How To Retire Early And Never Have To Work Again

Beautiful Sunset In MexicoThere’s nothing better than being free to do whatever you want. However, unless you’re born with a multi-million dollar trust fund, you’ll unfortunately have to work for your freedom.

You can follow my savings guide to increase your chances of a wonderful retirement by 50-65. But, what if you want to retire earlier? Say at the age of 40 or 45? You’re in luck, because I have a very simple, yet effective plan for you. This is something I’ve been following for the past 13 years to allow myself the option to retire as early as 35-4-. I think you’ll like the option as well!

What’s important is recognizing your inner frugality, your Herculean discipline, the government’s generosity, and your enormous hustle. There’s nothing better than taking action and seeing results!


Realize that it’s an absolute fallacy you must work until 60-65 to be able to retire. It’s up to you whether you want to have the freedom to do whatever you want. You just have to make some sacrifices.

I will assume that you enter the work force at age 22 after college. All you have to do is work for 18 consecutive years and save 55% of your after tax profits without fail. At age 40, mathematically you have now saved enough to last you 20 more years until age 60. At age 59.5, you are then allowed to withdraw any money from your tax-deferred retirement savings penalty free.

The money you saved in this time period can be spent in full, if so desired, every year until you hit age 60. By the time you are 62-65, you are then eligible for Social Security benefits to compliment your other tax deferred retirement savings.


How To Retire Early And Never Have To Work Again On An Average Income

Jane is a University of Colorado grad who majors in English. She gets a job in Denver as a telecom services provider sales rep.  It’s not the best job in the world given her interests, but it pays the bills while she stays with her parents for the first 3 years to save money. At the age of 25, she moves out and co-habits with her boyfriend, saving money in the process.

From ages 41-60, Jane can spend roughly $29,163 a year until age 60 and never have to do anything at all! That’s right. With her $530,250 saved up, she doesn’t need interest or investment returns to spend $29,163 a year. So long as she doesn’t increase her lifestyle she’s grown accustomed to for the past 18 years, she’s fine. Jane can also earn a risk-free 2% return on her $583,275, which yields roughly $11,500 to go on top of her $29,163 to equal roughly $39,000 in after tax income a year.

If we exclude the interest income, $29,163 a year is not exactly a lot to spend, but during her working years from age 22 to 40, she was only spending about $32,000 a year after taxes anyway. In order to make her money go farther, Jane could move to a cheaper country, live with a working spouse, work part-time, or attempt to invest their money. If she’s been used to living off $32,000 working, suddenly, there are 8-10 hours more a day to make $2,837 a YEAR to close the difference and then some!


How To Retire Early And Never Have To Work Again - Floyd, Financial Samurai

Floyd graduates from Virginia Tech and becomes a software Engineer at a small software company in San Francisco. Floyd isn’t the most brilliant of software engineers, which is why he couldn’t get into Google, and therefore doesn’t make as much as his fellow Googlers. That said, he’s making a healthy six figure income by age 30.

With a $902,605 nut Floyd has accumulated over the past 18 years, Floyd can spend a healthy $45,200 a year for 20 years without having to do a thing. At a risk free 2% return, Floyd can earn $18,000 a year to boost his annual spending to $63,200 if we want to get a little more realistic.

Couldn’t you live off $63,200 in AFTER-TAX income in practically every city in the world?  Imagine if you found a spouse who worked, or actually made and saved the same amount of money you did?  You could both live of $126,400 a year quite comfortably.  But, the theme of this post is to retire early and only depend on yourself, so this is what Floyd will do.


How To Retire Early And Never Work Again - Talented Felicity, Financial Samurai

Felicity graduates in the Top 3% of her class at UC Berkeley and gets a job at the Boston Consulting Group, one of the world’s leading strategy consultant firms. She has a fantastic career and gets promoted every 3-5 years on average until she becomes a senior executive at age 38. She has a couple little ones, and decides to retire at 40.

With a retirement savings of $1.36 million, Felicity can spend $68,000 after-tax a year as she stays at home and spends time with her 6 and 7 year old sons. Felicity didn’t have the best of luck with love, and divorced her $300,000 a year husband soon after the kids were born. They share custody of their sons, and also share the cost of raising them.

At a 2% risk free return, Felicity can generate $27,000 a year in interest income, boosting her annual spending to roughly $88,000 after tax. Felicity was living off of around $88,000 a year in disposable income at the age of 35, so it’s not that big of a stretch for her.


The Secret To Retiring Early - Holy Grail Financial Samurai Chart

If you save 50% of your after tax income a year, you only have to work 1 year to accumulate 1 year of retirement savings. If you keep saving at this rate for 15 years, you will logically accumulate 15 years of retirement savings. If you save only 10% of your after tax income a year, you have to work roughly 10 years to accumulate 1 year of retirement savings!

The key here is after tax income and what you live on. The default, base case scenario is that one can live off 50% of their after tax income. Living off less for an extended period of time without making more than $100,000 a year is not very realistic or sustainable.

