Early Retirement at 33: An Overview

Sunset over the sea

One of the most popular page at Root of Good is the “I Retired at 33!” page where I introduce myself and talk a little about Root of Good.

I assume that means people are interested in the story of how I retired at 33.  In this post, I’ll give a quick summary of how I managed to pull off retirement at a very early age.

 

Early Years

I started finding ways to make money at an early age. Buying candy in bulk and selling individual pieces for a quarter each at school.  A newspaper route.  Mowing the neighbor’s yard.  Tutoring kids after school.

During high school, I had a few different after school jobs, and found full time positions over the summers.

Of the money I earned, I saved a large proportion of it.  I was a self-made thousandaire before I even left high school!

College

College

I decided to go to the nearby state university.  It was a very good school for engineering, and very inexpensive ($3000 per year back in 1998).  My SAT scores could have gotten me into a more prestigious school somewhere else, but in hindsight the local state university was the best choice.

I took more than the normal 15 credit hours each semester and graduated in three years.  Not only did I save a year of tuition, I also made working and earning a (hopefully) good salary one year closer.

During my three years in undergraduate, I had a series of jobs that were interesting, paid well, and/or provided useful experience for my career – civil engineering.  I also managed to win 11 academic scholarships, and a few research grants.

By the time I finished undergrad, I had a nice bit of savings accumulated.

Instead of heading into the difficult job market of 2001, I went to law school.

Lucky for me, the law school was also in-state, which made tuition relatively affordable.  Around this time my wife and I bought a condo together where we lived during my law school days.

I worked a few summers at law firms and various governmental legal employers.  Eventually I figured out I didn’t really want to practice law for a living.  The hours sucked big time if you wanted to make the big six figure salaries!  I was all about making some money, but not at the expense of a life outside work.

At one of these summer jobs, there was very little actual work to do, so I decided to start my own business.  I ended up making over $30,000 in the next couple years with relatively little effort.

Figuring a Juris Doctor might come in handy one day (or at least look cool on my office wall), I finished up law school and immediately started a great job at an engineering consulting firm in Raleigh.

We tried (but failed) to sell our condo when we moved back to Raleigh, so we rented it out to some PhD students at the university.  A year or two later the California property boom sloshed some excess money our way when a nice couple from Santa Clara bought our condo sight unseen for a third more than we paid for it.  More money for our portfolio!

 

Optimal Spouse Selection

Mrs. RootofGood and I married right before I finished law school.  She is obviously perfect in every regard.  She also obviously reads this blog, so I have to say that.  Our similar outlooks on personal finances have been a huge wealth generator.

It may come as no surprise that we are both very frugal about virtually everything.  We agree on saving a large part of our incomes.  We take vacations off season because crowds are thinner and our wallets get fatter (er, less thin).  Our furniture might be uncharitably described as dorm room chic.  Our kids wear hand me downs alongside inexpensively purchased new clothes.  We live in a modest neighborhood and drive modest cars.

We made these frugal choices so that one day we can retire early and not have the stress and time demands from a regular job burdening our daily lives.  There is more to life. 

 

Work

Good Job With Benefits

I found a good job straight out of college that paid well and had a really good set of benefits like a low cost 401k plan with a nice 6% matching contribution and an Employee Stock Ownership Plan.

Mrs. RootofGood found a job at a great company with even better benefits, although the pay wasn’t the highest at first.  Her 401k plan was better than mine and had an even larger matching contribution!  The health insurance plans offered at her firm were excellent and almost free, even for family coverage.

During our careers, we both focused on expanding our skill sets and increasing our responsibilities in the hopes that our salaries would rise over time.  My salary jumped big time once I earned my Professional Engineer’s license.  Mrs. RootofGood earned a number of promotions and raises.

This is almost certainly un-American, but we dumped raises into investments instead of buying more crap.

 

Maxing Your Savings

As soon as we started working right after college, we immediately started contributing the maximum to our 401k’s and IRA’s.  It made our paychecks artificially tiny.  Puny.  But maxing out savings options is like putting your net worth on steroids.  There’s muscles popping out all over the place!

Eventually we had to seek out more places to stash money.  Enter the Health Savings Account, the 457, and after the kids were born, 529 college savings plans.  After filling up those accounts, brokerage accounts held the rest of our investment contributions each year.

 

Don’t Pay Taxes

That’s a typo.  Pay as little as possible!  Contributing to 401k’s, traditional IRA’s, health savings account, 457, and a 529 college savings account kept our taxable income low.  We also paid for child care through the Childcare Flexible Spending Account offered by Mrs. RootofGood’s employer.

Our tax strategies have been so successful that we ended up with a federal tax bill in 2012 of $600 in spite of gross earnings over $140,000.  I consider an average tax rate under 0.5% to be pretty good!  2013 is even better.  Our tax rate is 0.1% ($150 tax on $150,000 income).

We didn’t do anything sneaky or illegal.  In fact, I do our tax returns on paper and one of my rules of investing is to keep it simple enough so it doesn’t make our tax returns insanely difficult.

 

Home Sweet Home

A Permanent Starter Home

Right as I was finishing law school, we took our cash from student loans, summer jobs, and profits from business ventures and dumped them into a house (along with a small loan from my parents that helped us both out).

We investigated buying land and building a house, and eventually rejected that option as it would be very expensive to custom build a house compared to buying a “used” house.  Plots of land close to town were more expensive than whole houses (and the land underneath them!).

