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It's possible. I did it. I am 43 and I retired when I was 40. I lived frugally in Silicon Valley and saved and consistently invested more than half of my in

It's possible. I did it. I am 43 and I retired when I was 40. I lived frugally in Silicon Valley and saved and consistently invested more than half of my income. It was a decision I made when I was 23. I remember doing a spreadsheet at that time to plan it all out. This was back before there were good references on how to plan it out. Some of my assumptions were a bit off, but I got there in the end.

misteredison12 12y ago
Can you give more details on your story? I'm particularly interested in how much you needed to retire, and how you've set everything up to make yourself comfortable that you won't run out of money.
- siberianbear 12y ago
  This subject has been researched in great detail. There's lots of great information all over the Internet. I recommend these two blogs if you want to learn more: http://earlyretirementextreme.com/ http://earlyretirementextreme.com/ http://www.mrmoneymustache.com/ http://www.mrmoneymustache.com/ The TL;DR is this: you need to be able to live off about 3.5% of your portfolio for one year. That will allow you to avoid depleting your principal over a very long term, and also give yourself an inflation-adjusted raise every year so you maintain your spending power. Often people quote a “4%” rule, but I think it’s meant for people that retire at a more “normal” time in their lives. The extra 0.5% actually makes a big difference in the probability that your portfolio can fail. So, if you have a million dollars, you need to live off $35K a year. If you’re willing to really change your lifestyle, you can retire off $500K, which would give you $17K a year. It doesn’t sound like much in Silicon Valley, but that will put you in the top tier of income in a place like the Philippines. I don’t want to post my own net worth because it might come across as chest-beating. I’ve been living in a few places that are a lot cheaper than the United States, so my expenses are low. Over the last three years I’ve been averaging living off slightly less than 2% of my net worth annually. So, I’m REALLY safe by the “3.5% rule”. My net worth is higher than when I retired. I’m enjoying my life. Every day is a clean slate. There is nowhere that I have to be at two o’clock on a Tuesday afternoon. I can read or take a walk, go to the gym, or tinker with some computer language. I like this life. I sure hope I did all the math right, because if I have to back to a cubicle in Silicon Valley it’s going to be REALLY painful for me. No amount of free sushi by your employer is enough to compensate you for your lack of freedom.
  - scalesolved 12y ago
    That sounds fantastic, I'd love to read a more in depth blog post about this!
    - Two9A 12y ago
      The reference blog post from Mr Money Mustache is: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... Essentially, your income in retirement should not be dictated by your current income, but by your current level of expenses. If you can save a multiple of your current annual expenses, and that multiple is high enough to account for real-terms investment gains, you're financially independent: you don't need to work any more. The number generally used is 25x, which corresponds to real-terms gains of 4% per year on your savings.
      - wstrange 12y ago
        It's a great read. The one thing that concerns me is the assumption that your investments will earn 5% after inflation. That has been very difficult (at least for me) since 2008.
      - siberianbear 12y ago
        @wsstrange: The S&P 500 is 50% above its 2008 peak on May 8, 2008.[1] That's a 5% annual compounded return ((210/140)^(1/7)). And that's using the 2008 peak: if I use the lowest price from 2008 (in December), your return would have been 8.8% annually. Inflation (at least in USD) has been benign during this period, so probably there has been a real 4% return during that period. I don't know how you concluded that you didn't get a 4% real return during this period. If you look at the stock market over any short-term (<15 years) it will be quite volatile. Over very long periods it is more regular. If you're investing in the stock market, you must take a very long time horizon. If you really want to understand this topic in more details and whether your portfolio is likely to fail over some period of time, I encourage you to play with FireCalc [2]. [1] http://tinyurl.com/poz7trc http://tinyurl.com/poz7trc [2] http://www.firecalc.com/ http://www.firecalc.com/
czep 12y ago
Yes but you must realize it can't work for everyone. Clearly you made some smart decisions that involved a lot of sacrifice to end up in this position, and I'm not denigrating that at all. But a) not everyone has the ability to make those sacrifices (child care, elder care, health emergencies, etc) and b) even following the same path as you did could lead to a different outcome. There is an element of luck that, again I'm not discounting your achievement, does factor into the outcome. We need programming to be a real career. People shouldn't feel pushed out when they are in what in any other industry would be considered the prime of their career. This mentality is destructive not only for us but the economy as a whole.