Use a simple $100,000 after tax disposable income figure, and a $50,000 yearly living expense target for retirement to work the math yourself. Save half of $100,000 = $50,000 = 1 year of retirement.  Save only 10% of $100,000 = $10,000. You need to save $10,000 for 5 years to accumulate your $50,000 annual living expense!


Children are obviously a big determinant in whether you’ll have the ability to retire early or not. But, are children really that expensive if you see plenty of couples who earn $50,000 or less have multiple children? The government provides a $1,000/year tax credit per child for middle class families as well.

The conventional wisdom is that if you decide to have children, you should immediately slap roughly 22 years of work to your life.  You want to be able to provide for their living expenses and tuition through college, just in case your child isn’t that gifted to get a scholarship, or work to support themselves.

The good thing is that conventional wisdom is often times wrong. If two parents decide to save 55% of their after-tax income every year after college for 18 years, the “Average Janes” of the world will have $78,000 a year to retire on and provide for a family. The “Floyds” of the world will have roughly $120,000 a year to spend, and the “Felicities” of the world will have about $170,000 a year to spend. Can you make these numbers work to provide for your family? I think so, but it will obviously be much harder if you were a single parent.

What’s even “easier” than both parents saving 55% of their after-tax income is that one parent works, while only one parent saves as aggressively.  This way, the early retiree parent can simply be added on the working parent’s healthcare and all other benefits. Hey wait a minute, I think this is what happens already for stay at home moms or dads! Again, the difference is the aggressive savings plan, so study the chart above once again!


Inflation is a beautiful thing that scares people who do not understand basic economics. To put it simply, inflation rises when the economy starts to heat up, and falls or stays flat when the economy cools. People often ask, “What happens when inflation hits 8%?  We need to invest and save more!  We’ll be screwed!” We won’t be screwed. If inflation ramps from 2% currently to 8% in the future, it means the economy is ROCKING AND ROLLING! There is too much money sloshing around the system, and demand is too great, causing prices to rise.

What happens when “prices” rise? Your income and real assets rise. Nominal interest rates also start to rise, meaning the real interest rate return on your investments, CD’s, and savings also begins to rise. Nominal interest rates are generally higher than inflation, otherwise you’d have negative real interest rates. In other words, in a 8% inflationary environment, you might receive a 9% nominal interest rate on your yearly savings account, leaving you with a 1% real rate of interest.

Everything is aligned folks!  Don’t let the inflation pollyanas scare you. Look at the 35 year chart of the 10-year US yield. It’s done nothing but go straight down.  If people want to go more into detail and understand economics, let me know. But before we have an economics debate, please make sure you’ve at least read the basics.


Believe it or not, some people actually want to continue to be active during their early retirement. Maybe they become park rangers, tour guides, freelance writers, or consultants. If your monthly individual operating expense is $50,000 a year, and you find a job you enjoy that lets you work part-time and make $20,000 a year, then you’ve suddenly bought yourself many more years in living expense coverage.  Or put it differently, all you need to do is be an “Average Jane” in the example above.

There are thousands of things in this world that you can do to make money. And to let your mind languish after retiring from your day job is one of the dangers of early retirement. By making just $20,000 a year in a hobby she enjoys, “Average Jane” increases her disposable income in retirement by 50% to $59,000 from just $39,000 previously.


1) First and foremost, get a college degree because it will help set you free. Without a college degree, it’s unlikely any of these three would land their jobs.

2) The second lesson is that by living below your means, and sacrificing, you can essentially live for the rest of your life after 40 without having to work another day in your life.

3) Third, there will be people who say it can’t be done, but it can be done, because all three examples are real. Furthermore, I am a 4th example!

For 13 years I’ve saved 50-75% of my after tax income, leaving me with roughly 16 years worth of current living expenses (13 years x 1.2 in the chart above) based on my cash savings. If I decide to sell my house and live in a more cozy 2 bedroom condo/house, the living expense coverage rises to about 25 years. And If I sell my rental properties, the living expense coverage shoots to over 30 years.

What’s important is NOT the amount saved, but the annual living expenses coverage saved, since each person’s desirable living expenses are different. Maybe some people in the Midwest are happy with $3,000 after tax a month to live on, while others in NYC need $10,000 in after tax income to comfortably survive. Shoot, some of you might even want to move to Thailand, Malaysia, or The Philippines, where $2,000 a month in after tax income will let you live like Kings and Queens!  Who knows the right dollar amount. It all depends on the individual.


If I wasn’t whipped so hard my first two years out of college, I would never have saved so much. Thank you sir, may I have another!  I worked for a firm that made me get in at 5:30 am every morning and have me stay until 7:30pm on average every evening.  Some evenings, we went to 10:30 pm, which was brutal. Furthermore, I constantly had to work at least 5 hours a weekend, leading to a total time spent of roughly 75+ hours a week. I gained 20 lbs, was constantly under pressure, and was generally pretty stressed. Despite the pain, the one thing I knew was that if I could just get through these first two years, I would be set.

