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Am I missing something here? The age/penalties seem to me to be what deters early retirement in my circle, not the ability to save.

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You're sol on pensions.

401(k) can navigate early withdraws via a Roth ladder. However, you can't roll, i.e. 401(k) - Traditional IRA, until you've quit your job and convert to withdraw, Traditional IRA - Roth IRA - withdraw without penalty, until each conversion is seasoned for 5 years. Effectively, this means you need enough taxable to cover 5 years and then you can start utilizing tax advantaged monies.

Healthcare is a very real issue for RE. Most either game their withdraws, "income", to be right under subsidy limits, arbitrage geography be retiring in EU for cheap healthcare or just bake it into their expenses and save enough to cover it.

For all the critics of Obama Care, one thing it did was made it much easier for non corporate folks to get their own health insurance. What you lose, however, is the substantial insurance subsidies most employers provide.

In other words, you just have to realize to may need $1000 or much more per month for premiums.

Unfortunately, most people in their late 40s and early 50s have all their funds tied up in traditional IRA/401k. Anyone who wants to retire early needs to plan well in advance to make sure that doesn't happen... Tough to do at the 11th hour.

I completely screwed off in my 20s, but worked hard. Had a zero or slightly negative net worth when I hit 30 and had a child, and then things changed quick and so did promotions and compensation. No two people take the same route. When I was 30 it was 2009, so I was fortunate to be investing big chunks after the GFC and that compounded.

cjsag94 said:

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MAS444 said:

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There's either a lot of BS in this thread or I had way too much fun in my 20s and 30s (not that I would change a thing). I'm guessing some combination of the 2 (and admittedly, possible more of the latter). But the idea of retiring early never even crossed my mind in my 20s/30s. Thinking about it some and reading this thread, I'm glad my financial goal during this period of time wasn't focused on not doing what I'm going to be doing for the next 20 - 30 years.

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I gave up my pursuit to get an answer to this early in this thread. I was genuinely curious why someone in their 20s set this goal rather than enjoying things life threw at them.

I got answers ranging from stuff I like is all free, or I saved 50%+ of my salary without sacrificing anything (then went on to say sacrificed all the American consumerism stuff)...up to built a wildly successful business and was bought out with 8 figures in my forties.

Never got an answer as to why the average Joe, sitting at 24 years old, decides to live on necessity alone, save excessively, so they can "retire" in their 40s. Again, not asking why someone who makes a lot of money and reasonably lives a normal life and chooses to capitalize on opportunity to build financial Independence, or wants for nothing in this world (still curious why you have a need to save much if you want for nothing).

I'll step away again.

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I provided my answer: taking back ownership of my time.

I don't mind working, but I don't enjoy the obligation of 8-5. As I mentioned earlier, we always have and continue to save 40%. We're 32, with a 1 year old, will FI in a few years and feel like we didn't miss anything life threw at us in our twenties.

I have some expensive hobbies: cycling, skiing and espresso. For most of our twenties we traveled internationally a few times a year. We've had unreal experiences at Alinea, Eleven Madison Park, etc.

We're probably not the low litmus case coming out of undergrad as STEM DINKs. But we're also not uncommon. I attribute our ability to have it both ways because of 1) income (6-fig combined out of undergrad) with 40% saving rate, 2) minimization of waste through intentional spending, 3) credit card churning (we haven't paid cash for a flight or hotel our entire marriage - however, more so now because of my work travel points, less churning), 4) we caught the falling knife on our home purchase and 5) controversially, investing on margin / leveraged funds ("leveraging our youth"). And now compound growth has taken over and our appreciation last year was significantly more than our contributions.

I think FI is a worthwhile focus for everyone in their 20s for the sake of leveraging compound growth and life-cycle investing. RE is too subjective and specific to each person. Do you whenever you've reached the point that you have that option. I might retire in a few years, I might continue working or I might try and start a business without fear of flopping and putting my family on the streets. Whatever it is - I'll enjoy having options.

Yeah, I realize that. But it goes back to the other questions about sacrificing quality of life in order save money.

If I'm already putting a lot in my tax-deferred accounts and feel comfortable that I'll have a healthy 7+ figure account when I'm of "traditional" retirement age, I have to make a judgement call on whether or not I want to live frugally to save even more, or if I want to enjoy life. I like to think I'm somewhere in between those two extremes, especially considering we are a single-income family.

