
How to Retire at 40 - T-A
https://www.bloomberg.com/features/2016-early-retirement/
======
DrScump
<He and his wife, who quit her back-office job at Credit Suisse in February,
spend about 3 percent of their $1.5 million portfolio a year.>

Yeah, the tricky part is accumulating the first $1.5 million in the first
place. After that, it's a bit easier.

~~~
tylerhobbs
3% of $1.5m is only $45k. If you and your spouse can live off of $45k while
you're still earning, you can save ~$100k per year and accumulate $1.5m by the
time you're 40, easily. See Mr. Money Moustache for details on how this isn't
as unreasonable to do as you would think:
[http://www.mrmoneymustache.com/](http://www.mrmoneymustache.com/)

~~~
n00b101
_If you and your spouse can live off of $45k while you 're still earning, you
can save ~$100k per year and accumulate $1.5m by the time you're 40, easily._

To spend and save $145k net income per year, you need a gross comp of $240k
per year where I live. To save $1.5M at a rate of $100k per year would take 15
years. To do so by age 40 would mean that you need to be at a $240k/year
salary by the tender of age of 25, and also have the restraint to live off of
a mere $45k per year (presumably in a city with a high cost of living, since
you are earning $240k at 25). And after you retire at age 40, you get to spend
2% of your $1.5M per year ($30K) which is below the poverty line where I live
(at least as a household income).

~~~
gnopgnip
You are not factoring in the tax savings of a 401k or other retirement
account. For instance a married couple that earns up to $183k a year can save
$36k a year in the 401k, plus the employer match, and another $11k in IRA's
that reduces your does not count as income. Your contributions grow tax free
with compound interest. If you contributed $3916 a month from when you were 18
until 40 with 5% annual interest you would have a nest egg of 1.8Mil. If you
each had a salary of 75k a year you would only be paying taxes on 100k of
income, about 71k take home.

~~~
falcolas
If you tap your 401k before you're 60, you will face major tax penalties. So,
that's at least 20 years you have to manage without your 401k funds if you
attempt to retire at 40.

~~~
dgacmu
No - Google for 401k SEPPs.

The earlier comment also omitted the backdoor Roth, which can get a married
couple another 11k post-tax into a Roth, which can then grow and be used tax
free.

~~~
falcolas
An interesting exemption (basically, you set up a structured, regular payout
of your 401k over the remaining life expectancy and don't touch it). I still
don't see this being realistic in almost any case, but it's a good option to
keep in mind.

That said, "$3916 a month from when you were 18 until 40" is simply not
realistic for most people. How about college? You're not going to get a $100k+
a year job without either college or years of experience. Where do you find
that perfect mate capable of immediately working their own $100k salary and
contributing almost $2k a month to retirement at 18?

Personally, I make a really good salary (it's worth noting that it took until
I was nearly 40 to even get to this point), have a working spouse, live in a
relatively inexpensive part of the country, and I still could not put $4k into
an 401k or roth IRA every month. Owning a house and reliable cars, having
dependents... it's not realistic; it leaves nothing for wiggle room.

I'm also going to come out and say it: working yourself to the bone, skimping
and saving is no way to live some of the most active years of your life.

That's my 2¢.

~~~
nogbit
"I'm also going to come out and say it: working yourself to the bone, skimping
and saving is no way to live some of the most active years of your life."

Exactly the response to all of these "retire young" articles. They neglect to
say that you are doing it at the expense of not taking advantage of a healthy
young body to adventure and enjoy life while you can...you may get hit by a
bus tomorrow and then what a freaking waste of time all the penny pinching
was!

------
applecore
_> We asked three people who retired in their 30s and 40s to explain how
they’ve made it pay off._

Alright. Let's see how they do it...

1\. "a blog where he chronicles his retirement experience"

2\. "writing a book about retirement"

3\. "blogging about financial independence"

The trick to early retirement is blogging about early retirement.