Given the difficult experience right out of school, I swore to myself that I would save like a maniac to have the optionality of retiring early if I wanted to. I NEVER wanted to go back to that situation again. To be able to have the freedom to answer to no one is priceless. Hence, saving 50-75% of my after tax income is such a bargain for priceless!

Right before my 35th birthday in 2012 I decided to take a leap of faith and retire from Corporate America to travel and work on my entrepreneurial endeavors. It’s been over three years now and I love every minute of it. Early retirement is absolutely worth all the “sacrifices” of saving and investing your earnings.

Recommendation For Achieving An Earlier Retirement 

Get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts on their Dashboard so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going.

One of their best tools is the 401K Fee Analyzer which has helped me save over $1,700 in annual portfolio fees I had no idea I was paying. You just click on the Investment Tab and run your portfolio through their fee analyzer with one click of the button.

Finally, they just launched in 2H2015 the best Retirement Planning Calculator online. Unlike other retirement calculators, their calculator pulls in your real data and runs a Monte Carlo simulation to produce the most likely financial scenarios. You can input multiple different expense, income, and life events to see how your finances shape up.


Retirement Planning Calculator

There is no better free online tool that has helped me stay on top of my finances more than Personal Capital. It only takes a minute to sign up and it’s free.

Charts completely updated for 2016 and beyond

Photo: Sunset at Islas Mueres, Cancun.



Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

You can sign up to receive his articles via email or by RSS. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information.

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  1. h says


    Your numbers in the last chart are wrong. If you save 50%, then yes you save 1 year of expenses. If you save 66%, you save 2 years of expenses (You’re spending 33% a year, providing twice that in savings). If you save 90%, then you’re saving 9 years of expenses. I think your numbers are wrong because you’re assuming the same fixed expenses regardless of how much percentage you’re saving. Jacob from ERE made this point nicely in one of his posts.

    • says

      What is wrong and what is right?

      I don’t want to live in a trailer like Jacob did, and I’m sure the majority of people don’t either. I assume a fixed operating nut that is good enough to keep one living reasonably well. That is open to determination, but I can say that unless you make a million+, saving 90% of your after tax income is bad living.

      You can save 90% for a little bit, but I’m sure lifestyle and desires will change. People have to be realistic.

  2. Processing Gateway says

    This is a very interesting post. I hope I had to work 75+ hours right after college. Unfortunately on my case, it happened a little late (late 20’s) with additional heap of debts. While my desire to save is huge at this moment, paying debts is I think more important now. What works for me is the “Snowball Debt Plan” by Dave Ramsey.

    I’ll be following your blog.

    Best regards,

  3. spruby says

    A few major misses – health insurance costs (increasing far beyond inflation); plain old ability to procure health insurance if not working – difficult and expensive; reduce skills to rejoin the work force if there is a problem during that 20+ year retirement before social security; and social security assumptions are wrong – minimum retirement age is increasing so you need to cover more years than you calculate; and finally this is targeted to a small population that earns enough money that they can live easily on half – at my salary – $140K – no biggie – if I made $30K – not a chance in hell.

    • says

      Spruby, are you that unhealthy that you can’t get private health insurance for under $1,000 a month? Sounds like you want out from your $140K a year job.

      If one is making only $30,000 for their rest of their lives, you are right. Unfortunately early retirement is not going to happen. A healthy traditional retirement can with aggressive savings.

  4. joe says

    Since savings @ 55% doesnt include 401k (has been said many times). I would like to see your chart for average jane including 401k contributions. Honestly, I dont think it works you would have to assume something like 10% annual growth in the 401k. More importantly it leaves little disposable income (if 10-20% was moved to the 401k). Average jane would have to rent a small house with 10 people for the rest of her life. Or maybe just just marry FELICITY :)

  5. Jez says

    I like this article and although I haven’t read it in full I see a couple of errors.

    1. What about a home? With no paid out mortgage rents are going to soar and you will miss out on paying a reasonable price for a home and having that behind you.

    2. You won’t have much 401k because it wasn’t leveraged and just 18 years of work will put bugger all into it.

    3. The person in the equasion/scenario has failed to hedge against inflation or invest into growth assets, meaning they never leveraged their wealth and it’s just running out

    4. NEVER trust the age pension.. (Unless you really couldn’t give a rats)

    5. There are probably loads more but I can’t be stuffed

  6. Jez says

    I’ll let you into my little retirement plan.
    I’m 32, have four properties, one which my Wife and I live in and are paying off. We plan on selling one investment property within 5 years, paying down (or off) our mortgage, then we’re home and dusted (although can choose to work for a better retirement if we’d like) The equasion looks like tis in 5 years time: Home worth around $900,000 (all in Aussie dollars) 2x investment properties worth (combined) $900,000 and a debt of $700,000 (total LVR of 40%)but rents more than covering the loan repayments and expenses. We then use a line of credit on an investment property but never spend any more than 5% of the total value. If we make more than 5% capital on the investment over a one year period, we’ve made our money back, plus a little extra, if not we consider going back to work (heaven forbid!) but in reality we’d probably work anyway out of boredom. We’d like to purchase more property for a better retirement along the way, the more the better and lets face it: Who wouldn’t like to buy a multi million dollar home? I think it’s really a toss up of: live modestly, retire. Or, live like a king (& queen) work really hard, for a long time but come home to a big beautiful house. I’m torn