My job is actually enjoyable, so I don't feel pressure to save enough to retire this decade. And while I do make a good salary, I'm not executive material, so there is a cap. My pre-tax retirement savings will always outpace my post-tax savings (especially since I tend to be more risk averse with that money).

I mainly just wanted to point out the "other" reason why a lot of us corporate slaves tend to say we "can't" retire until we are 55+.

RangerRick9211 said:

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cjsag94 said:

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MAS444 said:

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There's either a lot of BS in this thread or I had way too much fun in my 20s and 30s (not that I would change a thing). I'm guessing some combination of the 2 (and admittedly, possible more of the latter). But the idea of retiring early never even crossed my mind in my 20s/30s. Thinking about it some and reading this thread, I'm glad my financial goal during this period of time wasn't focused on not doing what I'm going to be doing for the next 20 - 30 years.

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I gave up my pursuit to get an answer to this early in this thread. I was genuinely curious why someone in their 20s set this goal rather than enjoying things life threw at them.

I got answers ranging from stuff I like is all free, or I saved 50%+ of my salary without sacrificing anything (then went on to say sacrificed all the American consumerism stuff)...up to built a wildly successful business and was bought out with 8 figures in my forties.

Never got an answer as to why the average Joe, sitting at 24 years old, decides to live on necessity alone, save excessively, so they can "retire" in their 40s. Again, not asking why someone who makes a lot of money and reasonably lives a normal life and chooses to capitalize on opportunity to build financial Independence, or wants for nothing in this world (still curious why you have a need to save much if you want for nothing).

I'll step away again.

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...because of 1) income (6-fig combined out of undergrad) with 40% saving rate,...

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When you (& others) mention savings rate, is it a % gross/annual incomes or a % of posttax take home pay?

In the FIRE world., its normally calculated

SR = savings / take-home pay

Savings includes: 401k contributions and match, HSA contributions, principal portion of mortgage payment, and anything leftover from your paycheck not spent.

take-home pay is gross pay plus 401k match minus income (and FICA) taxes.

cjsag94 said:

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For all the critics of Obama Care, one thing it did was made it much easier for non corporate folks to get their own health insurance. What you lose, however, is the substantial insurance subsidies most employers provide.

In other words, you just have to realize to may need $1000 or much more per month for premiums.

Unfortunately, most people in their late 40s and early 50s have all their funds tied up in traditional IRA/401k. Anyone who wants to retire early needs to plan well in advance to make sure that doesn't happen... Tough to do at the 11th hour.

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I'm confused by this. Your first paragraph makes it seem like a good thing. I was non-corporate, had access to amazing insurance on my own when I started my business, then saw it be cancelled 3 times, more than triple in price and turn into crap with an hmo as my only option (net worth of 2+ million on an hmo mind you), constantly crossing my fingers the end of each year waiting for either another cancellation letter (leaving me completely ****ed and likely forced to move to somewhere that still offers something I can use) or a price hike, or best case a cut in coverage.

From my perspective, Obamacare has made it harder for people like myself to get coverage, and actually makes me consider going corporate only for this benefit. I won't, of course, since I tend to prefer working for myself, but I just have to factor how horrible my (and many who aren't on an employer plan) insurance situation has gotten into the equation.

Your first paragraph is the exact opposite of reality for most people, but I agree with your second and third paragraphs.

YouBet said:

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EliteZags said:

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JSKolache said:

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You aren't going to retire "super" early based on your 401/IRA/savings from a 9-5 job. If you want to retire early, you need to create a successful business and then sell it for millions.

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Just cause your 9-5 job won't get you there doesn't mean no one's can

I'm a bit further behind and won't reach comfortable retirement til my 40s -started late and also took a full year off recently, but my cousin who came out with a compsci degree right into a big company, disciplined investor and saver, should easily hit 7 figure NW before 30 (he's close already at 27) and multimillionaire in his 30s to retire well before 40, likely not reaching mgmt or even Principal level of his position. My sister is on a similar track with a bit more pedestrian of salary but maxing retirement accounts at 22 blows up for you long term.
None of us are living like scrubs either in Newport Beach, LA, and Seattle, just being economically efficient and not wasteful

Those that started investing early with high level degrees and controlled spending should easily reach FI before 40

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Wouldn't mind seeing the math on this. You would pretty much have to come out of college making 1% salary to do this and then not spend any of it.

