Many of the top early retirement bloggers were successful not because they acquired millions of dollars in some extraordinary or unique way. They were able to do it because they simply found a way to not “need” as much money as the typical person.
One very extreme example of this is Jacob Lund Fisker from the website and best-selling book Early Retirement Extreme. Jacob was able to retire before the age of 30 after only 5 years of working by getting his annual spending down to below $10,000 per year. Knowing what we know about the 4 percent rule, a retirement income like this would only require a mere nest egg savings of $250,000! Though his approach is certainly not for everyone, it illustrates the extent to which a lower income need can affect your overall plan.
Another good example is the blogger Mr. Money Mustache (real name Peter Adeney). MMM (as he’s called) is another popular retired-by-age 30 character that publicly boasts about enjoying an annual budget of just $24,000. His retirement only required a savings of $600,000 to pull off.
Along the same lines are Jeremy and Winnie from the website with the unusual name Go Curry Cracker. They too utilized the 4 percent rule to retire in their 30’s with $40,000 per year in anticipated expenses. However, they make their dollars stretch farther by living for extended periods of time in places with lower cost of living than the U.S.
One of my favorite examples of a successful early retirement is that of Robert and Robin Charlton from the book “How to Retire Early”. They were able to save almost $1,000,000 from scratch in just 15 years and retire before age 45 with a projected retirement income of $40,000.
There are many, many other examples of other bloggers who have used similar strategies. The forum Early Retirement.org also has thousands of stories from people who have either achieved financial freedom or are on their way there.
Redefining the Word “Fun”
A lot can be done with less than you think. This is especially true when you read through many of the articles from the early retirement blogging community.
As you really analyze their stories and listen to their philosophies, you come to understand that part of what helps make each of their plans a success is all in how you define the word “fun”.
Often you’ll hear them redefine fun as:
- Traveling to exotic, lower cost of living locations
- Spending time with family or friends
- Taking their time to accomplish projects around the house
- Being active outdoors
- Playing a sport they like
- Learning a new hobby
- Tons more!
If your definition of fun is spending is buying the latest gadget, dining out to an expensive meal every night, and traveling to exotic resorts, then that’s fine. Again, your retirement should be designed for you and no one else.
But understand as a result you’ll be faced with a much steeper challenge. The math simply doesn’t change. If we generalize that you think you’ll need a generous $200,000 of retirement income per year, then the 4 percent rule quickly shows us that you’ll need a whooping $5 million for your nest egg. Are you prepared to make that happen?
Spending Changes As You Age
Even though we’ve been using a “fixed” figure for our retirement income in nearly every example, it may be useful to know that this may not be the case. According to David Blanchett from Morningstar, inflation-adjusted spending in retirement gradually decreases over time (unless health-care costs cause it to rise again in life’s final years).
He quantifies this as follows:
Households spending $50,000 at age 65 decrease their real spending by about 15% by age 80; the drop hits 20% by age 85. For those spending $100,000, it’s 20% by 80 and nearly 30% by 85.