      • jez says

        Ha! Just stumbled upon this one from 3 years ago. I’d forgotten all about it! I semi retired 6 months ago now and it’s good. We didn’t go the giant house route because as we aged some more our true wants became apparent and what we really want is freedom. We enjoy travelling when we can (our dogs make it difficult to travel but we love em like kids so it’s all good) and we have a great place on acerage with plenty to do. In order to do this I think you need to be a different kind of person. I service my own vehicles. Do all our own handy work and this saves us thousands every year. We don’t buy new cars and only pay cash for anything. We’re pretty good at finding cheap flights and accommodation. We have to think differently than most other people because we’re not wage jockeys anymore. All in all just being frugal makes the biggest difference in order to be free of swapping time for money. We think differently.

  7. says

    Perhaps it is very different in the wild west, or in the golden paved streets of New York City, but here in the hinterlands, or anywhere an educator, or personal caregiver, service worker is employed, they are unlucky to EVER see the sunny side of 75,000 annually – no matter HOW long they work. And lest you point to the Bachelor’s degree requirement – many in food service have multiple university degrees – including advanced ones – and are unable to get employment in their fields. Finally, careers with “ladder” salaries do not give much in raises and career caps are fairly early and are low. Aside from remaining childless and at home when not working, how does the real “average Jane” save more than 10 – 15 k a year? Thank you, Kate

    • says

      Is not the hinterlands much cheaper to live in than NYC? If so, then perhaps $40,000 there is equivalent to $75,000 in NYC and you don’t need to save as much.

      We all have different skills, and I’m pretty sure we can figure out some way to make a side income with the skills we have. We just have to make the effort.

  8. says

    No edit button, so need to note that the sentence ” they are unlucky to EVER see the sunny side of 75,000 annually – no matter HOW long they work” should read with “UNLIKELY” for “unlucky.” Apologies for the typo.

  9. John C says

    Sam are you honestly saying you can discount inflation? Are you honestly advocating in today’s environment with the FED, ECB, Japan CB etc printing billions per month inflation will not be a problem?

    • says

      Yes. Look at the 10-year yield. We’re at 2.75% on 1/24/2014. The 10-year yield has gone down for 35 years in a row. I can see it going to 4%, but not much higher. The markets are very efficient now and policy is becoming more effective.

      • Sloan says

        I understand your the tour and according to this I already have 20 years if free living
        My problem is I’m only 45. So clearly I will live longer than 65
        So am I missing something ? Won’t I be broke at 65?

  10. Dave says

    Editorial comment: Average Jane, 3rd paragraph, you wrote, “… only spending about $32,000 a month after taxes …” I think you meant to write $32k per year.

    Anyway, great post, as several examples to show how saving consistently over a long enough time period can amount to serious bank!

  11. Megan says

    Wow, it must be nice to be an “average Jane” and receive $5-10 thousand dollar raises each year.

    • says

      BART workers in SF are on strike. Many dont have college degrees. Average income is $80-100k and they all have pensions where they don’t need to contribute. You were saying?

  12. Nathan says

    As a young reader (18 months in the workforce) I save ~45-50% of my after tax income. Making 25% contribution to a Roth 401k with a 6% match. The other chunk is cash. I have an interest in building passive income streams but dividends, CDs, and real estate require a large amount of money to be able to live off of. (5.5% to equate $2800/month is ~$611k)

    Not to be intrusive but what % of your net worth came from book sales and stock market unicorns?

  13. Melissa says

    This sounds great & all, but I see your “average” Jane starts out at $35K & is making $100K by the time she’s 40. I certainly wouldn’t consider this “average”, especially not in the Ohio Valley where I live. The average income per capita around here is about $40-$45K, PERIOD. That’s even with a college degree, which I have BTW & still fall into the low end of this average. How, pray tell, do you suggest we save 50% of our income??? I’ve personally nixed out everything extra I can think of including cell phone & cable. I’m also debt free except for my mortgage, & there’s still no way I could save 50%. I’m doing good to save 20% & most months not even that. I even have a 15 yr mortgage on my home & make extra payments so it will be paid off in only 10 yrs. I’m about 3 yrs into it. Bottom line, I feel like I’m doing the best I can here & I seriously don’t believe I could spend much less. That being said, what’s a more realistic plan for REAL average Janes like me??? That’s what I want to know. I should also point out that I have a child & am seeing your chart almost 15 years late. I know I’m not retiring in 5 years & that’s fine, but retiring at 50 is still better than 65.

    • says

      One of the things you having for is a low cost of living. It’s all tied to average incomes so saving 20% is great. Try inching it up by 1% every month. I’m sure you will be able to get to 30-35% savings rate in a year’s time. You will surprise yourself. Trust me! But you got to try!


