When toddlers close their eyes, they think others can’t see them. But I wouldn’t expect grown adults to think the same.

Despite half the United States population living in expensive coastal cities and other high-cost areas of the country, there is somehow disbelief and even outrage a family might need multiple millions, let alone $5 million dollars, in order to retire early comfortably.

I recognize the attractiveness of lower cost areas, hence why I’ve aggressively invested in the heartland of America. Migration to the heartland is a multi-decade trend I want to be a part of. But I hope more folks can also recognize some of the reasons why people live in higher cost areas as well: higher pay, more job opportunities, greater diversity, sometimes better weather, amazing food selection, and family to name a few. 

Every so often, the stock market will take a dive when you least expect it. When we sense danger, the natural tendency is to run the other way, preferably in a herd for survival. As a result, sell-offs often intensify as computer algorithms now join us humans in rushing out of positions.

As I’ve gotten older, despite much larger absolute dollar swings, I’ve become more sanguine in times of stock market volatility.

Here are some things you can do to reduce your fear and not sell or buy at inopportune times. 

If you want to retire early, you must maximize the value of your after-tax investments. Pre-tax retirement accounts such as your standard IRA or 401(k) are nice, but they won’t get the job done unless you think retiring after the age of 59.5 is considered early.

There is an exception to that rule, however, which allows an employee who retires, quits or is fired at age 55 to withdraw without a 10% penalty from their 401k called the “rule of 55.” You can also utilize Rule 72(t) for early withdrawal. The distributions must be “substantially equal” payments based upon your life expectancy. Once the distributions begin, they must continue for a period of five years or until you reach age 59½, whichever is longer.

But these rules are crutches for those who’ve bungled their early retirement plans. A successful early retiree waits until at least 60 to access their pre-tax retirement accounts because they have an abundant amount in their after-tax investment accounts.

Let’s first review how much you should have in your pre-tax retirement accounts by age as our foundation. 

Over the years, many readers have asked, “What does it take to become a Financial Samurai? Do you have a set of core principles to follow?”

I resisted putting anything formal together because to do so felt a little bit arrogant and presumptuous. But after almost 10 years of running Financial Samurai and having over 1,000 people ask me the same thing, it would now be wrong not to.

Now that I’m a father, I regularly think about how to ensure taking care of my son and wife if I were to die prematurely. In addition to creating a will, buying life insurance, and setting up a revocable living trust, it’s a good idea to expand Financial Samurai so that somebody can take over or contribute to the platform regularly once I’m gone.

Financial Samurai is not just me. Financial Samurai is a way of life. To be a Financial Samurai is to be someone who follows these five principles.

According to the Federal Reserve’s Survey of Consumer Finances, the average US household net worth is a whopping $692,100! And that’s based on data from 2016, when the S&P 500 was ~30% lower. Further, real estate prices in many major cities have also increased substantially since 2016. Surely, the average US household net worth will be even higher when the next survey comes out in 2019.

What’s also interesting from the chart below is that the average net worth for a college educated person is $1,511,000 compared to a net worth of only $249,600 for someone with just a high school diploma.

Further, the average net worth for a homeowner is $1,034,200 versus only $91,100 for a renter. A 11X difference is massive! For all of you who still think it’s wiser to short the real estate market by renting over the long-term, the data does not support your belief.