What's he making?

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it's pretty high but not like executive level or anything, think software engineer for the big players in Seattle area, enough to megabackdoor Roth, stock incentives etc. But he was also able to have college paid for and started investing very early on (while still in school even) which was huge

even with that he's still far behind his 29yo sister who hopped around the heavyweights of silicon valley, through a major buyout, and now exec at a dynamic startup- made Forbes 30 under 30 last year and likely to FIRE or at least take extended multi-year sabbatical sometime this year with a NW I don't even want to contemplate

takeaway is if your kids show any aptitude in tech/computers then get them into compsci programs and watch em fly, the outcome where gaming interest at an early age can payoff.
Meanwhile I'm here feeling like the gudgeoning work put into engineering degree(s) isn't justified with the limitations on compensation, but I can't complain too much living on the beach and saving >50%

TXTransplant said:

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Ed Gelton said:

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DRE06 said:

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JSKolache said:

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You aren't going to retire "super" early based on your 401/IRA/savings from a 9-5 job. If you want to retire early, you need to create a successful business and then sell it for millions.

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This is so wrong.

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Everything this guy posts on here is wrong. Financially challenged but thinks he is genius. I'm sorry.

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I'm in a high-paying 8-5 job corporate career and am doing a pretty good job saving (have been maxing out 401k, Roth, and HSA for a while), and I've always thought the same thing. NOT because the money won't be there (if you're an engineer working for a major company, you should have 7 figures+ in retirement by the time you're 40), but because of the 55-59 1/2 age restrictions.

I'm 41 and have a fair amount of cash on hand, but certainly not enough to retire on. The vast majority of my retirement is tied up in investment accounts and a pension. I'm not going to take a financial penalty just to retire early. Then there is also the issue of health insurance.

Given how many people I work with who have got to have well over 7 figures but aren't retiring until they are well into their 60s and have 30+ years invested, it seems like this is the real reason people aren't retiring until at least 55. Or maybe we just love our jobs...? (Ha!)

Am I missing something here? The age/penalties seem to me to be what deters early retirement in my circle, not the ability to save.

Then there is the other issue of "What do I do if I don't go to work?" For a lot of us, our only option to practice our professional skills is to stay in a corporate job. Part of me thinks I went to school too long to retire in my 40s! If you can find a gig that's not too bad, might as well stick with it. I'm 41 and my kid will be out of the house in another 3 years. The idea of continuing to work but using up the 7 weeks vacation I will have accumulated by then doesn't seem so bad.

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https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

read 1st 2 posts here

I think it interests a lot of people. I would say the most interesting component are the people that live like they make nothing before and after FIRE. Some stories are really head turning when you factor what people sacrifice and shopping thrift stores etc. to retire at 42.

I think you are seeing a large revolt against the corporate culture/mindset. This FIRE mentality really grew out of the 08/09 downturn and is a 30-45 year old thing.

For me the most interesting questions with regard to the FIRE plan are:

1) will I still value not working for a wage nearly as high once it becomes close to "stress free" becuase I don't need the money?

2) is there some amount I'm willing to continue working and earning, beyond my own predetermined goal, to either (a) offer my kids the flexibility to not sell as much of their time for money or (b) insure against a larger financial crisis



While the questions are interesting, I've determined not to let them distract me now when they don't change my immediate behaviors. I can worry about them when I'm waking up to go into the office in 9 years - and I might just point the car towards a beach instead.

For my personal situation, it's this:

1) I never want to quit work altogether. So to retire early(most realistic for me is early 50s instead of early 40s), I'm not concerned with making enough to support me for life, but rather enough to feel comfortable enough to take a pay cut to do something I like more for less. Like Cyp and some others say, being able to choose what you do or when you do it sounds amazing.

2) I don't hate my job, but I don't like it, either. It's certainly not what I'd do on a day to day basis if I didn't have to. Ideally I'd cut my work day in half, and as opposed to working 45-48 hours a week, closer to 25 in 'retirement'. Most of the time around now(1-2pm) I'm just burnt out sitting in an office and thinking how much greater the day would be if I could just go in from 7am until midday, then go hit 18 holes after work or slide on over to Lake Austin for some boat time. The more money I save now, the quicker this can become a reality.

