In case you haven’t noticed, $#!t is going down. We’re still in a pandemic. Interest rates are rising. Energy costs are skyrocketing. Experts debate whether we are already in recession or if one is looming. Headlines warn of job uncertainty globally, and locally I experienced the same: hiring at my company froze, thawed out again, and then layoffs swept through.
Personally, I watched my net worth drop $150,000 from the beginning of the year with no sign of stopping, the market eating up my paychecks and spitting out red.
Despite all of this, I quit my job and retired early at the age of 29.
That’s right, yours truly is retiring early, without investing in crypto or inheriting from a long-lost relative. This is not a “I did it, so you can too,” narrative— because my story is unique. However, by sharing my journey I hope to help others understand that retiring at 65 does not have to be the default.
How Can You Retire Early?
One thing I always wondered is why everyone has the same retirement age of 65. Surely someone earning twice as much could retire twice as quickly? Yet it seems like as paychecks increase, so does the swell of our lifestyle. Just like how no matter what size suitcase I pack for a trip, I will somehow manage to stuff it to the brim. However, with some intentional downsizing of your lifestyle (or significant upsizing of your income), it is possible to retire early. Extremely early.
If you want to know your early retirement number, a rule of thumb is to multiply your anticipated yearly spending in retirement by 25.
For me, that’s $22,000 (my average spending over the last 4 years) * 25 = $550,000. I hit that number last year, and continued working for another year in order to live in The Netherlands and pad the coffers a bit. At its peak, my net worth was nearly $800k, although with the recent market downturn it’s currently sitting at about $650k.
Running my numbers through an early retirement calculator shows a 100% success rate of my plan. It crunches scenarios based on historical data dating back the last 150 years. That means that my portfolio would have survived even the worst market crashes in history. As the wisdom goes, past performance does not guarantee future returns, but it’s still nice to know that my money would have lasted through the Great Depression, 1970’s stagflation or the Dotcom crash.
How Long Until You Can Retire?
I discovered the idea of FIRE— Financial Independence, Retire Early— in my early twenties. The idea of investing enough money so your passive income covers your expenses appealed to me right away. I found out that it’s not all about making millions as a tech mogul or pinching every penny, accessible only to a very lucky or unlucky few. I learned that even someone like me could tweak the variables of earning, saving, and investing to make it possible.
I learned that if you save 50% of your salary, you can retire in ~17 years, no matter how old you are. Thus, a twenty year old consistently saving half their paycheck can retire by age 37. Putting away 75% of your salary fast-tracks you to retirement in about 7 years.
Here’s a handy table from Four Pillar Freedom that shows how many years it takes to get to financial independence based on your savings rate. The important column is the 25x annual expenses if financial independence is the goal:
Indeed, this table tracks with my experience. I started saving 75-80% of my paycheck at age 22, and now 7 years later I can retire.
Why I’m Changing My FIRE Plans
Since I started this blog, I picked a high (for me) FIRE number. The goal was $1.2M by the age of 32.
Instead, I’m retiring 3 years earlier with half my original net worth goal. My original plan accounted for spending double in retirement, with an extra cash cushion of $200,000 just in case. That ‘just in case’ included potential children, economic instability, a spendy partner, or the possibility of suddenly developing a penchant for an expensive hobby. I wrote how I could have retired last year, but decided to work a bit longer to mitigate the risk.
After working one more year I decided to bite the bullet; I quit my job this month.
The biggest impact on taking early retirement even earlier is embracing risk. Yes, the world feels like it’s wobbling on an unstable axis, but that will never change. Many people don’t feel ready for life-changing decisions, from leaving school to head to the workforce, walking down the aisle, or expanding their family. Often these life events happen before we are ready for them. However, the benefits of risk and change often force growth and a new life we could barely have imagined before.
Here are some reasons I’m okay taking the risk of early retirement before I feel 100% ready:
It’s Okay If I Want To Work Again
Let’s say I take off work for a year or so, but I start to get bored, or anxious about sequence of returns risk (big market losses early in retirement), or decide I really want a bonsai bonanza of a garden (the first expensive hobby that comes to mind). I can go back to work!
Work will always be there. Sure, it might take a little more time and effort to find a job with a resume gap. I realize that during a recession jobs are not as plentiful. Unemployment can be dire, especially for those with little financial safety net and a family to feed. However, with emergency savings I have the cushion needed to take some extra time to find something sustainable, and I only have myself to feed. I also have in-demand skills as a software engineer with years of experience in web and app development. It is an industry that is generally looking for more talent; if I need to brush up my skills, so be it.
In this scenario, “failure” means going back to work after taking a long vacation. That’s a risk I’m willing to take.
I Don’t Want Much
My original plan hinged on future-me wanting more. I just conducted a year-long experiment where I spent whatever I want, whenever I wanted to. I ate out a lot, bought nice gifts, and hired a cleaner. Unsurprisingly, my spending did increase, but I don’t feel the need to continue living that lifestyle. I am happy to trade the ‘opulence’ for a chance to not have to work! At all!