misteredison12 12y ago

Can you give more details on your story? I'm particularly interested in how much you needed to retire, and how you've set everything up to make yourself comfortable that you won't run out of money.

siberianbear 12y ago
This subject has been researched in great detail. There's lots of great information all over the Internet. I recommend these two blogs if you want to learn more: http://earlyretirementextreme.com/ http://earlyretirementextreme.com/ http://www.mrmoneymustache.com/ http://www.mrmoneymustache.com/ The TL;DR is this: you need to be able to live off about 3.5% of your portfolio for one year. That will allow you to avoid depleting your principal over a very long term, and also give yourself an inflation-adjusted raise every year so you maintain your spending power. Often people quote a “4%” rule, but I think it’s meant for people that retire at a more “normal” time in their lives. The extra 0.5% actually makes a big difference in the probability that your portfolio can fail. So, if you have a million dollars, you need to live off $35K a year. If you’re willing to really change your lifestyle, you can retire off $500K, which would give you $17K a year. It doesn’t sound like much in Silicon Valley, but that will put you in the top tier of income in a place like the Philippines. I don’t want to post my own net worth because it might come across as chest-beating. I’ve been living in a few places that are a lot cheaper than the United States, so my expenses are low. Over the last three years I’ve been averaging living off slightly less than 2% of my net worth annually. So, I’m REALLY safe by the “3.5% rule”. My net worth is higher than when I retired. I’m enjoying my life. Every day is a clean slate. There is nowhere that I have to be at two o’clock on a Tuesday afternoon. I can read or take a walk, go to the gym, or tinker with some computer language. I like this life. I sure hope I did all the math right, because if I have to back to a cubicle in Silicon Valley it’s going to be REALLY painful for me. No amount of free sushi by your employer is enough to compensate you for your lack of freedom.
- scalesolved 12y ago
  That sounds fantastic, I'd love to read a more in depth blog post about this!
  - Two9A 12y ago
    The reference blog post from Mr Money Mustache is: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... Essentially, your income in retirement should not be dictated by your current income, but by your current level of expenses. If you can save a multiple of your current annual expenses, and that multiple is high enough to account for real-terms investment gains, you're financially independent: you don't need to work any more. The number generally used is 25x, which corresponds to real-terms gains of 4% per year on your savings.
    - wstrange 12y ago
      It's a great read. The one thing that concerns me is the assumption that your investments will earn 5% after inflation. That has been very difficult (at least for me) since 2008.
    - siberianbear 12y ago
      @wsstrange: The S&P 500 is 50% above its 2008 peak on May 8, 2008.[1] That's a 5% annual compounded return ((210/140)^(1/7)). And that's using the 2008 peak: if I use the lowest price from 2008 (in December), your return would have been 8.8% annually. Inflation (at least in USD) has been benign during this period, so probably there has been a real 4% return during that period. I don't know how you concluded that you didn't get a 4% real return during this period. If you look at the stock market over any short-term (<15 years) it will be quite volatile. Over very long periods it is more regular. If you're investing in the stock market, you must take a very long time horizon. If you really want to understand this topic in more details and whether your portfolio is likely to fail over some period of time, I encourage you to play with FireCalc [2]. [1] http://tinyurl.com/poz7trc http://tinyurl.com/poz7trc [2] http://www.firecalc.com/ http://www.firecalc.com/

czep 12y ago

Yes but you must realize it can't work for everyone. Clearly you made some smart decisions that involved a lot of sacrifice to end up in this position, and I'm not denigrating that at all. But a) not everyone has the ability to make those sacrifices (child care, elder care, health emergencies, etc) and b) even following the same path as you did could lead to a different outcome. There is an element of luck that, again I'm not discounting your achievement, does factor into the outcome. We need programming to be a real career. People shouldn't feel pushed out when they are in what in any other industry would be considered the prime of their career. This mentality is destructive not only for us but the economy as a whole.