Judging from the response I got to my post “How Much Should You Save for Retirement?“, people are really interested in the subject of my retirement. In that post I mentioned my desire to retire at 50 and that I had some ideas on how to do that. I do need to make a plan in order to reach this goal.
When I was in my early 20’s I read a book titled How to Retire at 35. I decided that would be a good goal. I didn’t make much money then so my plan was to start saving big money as soon as I had a good-paying job. Of course, once I had a good-paying job I forgot all about my idea of retiring at 35 and spent money like crazy. When I turned 30 I made a goal of retiring at 40. That goal obviously didn’t happen either. The problem was I didn’t really have a plan and I kept getting sidetracked and putting other things ahead of saving for retirement. Whenever I saved a little money I’d go off on some adventure and then be broke again. I did have fun on my adventures but if I had just been disciplined I could be having adventures all the time now.
This time I’m going to do things differently. I’m already better off than before because I’ve already gotten in the habit of saving for retirement. This time I’m going to keep retirement as a priority. My goal is to have $1000 a month to live on at age 50. If I retired today I’d only have $34.87 a month to live on. That is a very large gap but it isn’t as bad as it looks. That is based on just living off the interest from my savings. Based on just living on the interest, at 6% I would need to have $200,000 saved. Since I have about $6000 saved now I’d need to save about $1200 a month to meet that goal if my savings had an 8% return. That seems like a large amount considering I don’t make that much total right now. After I finish school though that should be a reasonable amount and in the meantime I’m saving all I can afford.
My goal of living on $1000 a month might seem far-fetched to some but I’m confident that it is reasonable. I’ve lived long enough to see the effects of inflation but unless we have really high inflation the next nine years I don’t think it will be much of a factor. I live on about a $1000 a month now and I could live on considerably less. One way I could cut my cost of living would be to live in a van. I’ve already posted about that and I believe it is a feasible option and one that I would enjoy. Another way to cut my living expenses would be to live in a foreign country. I lived in Guatemala for 3 months on $450 and had a great time. The cost would be a little more now but it would still be dirt cheap. A third option would be to spend half the year hiking a long trail such as the Appalachian Trail. I’ve hiked about half the AT and I think with some planning I could hike the trail on a budget of $200-$300 a month. Those are just the ways I came up with off the top of my head on how to drastically cut my living expenses, I’m sure there are many more.
That is my plan for now. It might undergo some changes before I turn 50 but I’m going to keep my focus on the goal.
You will probably find that at age 50 your body doesn’t work as well as it did at age 35. Sleeping on the ground and eating strange food is much more difficult the older you get.
So – don’t be surprised if $450 in Guatamala at age 25 turns into $1500 in Guatamala at age 55 in order to have the same “perceived” level of comfort. Medicine, eye care, tooth care, blood pressure, etc…
I’m 46 and in very good shape. I can still do everything I used to, but my endurance is shot and it takes 5-7 days to recover from a big construction project or a soccer match (instead of 12 hours when I was 20 and 2 days recovery when I was 30).
Jim- I’m almost 41 now. I don’t think my body will decline much in the next nine years. Since I’m not in great shape now if I got in shape my body might work even better at 50. There are plenty of hikers 60+ years old on the AT and many of them can out hike me. I don’t think age will be that big of a factor.
Hiking the AT is on my todo-list as well.
I don’t think age is that significant factor as well. I’m 32 and in better shape than when I was 22 (back then I would have labeled me at “pretty good” too). I regularly play hockey with a cast ranging from 17 to 58. The young whippersnappers are faster (because they are lighter), but in terms of endurance there does not seem to be an age correlation. In fact many competitive/top ultra runners are over 40.
When planning for retirement I wouldn’t expect to spend more than 4% of your portfolio value in one year, even if your nest egg is yielding 6%.
Hi TFM
You are 41 now and plan to retire at 50. Not that far away, how does this fit in with graduating law school and having a career in law? just wondering why bother go to law school if you are going to retire anyway in 9 years?
My question is how do you go about creating a retirement plan? do you have to factor in loads of costs or is making a monthly payment enough?
DGI- I’m familiar with the standard 4% withdrawal rate. I’d feel comfortable taking a higher amount though if I’m actually yielding more than that. I do plan on having some income plus SS eventually.
Claire- In hindsight law school probably wasn’t the smartest move. I might occasionally use my law degree after I’m retired.
Aurelia- There are lots of resources out there to plan for retirement. I’m keeping mine very simple though. I’m just guessing what my monthly expenses will be and planning to have more than enough to meet them.
If you are serious about your plan,diligent about saving, and remain flexible, it can be done. I originally planned to retired between the ages of 42 and 44, but ended up having to revise that to 47. I am flexible about my spending and working part-time, as necessary.
One big thing I forgot to factor when I first started planning was inflation. You can’t really plan to spend all your investment income every year, or you’ll run short as inflation takes a bite. My two biggest concerns right now are health insurance and property taxes.
Retiredat47- Thanks for the encouragement. Health insurance is something I’m worried about.
A van doesn’t sound too appealing, but Guatemala could be cool. As an extension on the van idea, there are quite a few people who live in RVs. No property taxes. I actually just interviewed a couple who does just this. They actually work at an RV site for extra money and free RV hookups.
I’m now 30 and would like to retire at 40. I’m in the process of getting an detailed plan together. Right now, my plan calls for buying up rental houses for cash flow. We’re also saving pretty aggressively and are moving to a smaller, cheaper house in the spring.
Good luck TFM and great post!
-HIB
HIB- Thanks. A van would be much simpler than an RV and I plan to drive a fair amount so the gas savings would be significant. Check out Early Retirement Extreme to see some of the problems you can have with an RV.
I couldn’t find the interview on your blog but I’d like to read it.
Just wanted to say that I love your blog. You have some real quality information here and its become a bit of a must read for me. Keep up the great work!