3) I/we don't really sacrifice that much. I have a nice truck, I play golf just about every weekend, hit the lake once a week or more in the summer, usually have at least one date night together, and we take 2-3 week long vacations a year, But luckily we are DINKs and are able to do this AND save quite a bit. I understand a lot of people can't find the balance with the best of both worlds.

The day I can get to where I can work part time instead of full time will be a very happy day. Plenty of things I can do with my time. Tons of hobbies. Tons of places I want to visit. I'm productive in the mornings, so getting up and getting some things done in the morning, getting off around 1-2pm and still having enough daylight to do my outdoor activities I love sounds like bliss to me. Unfortunately now I cannot do this and afford all that I want, so to me, it's about finding that balance now while building towards even more time/freedom in the future. Each and every year my goal is to work slightly less and less hours from this point forward.

cjsag94 said:

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For all the critics of Obama Care, one thing it did was made it much easier for non corporate folks to get their own health insurance.

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I was self employed with a cheap HDHP/HSA plan that fit my needs before ObamaCare, no corporate job required. I then got a corporate job but kept my cheap plan because it cost less than joining the company plan. ObamaCare drove the premiums for my plan through the roof so that keeping it was no longer a smart financial option. If I want to retire early, thanks to OCare, that inexpensive option is gone.

Same for me. Obummer care sucks.

You've gotta have a pretty healthy taxable account. From there, you can use dividends and interest for a lot of your living expenses that your rentals or part time "fun" job aren't paying for to fill the gap between retirement and 59.5

I have a goal to be able to retire at a certain age, but I doubt that I will. What I want more than anything is to know that I don't HAVE to work. Putting in the time and discipline now will give me security, but also open up a ton of options like starting my own business, consulting, or working jobs that don't pay much and are below my capability just for health insurance and a reason to shower and shave.

I've also not found it that hard to save a lot... don't buy more house than you need and stick to cheap used cars, that by itself will take you a looooong way.

aggiebq03+ said:

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cjsag94 said:

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Never got an answer as to why the average Joe, sitting at 24 years old, decides to live on necessity alone, save excessively, so they can "retire" in their 40s. Again, not asking why someone who makes a lot of money and reasonably lives a normal life and chooses to capitalize on opportunity to build financial Independence, or wants for nothing in this world (still curious why you have a need to save much if you want for nothing).

I'll step away again.

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You never got an answer because the average joe doesn't do this. The average joe never saves almost anything their whole working life and only thinks about what they can but on credit today.

People who visit the TexAgs B&I board aren't even close to the average joe. The people here are mostly very driven both in desire to learn and also in their career pursuits, whether working for someone else or for themselves.

For myself, I will echo what others have said. I wasn't focused on early retirement, but did want to build a good foundation early. I was fortunate to have parents who made sure I understood the real value of compound interest early in life. The money I saved my first year working will be worth far more one day than any other dollars I ever save.

Set aside part of your very first paycheck and never get used to living on your full salary, or worse beyond your means, and it never feels like you are "going without".

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Yeah, its 100% not the average joe (or even above average joe). No one will admit it in this thread, but these people most likely all came from well off families/full rides/no student debt. Most likely grew up around small business owners or saw what a corp job did to parents and despised that idea. This is an idea a random 3.0 college grad would ever consider taking on.

I don't get why you'd want to hate the prime of your physical years of your life living on nothing (and if you're not living on nothing, you've gotten help to let you save and do fancy trips, even if you wont admit it). I've seen too many adults and how hard it is for them to psychically do things in there 40's/50's to where i'm going to have some fun. I get we all like different things, but i'd rather save some, and enjoy my mobility now, than retire a few years earlier. if people want to do it, cool. Nothing wrong with being responsible, i just don't get the why.

I did not intend to suggest Obama Care was great (or even good). I was saying that for people who suggest early retirement is an issue because they can't get insurance, I just suggested Obamacare removed that obstacle. Before that, people with health issues were relegated to state risk pools with prohibitively expensive plans with very high deductibles and really bad coverage... So it improved access for people to get insurance.

Obviously, there's a lot bad about Obama Care (and anything else the government takes over it seems). You've definitely highlighted the degradation of options for people who don't fall into that high risk category.

Please don't mistake me as someone calling for Medicare for all!