  14. Pigbitin Mad says

    A person making $30,000 will not be making $100,000 after 20 years.

    I actually make less than I did back in 1985 as a telemarketer. The economy is going to suck forever. We can only hope for massive deflation so that my nest egg is actually worth something. (If only I would actually take the money out and stick it under a mattress). As it is $1 million dollars will probably buy a loaf of bread, just like in Germany after the First World War.

      • Ricky says

        Except that income is very, very loosely related to inflation. Just look at the historical median income. It’s went from $31k to $51k.

        Income is more related to skills/abilities and motivation to move higher up. I would agree that most reading your blog probably possess said abilities to move up. That said, it’s nearly impossible to expect the “Average Jane” to go from $35k to $100k in 20 years. Not impossible, but not likely. The average aren’t going to move to specific big cities where they can work rough jobs that pay a lot, no are they going to put in the time to broaden their skill set in the first place.

        • says

          Gotta believe in yourself Ricky! I’m confident that anybody reading this post and reading this site, which amounts to about half a million a month now will have the tools to outperform.

  15. Larry says

    Where are you getting the tax rates? 26% max? What about state tax over 10%, City tax, ect. Also, since when is tax rate capped at 26%? In the one example of income rising substantially, the rate will either increase to 36% or the ATR will kick in.

    In all cases, your Discretionary Income after all taxes is inflated.

  16. Nirav says

    If it was this easy then everyone’s life would be perfect! There is no way anyone who makes $35000 can earn $100,000 in 18 years.

    You are better off buying $1 lottery and hope to win Million Dollar jackpot.

    Simply ridiculous strategy.

      • Nirav says

        3% inflation rate is not GUARANTEED by employer. If you are making $35000, there is no way in a million year you can start making $100000 in 18 years.

        Why would an employer pay a person $100000 after 18 years when they can easily hire someone after 5 year to start from $35000 and you can get lay off. There is high possibility that your new employer can start your salary to $35000 again.

        • says

          Nothing in life is a guarantee. You could get fired after two years because your boss hates your attitude, who knows. But you keep going out of self belief.

          If you have the mindset that you can’t even get a 3% raise a year during the upswing in your career, then I’m afraid you have a defeatist mentality which will prevent you from achieving your financial goals.

          What do you do for a living and how old are you? What is your education background? I’d like to understand why you are so pessimistic. Thanks

          • Nirav says

            I am optimistic about my career growth and have gained above average increase. This article is great but not realistic for all.

            p.s: I have subscribed to your news feed, so we’ll be in touch.

            • Taffy says

              A person can definitely increase their income. If a high school drop-out like me can, anyone can. It took a lot of drive and a lot of schooling but it is worth it.

              I did it in 13 years.

              In 2001, at age 25, I made $24,000 a year. After going back to school to obtain multiple degrees and graduating in 2010, I now make $105,000.

              Job 1 – GED – there for 6 years – started at $24,000, top salary was $40,000
              Job 2 – BS – there for 3 years -started at $48,000, top salary was $52,000
              Job 3 – MS – there for 2 years – started at $80,000, top salary was $92,000
              Current job – been there for 1.5 year – started at $100,000, currently making $105,000

          • Dan says

            I’m sorry, but annual raises are just not realistic. I joined the workforce at age 21. I’ve seen one raise in five years, and I don’t anticipate any more raises. There are plenty of fields now where annual raises are completely nonexistent. If I followed this plan and retired at age 40, I’d end up having to live for 20 years on an annual amount of $18,500. That’s not defeatist, it’s realistic. Your view is an overly optimistic one that is simply not a reality any longer.

            • Dan says

              I’m 26 now. I make $45,000 a year, and that’s pretty much as good as it’s going to get for me salary wise. One needs realism in today’s world, because things can and will go wrong. The days of the annual raise are gone, and to think this plan is realistic is akin to living in a fantasy dreamworld.

            • says

              What about a second job or starting your own business online? Working 40 hours a week is totally arbitrary. I worked about 80 hours a week for 10 years. Working on your side business before work and after work is possible!

            • Dan says

              Who said anything about working 40 hours a week? I don’t think I’ve ever had a week where I’ve worked that little.

            • Steve says

              The last thing you need is “realism.” I don’t know what that is. I would lose that word from your vocabulary.

          • S says

            This is a funny thread. I was making about $35,000 18 years ago, now I make over $200,000. Do people not believe in the ability to switch jobs and learn new skills that may lead to greater incomes?

          • pigbitinmad says

            You never worked for Temple University. I was there four years at a starting salary of $26K. They gave out annual raises of something like 25 cents an hour. Only you didn’t really get it. They took it away in the form of “contributions to your health insurance premiums.” In other words, the moment you got the extra $10 per week, they would decide to take another $10 a week from your pay check to contribute to your health plan which cost them $12,000 per year anyway. I am not sure why they had to nickel and dime their employees to death since there was no money shortage at that time (and they were able to increase the materials budget by a few million….but that’s off topic).