~~~
betaby
Quickest path to get rich is to write a book "How to get rich"

~~~
bbcbasic
On the Warrior Forum they do deeper depths of recursion on that.

I.e. guys making money selling products about how to make money by selling
products on how to make money. Seriously.

~~~
theoh
There's a guy who wrote a "How to Write a How to Write Book" book:

[http://www.brianpiddock.co.uk/home.htm](http://www.brianpiddock.co.uk/home.htm)

------
kowdermeister
Or alternatively have 500k in the bank and move to a cheap European city where
you can live off 14k per year.

I'm actually more of a fan of Stefan Sagmeister's method of retirement, where
he split up his retirement years and moved it to in between his productive
years.

[https://www.ted.com/talks/stefan_sagmeister_the_power_of_tim...](https://www.ted.com/talks/stefan_sagmeister_the_power_of_time_off)

I could earn in a year enough cash to take the next year off, do fun things,
learn new things and then spend the next few on what I figured out in that one
"retired" year.

~~~
incompatible
I'm sure there are cheap places in the US too. I live in a cheap place in
Australia, which has the advantage of a government-provided health system and
qualification for an age pension at 67. So only household expenses between age
~40 and 67 need to be budgeted for, and with a frugal lifestyle without kids
that's not much.

~~~
ux-app
> qualification for an age pension at 67

>only household expenses between age ~40 and 67 need to be budgeted for

Pension is $20k/year. You're an Aussie, so you know how incredibly high our
cost of living is. 35cents/kWh for electricity (!!) 3x what some places in the
US pay + the insane prices we pay for groceries, gas, entertainment, vice
taxes etc.

Unless you have supplemental income from investments you will be straddling
the poverty line on the Australian pension. I've seen pensioners mend shoes
with gaffer tape.

This all assumes that the pension system stays solvent which is not
guaranteed. Already there is talk of lifting retirement age to 70+

> I live in a cheap place in Australia

You're probably comparing to other places in Australia (east coast?). Relative
to other countries, unfortunately, there is no cheap place in Australia.

~~~
incompatible
I could live in Europe, but I'm not convinced it would be cheaper. Australia
may be more expensive for some things, but there are also savings. Health
insurance would be desirable or compulsory in some countries. Not every
country has a decent tax-free income allowance like Australia (19k or so), and
some even charge a wealth tax. My housing costs are actually reasonable,
renting in a city of ~20k with a high unemployment rate. Since my income is so
low, my partner can still qualify for Centrelink benefits. Petrol? Don't own a
vehicle. Vice taxes? My only vice is an Internet connection. My entertainment
is an Internet connection .. frugal all round. The lifting of the pension age
to 70 and beyond is potentially an issue.

------
dennyis
It's not difficult if you plan for it and make it a goal. Mine is to be
financially independent by 40, so I could never work another day.

Realistically I love working, and can't wait to be able to donate more,
volunteer more, and help my children with education a starting businesses.

------
xref
"He’s “hoarding cash” on the chance he can buy stocks when prices dip, as he
expects they will"

That's called market timing, and it does. not. work. It doesn't work for
professional traders, it doesn't work for algorithms, and it will not work for
you. Don't. Do. It.

~~~
koonsolo
Strange you got downvoted for this. So I will enforce you stance.

