4 ms·

I stil don't understand how this guy did it. Can someone explain in a few words?

dan1234 10y ago
Young couple both earning a lot, and saving/investing most of it - a turbocharged retirement plan.
ahelwer 10y ago
If you can live on $1500/month, you only need to save up $450K-$600K and live off the 3-4% real returns in perpetuity. This quantity of savings is easily reachable within a decade by tech workers paid $100K+/yr. In general, just take (monthly spending) * 12 * [25 or 33] to get bounds on required savings. The only other useful observation is that reducing spending is much more effective for reaching financial independence than increasing earnings, and that most spending is staggeringly wasteful and easy to forgo. Oh, and if you manage to find a life partner with the same values and earnings - congrats, you can easily retire within five years.
- enraged_camel 10y ago
  Make sure you take into account taxes. Retirement investment plans such as 401ks and IRAs have significant tax benefits. The catch is that they can't be withdrawn from before age 59 without huge penalties. So if the goal is to retire early, one needs to use regular investment vehicles, which are subject to capital gains (15%),
  - ahelwer 10y ago
    You can transfer the money from 401k to IRA to Roth IRA then withdraw it after five years. You have to pay income tax during the IRA to Roth IRA conversion, but if you're retiring early your tax bracket is likely very low. Similarly, you'll be in the 0% bracket for long term capital gains.
    - kudokatz 10y ago
      for those that are more curious about this, a google-able term is "Roth IRA Conversion Ladder". An alternative is "substantially equal distributions" if I recall properly.
- user5994461 10y ago
  Or much simpler: Own your property. Once you own your place, you don't have to pay rent, you can live on $500 a month. That may be covered by the unemployment help, so you don't have to work either and don't pay taxes. Bonus: if there is a spare room in your place, you can rent it and you'll make enough to cover a lot of expenses and save much money.
  - moonka 10y ago
    >Once you own your place, you don't have to pay rent, you can live on $500 a month. That may be covered by the unemployment help, so you don't have to work either and don't pay taxes. At least in Washington, unemployment is limited to I believe 26 weeks. IIRC, during the big downturn this was doubled in a lot of places (perhaps nationally?) but at least here it is back to 26 weeks.
  - betaby 10y ago
    Speaking for avg Canadian city, avg property tax about 1.1%. Median home price is 285K, thus you need 261CAD for property taxes alone, add here electricity, basic house maintenance and you need 500CAD only to live in your modest fully paid house.
kudokatz 10y ago
> Can someone explain in a few words Live extremely frugally, invest all savings in the S&P 500, live happily-ever-after on that same budget for the rest of your life. IMO the key is being happy on a very small budget.

Young couple both earning a lot, and saving/investing most of it - a turbocharged retirement plan.

If you can live on $1500/month, you only need to save up $450K-$600K and live off the 3-4% real returns in perpetuity. This quantity of savings is easily reachable within a decade by tech workers paid $100K+/yr. In general, just take (monthly spending) * 12 * [25 or 33] to get bounds on required savings. The only other useful observation is that reducing spending is much more effective for reaching financial independence than increasing earnings, and that most spending is staggeringly wasteful and easy to forgo. Oh, and if you manage to find a life partner with the same values and earnings - congrats, you can easily retire within five years.

enraged_camel 10y ago
Make sure you take into account taxes. Retirement investment plans such as 401ks and IRAs have significant tax benefits. The catch is that they can't be withdrawn from before age 59 without huge penalties. So if the goal is to retire early, one needs to use regular investment vehicles, which are subject to capital gains (15%),
- ahelwer 10y ago
  You can transfer the money from 401k to IRA to Roth IRA then withdraw it after five years. You have to pay income tax during the IRA to Roth IRA conversion, but if you're retiring early your tax bracket is likely very low. Similarly, you'll be in the 0% bracket for long term capital gains.
  - kudokatz 10y ago
    for those that are more curious about this, a google-able term is "Roth IRA Conversion Ladder". An alternative is "substantially equal distributions" if I recall properly.
user5994461 10y ago
Or much simpler: Own your property. Once you own your place, you don't have to pay rent, you can live on $500 a month. That may be covered by the unemployment help, so you don't have to work either and don't pay taxes. Bonus: if there is a spare room in your place, you can rent it and you'll make enough to cover a lot of expenses and save much money.
- moonka 10y ago
  >Once you own your place, you don't have to pay rent, you can live on $500 a month. That may be covered by the unemployment help, so you don't have to work either and don't pay taxes. At least in Washington, unemployment is limited to I believe 26 weeks. IIRC, during the big downturn this was doubled in a lot of places (perhaps nationally?) but at least here it is back to 26 weeks.
- betaby 10y ago
  Speaking for avg Canadian city, avg property tax about 1.1%. Median home price is 285K, thus you need 261CAD for property taxes alone, add here electricity, basic house maintenance and you need 500CAD only to live in your modest fully paid house.

kudokatz 10y ago

> Can someone explain in a few words Live extremely frugally, invest all savings in the S&P 500, live happily-ever-after on that same budget for the rest of your life. IMO the key is being happy on a very small budget.