surewhitey]

We plan on having at least a million, probably more than a million. Just how much depends on how long work remains bearable and what margin of safety we want (4% vs 3.5% vs 3% withdrawal rate) and what luxuries we want ($2000 for travel or $12000 for travel). A moving target I guess you could say. We have enough right now to just about pull off a bare bones ER without any frills and with something like a 4% withdrawal rate, but work isn't bad enough to make us want to quit at this point (age 30 right now).

As for tax efficiency, we max out our 401ks (x2), my 457, and max out the Roth IRAs (earlier it was Traditional IRAs). Some years we are eligible for HSA, and we max it and invest it (instead of reimbursing ourselves). Max out the state tax deduction on 529 plans for our kids' educations. With what is left at the end of each year, we put it in tax efficient mutual funds or ETFs with low costs and low turnover. This way we avoid most capital gains distributions. I manage the taxable account to limit gains and to realize losses so I get a $3000 write off in recent years ("tax loss harvesting").

Sounds like I'm talking to myself...we're doing everything you mentioned. Glad to hear others think a million is doable, makes me feel more confident. We're planning on giving it a go for couple years and then reassess the situation. Even if we went back to work, we'd only be 43 & 49...

 

[pimpmyretirement]

My wife and I got our bachelor's, have jobs with decent salaries and live well below our means.

I tried the second job thing for awhile, it just didn't make sense for me:

1. I ended up spending almost as much as I earned, trying to make up for the lost time.

2. The money was taxed heavily and increased the complexity of my taxes with quarterly estimated payments

3. A couple hours of free time each working day is important for my happiness. Much more valuable now then later.

4. I found the extra work to distract from success at my day job. If I miss out on a 5k salary increase to earn 20k over the year, it's not worth it. I'd get that extra 5k every year moving forward AND my yearly % based increases will include the 5k, growing it more.

As a salaried professional, it's tough to beat the income increases that come from managing your career well. If you get paid $100k a year, your career (assuming a 3% safe withdrawal rate) is like a 3.3 million dollar asset. Making yourself just 10% more valuable pays large returns over time.

My conservative estimate is around $750,000 per person is required to FIRE with a 40+ year time horizon. When someone says a million dollars for two people, I find myself wondering if they have looked into the cost of health insurance. It can reach $1000 per month, per person, before paying deductibles and other related expenses.

 

[FUEGO]

My conservative estimate is around $750,000 per person is required to FIRE with a 40+ year time horizon. When someone says a million dollars for two people, I find myself wondering if they have looked into the cost of health insurance. It can reach $1000 per month, per person, before paying deductibles and other related expenses.

There are cost savings that come about with having 2 people living under one roof. So if $750,000 is sufficient for 1, then 2x $750,000 is probably more than enough for 2.

But as to health insurance, I don't have a concrete plan in place, because I don't know what the health insurance landscape will look like after Jan 1, 2014. We will qualify for heavily subsidized health insurance if things remain the same under Obamacare. Otherwise we would have to explore other options and have a larger nest egg to pay future health insurance and health care costs.