Suppose you have $50.000 to invest, what is the best strategy to invest it? If
you run over the history of stocks, the best strategy is to invest it all at
once, now. Not wait until you THINK the market is low, not splitting it up and
buying in smaller chunks to spread your risk.

~~~
bryanbuckley
well.. it depends. You didn't really specify goals, which is the most
important thing.

In many cases you are correct. Somewhat related see Vanguard's research
"Dollar-cost averaging just means taking risk later" [1] which finds lump sum
investing is better in ~2/3 of the cases they considered. They had a specific
time horizon.

Individual's have unique situations and goals and should consider those
instead of just dumping everything into an s&p index fund asap. Maybe an
individual is more sensitive to sequence risk at different points in his life?
There is an entire profession (financial planners) which allows you to
outsource these decisions to if you want. Same for the spending part of
retirement (hint: most common advice (bond/stock mix) is exactly the opposite
of what it should be e.g. "Rising Equity Glidepath" [2])

[1]
[https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-c...](https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-
cost_Averaging.pdf) [2] [https://www.kitces.com/blog/should-equity-exposure-
decrease-...](https://www.kitces.com/blog/should-equity-exposure-decrease-in-
retirement-or-is-a-rising-equity-glidepath-actually-better/)

------
monkmartinez
Just skimmed the article for lack of time, I will give it a proper reading in
a bit...

I may have missed it, but I was fully expecting to see something about the
Military here. At least for USA based persons. I have several friends that are
beginning to retire or thinking about retirement in their mid to late 30's.

Full health insurance, and a pension for the rest of their lives. It may not
be a ton in all cases, but most of my friends are young enough to pursue
whatever they want with a ton of financial security if they so desire. Or go
chill in a van down by the river.... either way it's a decent option.

~~~
showerst
Military pensions aren't super high, unless you're very high up. I picked 03
on the calculator (Army Captain, mid-level officer) and got < 40k before
taxes. High enlisted ranks are looking at < 30k. The benefits are good though.

[http://militarypay.defense.gov/Calculators/Active-Duty-
Retir...](http://militarypay.defense.gov/Calculators/Active-Duty-
Retirement/High-36-Calculator/)

An extra 25k/year after taxes does give you a bunch of flexibility, but it's
not really 'do nothing' retirement unless you live somewhere cheap, especially
if there's a family to support.

~~~
maxehnert
You can't 'retire' in the sense that you receive a pension with less than 20
years. Which means you were at least an E5 (you had to mess up a lot to retire
as an E5). You are certainly higher than an O3 if you were an officer.

Presumably after 20 years you've also got other savings such as the TSP
retirement account which the military matches 50% on (up to a certain amount
only I believe). Your retirement payout can be based on your highest 3 years
of service (you get to choose now), which are typically going to be the last
few, which if much of that is spent overseas will significantly increase your
retirement package.

You still won't be living in SF but you should be able to live pretty
comfortably in a normally priced city as long as the retirement package isn't
your only form of savings. Bonus points if you'er now 20 years into paying off
your house as well.

~~~
nommm-nommm
>Which means you were at least an E5 (you had to mess up a lot to retire as an
E5)

Looks like the high year tenure for an E5 is 14 years so you'd have to retire
at least an E6.

[https://en.m.wikipedia.org/wiki/High_Year_Tenure](https://en.m.wikipedia.org/wiki/High_Year_Tenure)

------
sparky_
Late 20s here, in a more advantageous financial situation than the folks in
the article. I honestly don't know what I'd do with myself.

I'd be lying if I said early retirement hadn't crossed my mind, but just from
the experience of taking a month or two off work between jobs, I'm 100%
certain I'd be bored out of my mind. If one were to retire at 40, then what?
Even spending a full 5 years traveling the world and screwing around, that
leaves you another 40 or 45 years of idleness.

Maybe I'm just not the type for this, but I'd have to do _something_
productive.

~~~
yaegers
I never really got the "wouldn't know what to do with myself" argument.
Especially with people who work in IT.

First, I would occupy my time with hobbies. With all that time I could try
anything I wanted that looks interesting. And if I really had to do something,
as a programmer, I could contribute to open source projects. Being retired
would give me enough time to help out in these projects or simply further
educate myself in new technologies that I find interesting. There is no much
to do. But I can't get myself to do most of these things because after a full
work day I am exhausted and don't have the drive to do much besides surfing
the net while the TV is on in the background.

------
wmat
Dammit, I just turned 46.