            The last time I was ever granted a cost of living increase of 3% was the early 90’s. Now the economy sucks so bad that no employer need bother with raises.

            Some people may land a job that pays $100K, but by definition most people will see their standard of living go down. I blame the oversupply of overqualified people on the fact that most jobs will be outsourced or mechanized. Even telemarketing is no longer done in this country.

            • says

              It’s true, due to globalization and the internet, there’s been wage arbitrage e.g. Indian IT, Philippines call centers, etc.

              The goal is to get on the tech/internet wave, and figure out how it can help you get ahead.

  17. says

    I know you have a financial interest in promoting capital, but that doesn’t mean it’s the best tool for tracking budgets and spending – Mint get’s that honor.

    Disclosure – I use both. Mint for the micro (spending), and PC for the macro (investments).

    • says

      I’ve never used Mint, so I can’t promote it. But from what I hear, Mint has a great budgeting tool.

      The reason w/ I like Personal Capital on this front is b/c they use a cash flow management tool. Budgeting is basic, like those who try to get wealthy just by saving money instead of trying to make more. PC is more focused on investing and building wealth through greater assets imo.

  18. MoneyTree says

    Your examples are certainly one way to retire early. It seems to be a pretty difficult way to do it, however. Why not retire in months instead of years or decades?

    Instead of working a job for 10 to 20 years trying to save up a million and live off the interest, why not just self-educate yourself on how to BUY an existing monthly income stream?

    If you are willing to push yourself through a learning curve, you can “retire” in months, not decades. Just buy one multi-unit residential income property with 30+ units and you can earn enough monthly income to pay all property expenses, a manager to run it and all your personal bills too. With a good manager, this type of income can be 95% passive.

    Rentals get a bad rap sometimes because the owners don’t have enough units to afford to pay a manager and to pay others to do repairs. Landlording can quickly burn you out if you try to do it yourself. In my experience, 30+ units is the magic number. I’ve chosen mobile home parks because they provide the most income with the least capital expense. If you self-educate, you really can buy just one property and “retire” as soon as you can complete your learning curve.

    Multi-unit residential rentals are an income stream that you can control. As inflation eats your income, you can raise rents, lower expenses or buy another park. REAL inflation, by the way, is running nearly 10% a year because the Fed Gov keeps changing the formula to make it look lower ( Wages, investments and savings will never retain their purchase power while this continues.

    I’ve studied the global financial system for more than 10,000 hours and must sadly report that a massive collapse or massive devaluation of dollars and digits is certain. In my opinion, it’s far better to own real goods and real income-producing property than paper and digits, which are just promises to pay. When the crisis climaxes, the holders of your paper and digits may want to pay, but will be unable due to people being unable to pay them.

    Another advantage of multi-unit residential rentals is you don’t need a ton of savings to buy a large property. I self-educated and learned how to buy my first mobile home park for $1,000 down and closed on the 5th so I’d get the prorated rents for the remaining month at closing. So I was actually paid over $5,000 at closing to take over the park. When you have no money in the deal, your yield is infinite. Ten years later, the park is worth 1,500 times my original investment, which was more than returned to me at closing.

    I now own two parks and my only “job” is to manage the managers. It’s secure, monthly, 95% passive income that allows me to be retired, live my life for “free” and own appreciating assets I can later sell, 1031-exchange or just live well off the rents as the properties pay themselves off. Because of the many allowable tax deductions available from owning rental properties, my taxes are very minimal too.

    Isn’t several months of self education better than the time and expense of attending college 4 years and working 10 or 20 years for someone else? Once you reach financial independence, you suddenly realize your most valuable asset is time. Trading time for money is a spectacular waste of your most valuable asset.

    Buying an existing income stream can get you off the employment wheel THIS YEAR if you focus on self-educating yourself how to do it. Save decades of time and years of stress and just BUY an existing income stream.

    I highly recommend this direct route to living “free” and retiring early.

  19. Eric J Broadus says

    Hello I have a question. In all three examples you presented how much they could spend over a twenty year period. I also see the 2% risk free rate. my question is if they spend that amount of money each to live off wouldn’t the amount they earn in interest decrease each year?
    Please explain.

    Thank you.

      • Ricky says

        That doesn’t make sense.

        “With her $530,250 saved up, she doesn’t need interest or investment returns to spend $29,163 a year.”

        How are you not touching principal if the money isn’t coming from interest or investment returns? Even if you really mean to say that the $29,163 is assuming a 5% withdrawal rate over 20 years (assuming your assets will stay steady gaining 5% a year) then there would still be no way to add the additional 2% into the mix because you can’t have money both in the stock market and in the risk free rate at the same time (at least, not the same money)

        Also, where did you get the $530,250 figure to begin with? You have her total savings at $583,275. To be even more picky… 41-60 is technically 19 years.

  20. Dave says

    All of these scenarios make me feel like a piece of SHIT!!! Do that many people earn $150,000 a year???