In order to not sit at a desk 8 hours a day, doing work for someone else, I will make food at home. Happily. I will hand-make meaningful gifts. I will travel and stay in hostels. Small adjustments mean I can live each day however I want. It’s not a trade everyone wants to make, and that’s okay. I’ll trade my own thoughtless spending for freedom any day.
In fact, getting back those 8 hours frees up time and energy to focus on the activities that save money in the long run. While working, the stress of the day makes it much more tempting to order-in, outsource jobs around the house, and make other purchases for convenience. With more time in my day, traditional “convenience” purchases don’t feel as necessary. I don’t want to work a job I don’t like to afford a life I barely have time to experience. Forget work hard, play hard— I want to work less, and party gently.I don't want to work a job I don't like to afford a life I barely have time to experience.Click To Tweet
Who Knows What Will Happen
Life is not guaranteed. Diseases strike at all stages of life. We cannot guard against death. We have just seen what pandemics can do— I don’t want to wait to retire, because who knows how long borders will be open. I want to travel, to taste life, to explore the world before global thermometers creep up, barrier reefs disappear, and Venice becomes the new Atlantis.
Hopefully humans can figure out ways to slow this perilous path but I don’t want to wait to find out if we do. Hopefully I will live a long and healthy life, but I don’t want to spend it all working only to find out I don’t have long after all.
I can continue to work out of fear of the unknown, or let the fear of the unknown motivate me to live free.I can continue to work out of fear of the unknown, or let the fear of the unknown motivate me to live free.Click To Tweet
Logistics and Frequently Asked Questions
I might not be able to predict what will happen far in the future, but I can plan my next steps. This includes:
- Exploring The Netherlands
- Traveling to SE Asia
- Moving back to the U.S.
Every day since I left my job has been packed: meeting up with friends, going on day trips to other cities, and exploring Amsterdam itself. I want to soak up my final months here (by law, I only get to stay 90 days after my work contract expires). I leave with the comfort that I can always move back if life works out that way.
Next, I’m booking a one-way ticket to Bali. I have another month somewhere (where should I go? I’m thinking Vietnam and Thailand, let me know in the comments), then I’ll return home for Christmas.
When I return to the U.S., I plan on pursuing art projects, surfing, and hiking. I also will write for this blog to keep everyone updated on how early retirement is panning out.
Currently I have health insurance based in The Netherlands, and will switch to traveller’s insurance when I embark on geo-arbitrage. For my return to the U.S., I have budgeted for ACA plans I’ve found on the healthcare exchange. (More on that when I get to it). I even have the option to move to the UK with my sister, where we both have citizenship (thanks, mum).
Healthcare is intensely personal and difficult to parse for each person, as plans vary by medical needs, the state you live in, and your own family structure. I am fortunate that I have the ability to be flexible to find out what works for me best. This is definitely one area that might not be replicable for other folks who are interested in retiring early, unless you can pull a Back to the Future and get your dad to fall for a European lady.
Every time I mention early retirement, folks ask about how to withdraw money from their retirement accounts without penalty. I plan on using the Roth Conversion ladder to access funds. There are already great articles written about this process, so click the link if you are curious! In the meantime, I have a year’s worth of expenses in cash and plenty accessible in my brokerage accounts.
Won’t you get bored?
This was the most frequent question my peers asked me when they learned I was retiring. I find this question amusing, because it’s hard to imagine getting bored of working on projects I’m sincerely interested in. In the working world, I was always working on someone else’s dream. A product that already existed, in industries I barely care about. I’m glad for the people I helped through apps I built— but that is not the only way for me to contribute to society.
One thing that blows my mind is that most of us from the U.S. have never had longer than a 2-3 week break. Since our careers began, ending the summer breaks of our youth, we don’t get to rest. I have been working for a decade and have never had longer than 2 weeks of vacation, even between jobs. When I moved internationally two years ago, I still only had one week before my next job started.
After taking a real break, then the fun starts. Bored?! I have a novel to write! I have gardens to grow, books to read, pets to walk, countries to travel. I am not worried about boredom in early retirement.
Who you are at 40 will not be who you are at 29
I appreciate the folks who mention that lots change over a lifetime. Though I don’t plan on living in a house for the foreseeable future, maybe I’ll want to settle down. Maybe I will decide I want kids after all. Luckily I am not pressing a “keep me unemployed forever” button when I quit this month. The plan is built on flexibility— the flexibility to live abroad, to work remotely, to spend mindfully as I’ve been doing for the last decade.
Work On What Matters
Every year I can reassess the life I want to live, and the money I have to fund it. If my lifestyle changes, the plan can change with it. It’s like an elimination diet for work— I stop working completely, and will only reintroduce what kinds of ‘work’ makes me happy and healthy.
Whatever happens, the first thing I’ll do is turn off my morning alarm clock.
What do you think? Is my FIRE number too low? What should I be thinking about in the early stages of retirement? What’s the longest break you’ve taken from work?
Let me know in the comments!