~~~
aws_ls
Isn't it more fun reading these articles from the other side? I find reading
such fun and interesting, and you always gain something from them, like the 4%
rule in this one, which was new to me. Of course you can intuitively plan
something which is similar.

Retirement is not for me. Freedom to work on projects of choice is. Some
financial independence or close to it, is needed for both, so this article and
especially the story/plans of others were very illuminating. Although, my
geography is different. So numbers change and I don't think its a linear on
the cost of living scale, due to cultural reasons. In India for example,
parents sometimes pay up to not just college, but also the marriage expense of
their children. :-)

------
applecore
Dupe:
[https://news.ycombinator.com/item?id=12605680](https://news.ycombinator.com/item?id=12605680)

------
ryuker16
This pretty easy if you start off with a public sector job right after school.

Go work a government job for 20 years and rock that sweet pension.

~~~
dragonwriter
This works in the military and some public safety positions, but most civilian
public pensions, while they might (e.g.) vest retiree health benefits after 20
years regardless of age, have a minimum age to start drawing benefits, and an
even later age to draw maximum benefits. For example, one common California
state (and local) arrangement, the CalPERS "2% at 55" formula, gives 1.1% ×
(highest annual salary) × (years of service) at 50, 2% at 55 (hence the name)
and 2.5% at 63, but below 50 you aren't eligible to retire.

------
Prad
Probably isn't difficult once you get started and have goals set in place to
do so. I'm only in my early 20's I haven't even thought about retirement.
However, I am saving all my money at the moment. Hopefully that helps me out
later when I really need it.

~~~
akg_67
In addition to what you are doing in your 20s, One favor you can do to your
future yourself is to learn about investing and finance. Recipe is simple.

* Maximize your income

* Minimize your expenses

* Save the difference

* Grow your savings.

------
krapp
How not to retire at 40, if you're an American - go back to school after 30
and try to turn your hobby interest in programming into a second career.

------
overcast
Having money, makes money. What a revelation.

------
paulryanrogers
Medical care, children, and less fortunate family members would likely make
this impractical for many--if not most.

------
mcguire
How to retire at 40...if you're a financial blogger.

------
betaby
TL;DR Have 1-2-N million US on you investment portfolio and live on %.

~~~
FuckOffNeemo
Haha, pretty much. Beat me to the point.

1) Have millions in the bank already. 2) ??? 3) Profit!

------
davidf18
On a related topic: This couple on a dentist's salary and after escaping Nazis
and the holocaust saved with Warren Buffet and $400 million -- the largest
single donation in Israel's history -- to the water research for Ben Gurion
University.

[http://www.wsj.com/articles/after-fleeing-the-nazis-a-
legacy...](http://www.wsj.com/articles/after-fleeing-the-nazis-a-legacy-that-
wont-run-dry-1466722996)

------
branchless
Knew they wouldn't let me down: "rental income,". So can everyone live off a
big chunk of another families labour?

"The equity in their home—worth about 21 times their annual expenses". And
what about now where the average first time buyer age is near 40!

Last one is a banker. Just need to work in an industry secretly building
massive debt and take your bonus each year and you are golden.

Money moustache man all over again.

~~~
econner
Having a place to live is one of the primary needs people have. Why shouldn't
you be able to make an income off of that? Everyone lives off of other
people's labor...unless you're subsistence farming or something.

I'll give you the banker one though.

~~~
branchless
Housing is a basic need and western finance and govt structures work to skim
off labour through land. If you are borrowing to rent out you are simply a
debt collector for the banks.

We used to have decent manufacturing jobs where the other half didn't have to
work who could run a car, had good hours and enough money.

Now land is the primary cost for every family. The same pile of bricks for
more of your labour. You happy with that? It's the system not the cost of
building or materials. Think of the advances since the 1960s in materials and
construction.

~~~
ap3
Yes, but they are not making more land

~~~
branchless
That is the exact reason why these vultures should be curtailed.

------
lets-tryagain
It would be interesting to hear what these people are doing for health
insurance.