  21. rogue says

    Dude, i am 22, with a 32k salary. can you please give me advice to save for retirement (doesn’t have to be early) and strategies to pay student loan (31k)? At this point i am completely lost but i want to be able to make wise decisions regarding my finances. Thanks!

    • says

      Well, since you stumbled across this retire early post at age 22, then it should mean that you are SERIOUS about your money now. My advice would be to continue to live like a poor student so long as you have student loans. That means no fancy car, no fancy clothes, rooming with someone or living at home, and saving like a mad man. Everything starts with savings while figuring out a way to be the best employee possible to get paid and promoted.

      Read this:

      • rogue says

        I am very serious indeed! I will definitely take your advice. Also, I was reading your blog post, “Are There Really People Who Only Work 40 Hours A Week Or Less And Complain Why They Can’t Get Ahead?” and hilarious because I have been working an average of 70 hrs a week every summer and winter vacation. Being a young female I always get asked if I have kids to support -.-

        • says

          Glad you enjoyed the article! It’s good you are thinking about your finances seriously now. That is so important and far ahead of many other people. Fight on, and never surrender!

  22. Jeff L says

    Save 10% of every penny you ever make.. invest 70% in a highly rated mutual fund and re balance once a year.. This is how the people who retire comfortably do it.. Of course you can save more when you can but 10% is the way.

    • says

      I honestly do not think 10% is enough. I would shoot for 20% at least and keep on going until it is unbearable to save more. And then keep on going.

      Few people test their savings abilities. But if people do, they will surprise themselves!

  23. Bee says

    Man I love this blog. Discovered it a few weeks ago and now just reading the backlog of posts.

    I would love to get to this point, to have the freedom of retiring early but I don’t feel particularly optimistic. I mean, I’m 20 and about to enter the last year of my degree, so I’ve got a lot of time yet. I feel that the ceiling for major earnings is much lower in the UK though. Might have to ship out to the states to earn that dollar.

  24. Caitlin says

    Great advice! I am a senior in college and have recently accepted a job offer for post graduation in May. I have also realized how little I know about investing, a 401k, CDs, etc. I found your blog when I first started researching information and I have been furiously reading whenever I get the chance! I am currently developing a budget for next year and I greatly appreciate all of your advice and information regarding saving. I was curious if you have a suggested booklist for someone starting out? I love reading and am going to make my reading list for the next few months rife with personal finance information. Thanks again!

    • says

      Great job starting so early! If everybody started as early as you, our country’s personal finance situation would be so much better!

      PF is pretty boring, but I remember enjoying David Bach’s books you can check out at the library. Good luck!

  25. Shyam says

    Samurai San: Help me with your logic and your math work on your comment below taken from example 2 -Floyd – coz it just does not add up

    “With a $902,605 nut Floyd has accumulated over the past 18 years, Floyd can spend a healthy $45,200 a year for 20 years without having to do a thing. At a risk free 2% return, Floyd can earn $18,000 a year to boost his annual spending to $63,200 if we want to get a little more realistic.”

    – How can Floyd earn the 2% return on the $902k nut while eating through it year on year. Isn’t the calculation of $63200 a year therefore, misleading instead of ‘realistic’ as you suggest?

    p.s. Love your blog and agree with most of your suggestions. I think most of the things you write about are universally true.

  26. says

    Love your posts. I am just now 28 years old and the only debt that I have is the mortgage on my primary residence and my rental condo. The wife and I bring in almost $200K a year and will have our primary residence paid off in 6 more years. We continue to max out my 401K at $17,500/year (which I have been doing since graduating college in 2008), and starting in 2015 will be putting $5,500 away in an IRA for my wife.

    We have over $100K in our retirement accounts and about $60K in the bank. We made some financial mistakes early on, but everyone does. I am sure even you have made some that you would go back and change if you could.

    For example, I bought my first house at 19 when they were giving them away like candy. I was still in college and it was 100% financed. Long story short is that after several years I eventually let it go into foreclosure and it cost me about $35K (the difference in the monthly expenses and what I could rent it out for over two years). It probably wasn’t quite $35K, because I did get some good tax benefits for two years out of college since it was technically considered a primary residence.

    Prior to this I had lost $14K in the stock market in 2007 when I put way to much money in a one tick pony (bio-pharm company). I was sure I was going to make 100X my money. Little did I know at the time. But it was a great learning lesson.

    Then in 2011 I decided I needed a new car, when my car was only 4 years old. After I sold my car for $4K, I had to come up with another $28K which was like 43% of my gross income at the time. I did pay cash, but that could had been used for investments that would had put way more money in my pocket. Then the next year we did the same for my wife and spent another $25K for a new car for here (again here care was only 4 years old).

    We also go married and paid $30K for our wedding (yes we paid for it ourselves). In hindsight this could had been used to put more money down on our primary residence or into another investment.

    So when you add all this up. We have wasted about $133K in the past 7 years, but still managed to make some really good decisions along the way as well. We are way ahead of our peers.

    Take our mortgage for example. Our monthly payment is only 15% of our gross income where some of our friends are paying up to 50% of there gross income or worse they are paying that in rent still. We own both of our cars outright, when many of our friends have a car payment or two if they are married. We have no credit card debt. We have a rental property that is cash flow positive.