The most common "why" I have seen is a parent died early (or shortly into traditional retirement) having missed out on life experiences whether they be travel, hobbies or with family. The next generation took that as a formative experience and are doing something about it. This isn't a blanket that covers all... and I wouldn't call it the majority, but is the leading reason in my observation.

Behind it, I think it would be an inflated sense of self worth in the corporate/business world, coupled with wages lagging behind the self-image. That disconnect can lead to being disenfranchised with work and valuing other endeavors more than seems appropriate to many others.

Seems like those are good reasons to enjoy the hell out of life when you're young and not wait til your 40s or 50s or whatever.

I've also got a little bit of a chip on my shoulder about how much other people my age have been given, but it doesn't take a ton of familial help.

I bought all my own cars (mostly beaters), paid my own tuition, room, and board, and bought my own house a few years out of college. The only "help" I had was some scholarships, but I also worked all the way through college and lived in the opposite of the luxury condos that started popping up in the 2000s. It can be done.

Ulrich said:

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A lot of people seem to have the idea that everyone hoping to retire early is eating ramen three times a day, driving a 1994 Tercel, and lives in a refrigerator box... it doesn't have to be anything like that.

Progress your career at a reasonable pace, don't buy a mcmansion or rent a swanky downtown loft, shop wisely for vacations, and don't trade in for a new BMW every three years. It's not that hard to get way ahead of your peers because most people are dumb.

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Don't bother. They'll ignore your post and continue to stawman a false dichotomy.

Anybody plan to retire early but concerned that when you get there your annual income is too high to leave? Such as a partner at a law firm sitting on $5 million in net worth in their 40's looking at the prospect of earning over $1 million each year in the near future.

What on this thread triggered me getting curved erection ads?

Not cool, guys.

GE said:

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Anybody plan to retire early but concerned that when you get there your annual income is too high to leave? Such as a partner at a law firm sitting on $5 million in net worth in their 40's looking at the prospect of earning over $1 million each year in the near future.

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It still comes down to your annual spending. If your annual household budget is $1MM, you better keep on working, you have no choice. On the other hand, if your annual budget is $50k, that portfolio should average annual returns of $350,000. You and probably your kids would never outlast. Now the choice is yours. Every single day you'll get to wake up and decide for yourself if you want to go in to work or not.

GE said:

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Anybody plan to retire early but concerned that when you get there your annual income is too high to leave? Such as a partner at a law firm sitting on $5 million in net worth in their 40's looking at the prospect of earning over $1 million each year in the near future.

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I get what you mean, it would be hard to walk away from that kind of money even if I don't need it. It's the kind of problem I hope to have.

In a lot of professions, if you're pulling down that kind of scratch you can do pretty well consulting or sitting on boards instead. Not as well, but a lot less stress and you can choose your workload.

Ulrich said:

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GE said:

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Anybody plan to retire early but concerned that when you get there your annual income is too high to leave? Such as a partner at a law firm sitting on $5 million in net worth in their 40's looking at the prospect of earning over $1 million each year in the near future.

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I get what you mean, it would be hard to walk away from that kind of money even if I don't need it. It's the kind of problem I hope to have.

In a lot of professions, if you're pulling down that kind of scratch you can do pretty well consulting or sitting on boards instead. Not as well, but a lot less stress and you can choose your workload.

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Certainly a great problem to have but a problem nonetheless.

I've considered it a good deal and the ability to make money something my kids and grandkids never have to really worry about if they're responsible would probably keep me working a few extra years.

GE,

Sounds like you are willing to work longer at a job where you are doing well at to subsidize your kids and grandkids. I think that is admirable but how do you go about doing that? Are you talking about helping them with school and part of their first house or something more such as providing them an allowance which would allow them to work a job they like but may not make enough money to live well on?

Many people receive this inheritance or help at a time when they are in the 50's or 60's and don't actually need it as they have adequately saved on their own. Sure it may allow them to upgrade their living situation but it doesn't substantially change their life as it could if they had this money in their 30's or 40's.

I understand the reluctance to give the money earlier because the tendency for most people would be to blow the money. That said I've got a friend who received a chunk of his inheritance in his 40's before his parents passed. This allowed him to quit work and go back to law school full time and ultimately go where he wanted to in life.

Not intending to hijack the thread.....