I enjoy looking at the search terms people used when stumbling on to my site. Most make sense, others are just funny. I thought it would be fun to directly answer some of the recent questions that were asked, which Google decided to send to me.
How do I retire by 35?
Assuming you start saving at 22 with no debt, you have 13 years to save enough money to live on for the rest of your life. Since you will be very young at retirement and you don’t want to gamble on how long you will live, you won’t want to draw down your account. To accomplish this, you should use a maximum of a 3% safe withdrawal rate. (If you don’t know what a SWR is, read the next question).
Let’s use real numbers going forward, and you can fill in your own numbers on your own. Let’s say you need $30,000/year to get by. This means you need $1,000,000 to retire at 35. Assuming you make $100,000 and spend $30,000, this means you are saving $70,000. Multiply this by 13 years of savings, you have $910,000. Looks like you will need to work until 36, make more money, or spend less money. (Of course, that money could grow during those 13 years, allowing you to reach your goal).
Simply by dropping your spending to $28,000/year, you now only need $933,000 in savings to retire. At a $100,000, that’s $72,000 in savings per year, which amounts to $936,000. Congratulations, you made it.
Now if you don’t make $100,000, that’s OK. You just need to either work a bit longer, or get spending down. My target is now less than $36,000/year for my family of 4, so if you’re solo or even without kids, you should be able to get well below $30,000/year.
Ultimately, assuming constant wages, 13 years to save, and a 3% SWR – You need to save 72% of your income to retire by 35.
What is a retirement “safe withdrawal rate”
The SWR is the rate you can withdrawal from retirement savings and have it last until death. For early retirement, you can’t afford to draw down the account so you will need to be very conservative. A good tool for this is at FIRECalc.com. There you’ll see that a 3% SWR most likely will make you very rich over the next 60 years, but going higher than 3% starts to get dangerous because a few bad years early on could send you spiraling down. I encourage you to read that website and play with the FIRECalc tool.
Things that are good about retiring early
I’ve already written about what I plan to do in early retirement. I think the most important thing, though, is that you have time for yourself and the things that matter to you. You can always choose to work if you want, but it’s now a choice.
It also gives you the challenge (and reward) of learning self-reliance. You likely won’t have the money to pay others to do simple tasks like tune-up your bike, fix your plumbing, cook from scratch, or insulate your house. You can learn to do those things on your own.
What is the LendingClub.com minimum spend?
LendingClub.com is a peer-to-peer lending outlet, that allows you to invest in other people’s debt. So far I’ve had very good returns (15.7%). I’ve written about it a little, and plan to provide more regular updates as I become an expert in peer-to-peer lending.
The minimum investment is only $25.
Am I as successful as my peers?
That’s for you to decide, but first I recommend you define successful. For me, I consider myself financially successful, which was my goal for a long time. I’ve come to realize I’m very unsuccessful in other areas – which I plan to correct.
Is boredom normal during early retirement?
There was a good discussion about boredom in early retirement here. I suspect that boredom is common in early retirement for those that did not plan ahead in what they want to do in retirement. If you have a list of skills you want to learn, people you want to spend more time with, books you want to read, and charities you want to support – I doubt highly that boredom is possible. Or, at minimum, worse than if you were at a cubicle.
What is the expected growth of savings if you start when you’re 18?
If you’re 18, I’m happy you’re asking this question and that you found my site. No one knows for sure what the future will return, but I’m assuming 6% growth, with 3% inflation. Which means an effective return of only 3%. Any upside to this will be great, but I wouldn’t count on it. The worlds economy is built on growth, and growth is slowing down dramatically.
How can i teach my kids to not be consumerist?
I’m still trying to figure that out. Consumerism is all around us, and it’s hard to keep it away from your kids. I suggest you start by turning off the TV. Second, have regular discussion with your kids about consumerism and why you’re against it. Discuss the environmental impacts. Discuss the true time-value of money, and what that new gadget costs in terms of time. Encourage other activities that have a positive impact on the world. And, of course, lead by example.
Can I retire early?
Yes, you can. Set a goal, do the math, and start saving.
Should I quit my high-paying, unrewarding job?
It depends. If you’re 2 years away from retirement, then stick around. 2-3 years is not much in total time, and the freedom of financial independence will help you forget about the unrewarding job.
If you are not close to retirement, then get out. Most people spend half their waking hours (or more) at their job, it’s positively unforgivable to do that in misery. Make sure to read Your Money or Your Life to understand the concept of life-energy, and how you’re trading your life away for money at a job you don’t enjoy.
I hope you enjoyed the Q&A. If I keep getting new interesting questions, I’ll do this again.