    We have the wind at our backs as each financial goal becomes closer and more attainable.

    Looking forward to more posts and inspiration for my own Finance Blog.


    Gen Y Finance Guy

  27. Steve Humphries says

    Great to know that people want to reclaim their life without giving it all to a corporation until they die. I am 56 and want to retire in 2015. I own my home, auto, not in debt, and have monthly bills less than $1000. I have a solar powered home with my own water system. I have a savings account, gas royalties , and a 401K. 15,000 of the 401K is after tax while the other 215,000 is pretax that I am told I can roll over to a (Roth or IRA?) If I am living off savings, gas royalties ($300) and the pretax 401K until 59.5 what do I count as monthly or yearly income if I am not working? I ask this based on the current health care insurance requirements even though I do not use the medical system and have little confidence in their ability to treat me with their poison pills. I have a lot of questions and need a lot of answers before I do let my company go. What is the tax rate for cashing in the 401 K/ Roth at 59.5? There are questions I don’t even know yet to ask but I need freedom. I can’t stand the communist/socialist control the corporations and governments want now and I must find a way out. I have been at my current location for 20 years and it has become progressively despicable. I will take the early social security at (62.5?) and it will be sufficient to cover my expenses. I know the propaganda they tell you to not take the early SS but I have had family that worked for the SS system and they have told me that the real numbers of how much you will draw are still greater with the early draw if done for a longer time of course. How much more will you get if you just don’t live to take the later draw? There is some good advice here for people beginning the job market but I am ready to leave and I will but thanks for your help or advice should you respond. How is the best way to proceed?

  28. DawgSaver says

    I’m 51 and would like to retire within the next 3 to 5 years. When I say retire, it doesn’t mean do nothing…I will always work…but I want to pursue other interests like home remodeling, landscaping, woodworking, volunteering, helping my kids get a start in life, all of which I enjoy doing but work gets in the way and my own fears of losing a steady paycheck, we will never have enough money put away as I fear the unknown … inflation, taxes, healthcare. I grew up with nothing so I have this constant anxiety of losing what we have worked hard for instead of relaxing an enjoying life.

    My degree is in Finance and I have been in Technology and/or Technology Management within Banking, Insurance, Financial Management firms for the last 30 years. My wife and I have 2 kids. No debt, No Mortgage, both kids college saved and paid for and a Net Worth of $2.7M (Approximately 20% Property, 45% IRA/401K/Pension, 20% Taxable Investments, 15% Cash). Living expenses are approximately $75K/annually. My wife stayed home to raise our kids so we lived on one income well below our means.

    I have been using Quicken to manage our home finances since 1988 aggressively budgeting, saving, buying, holding & diversifying our holdings. Living in the Midwest is where we have grown up and raised our kids so we all have a very good work ethic.

    I would like to work on generating more passive income with very little risk and the confidence that our “nut” is solid and I can enjoy life with the confidence that we are doing pretty darn good. Any suggestions or recommendations or a kick in the butt from you and your readers!

  29. coldhammer says

    I would just like to point out one thing to a lot of the posters on this particular article. If your mindset is “This doesnt apply to most people because they dont make over $100k a year” or “I cant do this because of x,y,z..” or any of the other number of excuses then NO it wont work for you. All of these strategies have one fundamental concept in common. You have to have the drive and the mental mindset that anything is achievable if you really want it.

    Think on this. 1) Statistically most multi millionaires never earn or have a combined family income of more than $86k per year. 2) A parking lot attendant here in Atlanta earns $12/HR and has managed to accumulate a $500k portfolio. ( Im sure he never said I cant do this because i only make $12/hr.

  30. says

    Greetings from Seattle! Thank you so much for sharing Sam! You are creating a great website and community. It is so great to find similar minded people here. Can’t wait to read more! Have a wonderful day!

  31. Olya says

    I love this post and I love that I discovered your blog! Very inspiring and motivational. I read a few others on early retirement and investing, but yours seems to resonate the most. Maybe it’s because I also live in San Francisco. I only wish I started thinking about these things when I was entering the workforce. I am 28 now, and have an embarrassingly small amount of savings. In fact I probably didn’t start saving at all till two years ago or so. But now it’s like a light bulb moment, where I realize what I want to achieve. Thanks for your detailed and well thought out posts.

  32. Kyle says

    hi im a 18 year old who has a pretty good work ethic and is hoping to make $150,000 $200,000 at an age of 28 starting annually, and i am currently in 11, and doing my csecs, mostly technical subjects, im not the best of student but i had decided to make something of my life so i started to concentrate more on my books, its never too late. but i know i will make it in a university but don’t know what i what job or steps to bring me to this success. i am seeking Ur guidance as im really focused now.

  33. b says

    Are the tax rates used above correct? Maybe this was only federal taxes? I live in California, and I’m pretty sure that it’s at least 10% worse. Perhaps this also doesn’t include payroll taxes?


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