Taking Early Retirement

When I hear people say they want to retire early, or they wish they could retire early, I start off by asking one question. Are you SERIOUS? Frankly, most people aren’t serious. Not really, really serious. It’s painful to retire early and most people don’t like pain. They use pain avoidance techniques.

People don’t retire early for the same reason that they don’t lose weight. It’s hard to stay on the diet, eat the right foods, and get exercise.

Retirement is the same idea; stay on a budget, use your investment plan to make the right investments, save 30% of your paycheck – every paycheck. Every paycheck for 25 years, or 30 years, or … Whatever your number of years to retirement is. Mine was supposed to be 35 years – but got cut short.

You know I retired in 2009. I was born in 1957. I was 52 when I retired. I worked for 30 years. We lived on a budget for 30 years.

The car we have now is a 2010 Subaru. We bought it brand new in March, the year after I retired, 2010. It is January, 2014 and we’re getting ready to take it in for its 30,000 mile maintenance. The car we had before the Subaru was a 1995 Mercury Mystique. We had the Mystique for 15 years.

I drive a 1999 Ford Ranger. I got it used in 2009 – so it was 10 years old, when I got it. The car I had before the Ranger was a 1992 Mazda Protege. I drove the Mazda 17 years before getting a truck and I’m still driving the truck today.

The point is, we don’t get new cars every three or four or five years. And we keep our cars 15+ years. We didn’t drive a long way to work. I used to ride my 10 speed bike I bought back in the 70s to work. Not every day – but often. We got jobs close to home, or moved to be closer to work so we kept our miles down. We took the bus on occasion.

I think you can see a pattern. I wasn’t cheap. We always ate well, had a nice 4 bedroom home and didn’t have a car payment. I had a 15 year mortgage. I had a car payment – once, in our early years. But that’s a different post, I’ll make soon.

I paid for my kid’s education – from savings; no loans, no debt. It was hard. But their education was a line item on the monthly budget and money went into the college fund every month.

It was hard. My kids did without a cell phone until they each got to college. But I didn’t pay for text messages on the phone. You got something to say? Call me and tell me. Or call your fiends and tell them. No Internet, no data plan, no 4G, no bells, no whistles.

A long time ago they called the phone service – POTS. It was an acronym that meant Plain Old Telephone Service. That’s what my kids had – POTS.

They are all out of the house now, have good jobs, have iPhones on a family plan that they split the bill on and each pay for. Last Christmas, they all chipped in and got me an iPhone and they pay for the service.

I have a data plan that they pay for if you can believe it. We did a Facetime call recently. I was impressed.

They showed my how I can send text messages using Google phone on my iPhone. You need a book to keep up with all of this stuff.

The bottom line is back to the very first question. Are you SERIOUS? Will you live on a budget? Take the bus to work? Ride a 10 speed to work? Get a 15 year mortgage? Have a 6 figure investment account? Keep you car for 15+ years? Pay cash for your kid’s education? No cell phone for the kids or if they want one they can get a paper route to pay for it. (Oh that’s right. They don’t have paper routes any more. That’s what the Internet is for.)

Well? Are you serious?

For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jeremiah John

I received an really interesting e-mail between the holidays. A woman in her fifties (she didn’t give her age), said she wanted to retire early. It was not unlike many e-mails I have received since I started writing this blog back in 2009. She wanted to leave work as soon as possible.

I won’t go into all of her e-mail – it would take too long. But the gist of it was this; what are the steps that she needs to take to retire in 12, 18 or 24 months?

That’s a tall order. No other information about her or her assets or her exact age, or anything was in the e-mail. Her last line was, “Can you please list all the steps I have to take.”

My early retirement was forced on me. I was 52 one day and practically out on the street the next. But I had a plan.

Let’s tackle this over the next few months, shall we? I’ve created a new blog post category called Steps. We’ll start with the big picture; say looking down at this problem she has, from 30,000 feet.

Once we have an idea of the Big Picture, we’ll tackle the individual steps one at a time, so it doesn’t overwhelm you or her.

But let me get this out of the way now. If she is going to retire in 12 months, she’s already got a plan and has an idea of the Big Picture. She probably knows a lot of these steps. But you may not. So here goes . . .

The Big Picture deals with three things; age, income, investments.

Pretty simple huh? You have to know what age you want to take your retirement and work backwards from there to the age you are now. You also have to know how much income you’ll need every month without Social Security.

Right here you are asking why you need to disregard Social Security and right here I have to ask how old you are going to be when you retire? Chances are pretty good I won’t get a Social Security check.

If you’re older than 57, you might get some money. Might.

I’m 57. I can collect my full benefit at my Full Retirement Age (FRA) of 66½ years. It will be ten years from this year; 2024, then I can start to collect my full benefit. Washington says we’ll run out of money for Social Security in 2036.

Washington also says that inflation last year was 1½%. Can you see why I’m worried there won’t be any money left when I get there? We’ll discuss this in more detail, in another blog post.

The last thing you need to consider is your investment plan. Face it. You are not going to retire early keeping your money in a savings account. You need an investment plan that will earn you 20 or 30% a year. You also need an account with $200,000 minimum. 20% of $200,000 is $40,000 annually before tax. Not enough for me to retire. Probably not enough for you either.

Which is better? 20% of $200,000 or 30% of $300,000? You get the idea. You need an investment plan.

There you have it. What age? How much do you need? What’s your rate of return? We’ll dig into each of these in another post.

For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jeremiah John