We bought the house thinking it would be a starter home.  Ten years later, and after ample fix ups, we are still here.  Now it is a permanent home, since it meets our needs well.  It still needs work, but what house doesn’t?

Houses can be expensive.  Of course, we weren’t silly enough to pay full price for the house!  The City put the house up for auction and we were the winning bidder at a price 20-30% below similar houses.  There was a little more research, due diligence, and risk taking on our part, but it has worked out well with no surprises.  Except the lake the City rebuilt for $2 million right behind our house soon after we moved in.  Somehow I concealed this awesome fact from Mrs. RootofGood.

We have been lucky to refinance the house more times than I can remember, pushing the mortgage rate down to 5%, 4%, 3%, 2.5%, and now 1.99% (for 3 more years until it is paid in full).  Each time we refinanced, we tended to make the loan term shorter to help pay off the house quicker.

 

Smart Investments

I started out investing with Edward Jones, a full service brokerage firm.  They “fully serviced” me by providing expensive investment products.  I’m lazy, so I stuck with them for a couple years and paid high fees.  Eventually Mrs. RootofGood’s compliance department gave me the kick in the butt I needed, and made me switch to an approved brokerage firm, so I had to leave Edward Jones.

Switching brokerage firms to Fidelity and Vanguard cut our investment costs and hidden fees (expense ratios) to almost nothing.  In addition, the online access was far superior at both firms.  Now I could manage and automate my investments from the comfort of my own couch.  In the middle of the night.

We have saved close to $40,000 on investment expenses by switching to a low cost provider like Vanguard and Fidelity.  That’s a year or two of living expenses!

The kids

 

Kids

Yeah, we had them.  Lots of them.  Three to be exact.

Recent really scary news reports indicate it costs like $300,000 to raise each kid.  I can’t figure out how they spend so much money on little creatures whose favorite things to play with are cardboard boxes and shiny pieces of plastic up until age 7or so.  And that $300,000 figure didn’t even include college!

The truth is, you don’t have to spend a ton of money on your kids, and they will still love you at least 94% as much as if you had spent $300,000 on them.

Moral of the story: don’t spend excessive money on them.  Spend time with them.

 

Know What You Spend, Budget If Necessary

Until four years ago I never closely tracked what we spent.  We have never had a budget.  “Save money on everything” is a reflex, and keeping expenses low comes automatically for us.  Apparently this is not true for everyone, so budgets could be a good thing if you have a spending problem.

I started out with a simple spreadsheet where I copy/paste all credit card and checking account transactions for each month.  The spreadsheet automatically summarizes the expenses for each quarter and each year.

Income Summary

Personal Capital looks beautiful!

 

I have recently transitioned to using Personal Capital to track all spending as well as all investments.  It provides a summary of all income, expenses, and investments in one screen.  Incredibly easy to set up and even easier to use.

This is a great tool for figuring out exactly where your money is going.  Knowing how you spend lets you determine whether you get value for your dollars, and where you might be able to focus efforts to reduce expenses further.

After I started tracking expenses in very fine detail, I realized we weren’t spending as much as I had assumed.  Core expenses were around $24,000 per year.  This meant we were even closer to early retirement (lower annual expenses = smaller investment portfolio required to fund those expenses).

 

Bahamas

Almost Free Vacations

We like to travel, but we don’t like to spend a lot of money.  This is one category of spending where we have paid very little over the years, yet enjoyed some pretty amazing vacations.  I have never sat down and figured out how many countries we have visited exactly.

Ok, a quick mental count says about ten, but all the Caribbean islands quickly blend together with their white sandy beaches and crystal clear blue water.

How did we save money?

 

Weathering the Great Recession

Boy howdy, some people lost a freaking ton of money during that little economic blip called “The Great Recession”.  We lost a boat load too.  And then made it all back.  In fact, I switched up the investments to a more aggressive allocation in the middle of the 2008-2009 crash and it has paid off well (I’m retired after all).

It truly hurts to hear stories of people who lost half their investments in the Great Recession, then sold everything and stayed out of the market during the recovery in 2010-2013.  We basically did the exact opposite and piled money into risky investments during the 2008-2009 market crash.

Sure, it was a little scary seeing the market crash 7% in a day.  But I call those “buying opportunities”.  The money we were “losing” was long term investments, so why did I care if one day it went down 7%?  I care what these mutual funds will be worth in 10 or 20 years.

 

The PlanMake a Plan

We made an early retirement plan right after I started my post-college job.  We had all this money coming in the door.  Way more money than we had before.  I knew back then that this was a powerful force that, if harnessed, could lead to something big one day.

Over the years the plan changed and our ideal amount of investments changed numerous times.  These changes are unavoidable, since knowledge of finances and investments increases over time, and your interests and desires also change.  We kept fine tuning the plan as our investments and our family grew.

 

Embracing the Unknown

I would be lying if I said we have a 100% certain plan to be retired early forever and there is no chance we will ever have to work again.  There is always uncertainty.  The best you can do is plan for it, and understand that flexibility will get you a lot further in uncertain times than rigidly holding to a plan.

 

Reaching Our Goals

Over the last six years the stock market produced a lot of wealth.  We went from having “lots of money” to having “enough”.  Having enough money to live comfortably for the indefinite future is a big deal.

After my job ended, I pulled out The Plan and quickly figured out we have “enough”.  Now my days are free and I can do (or not do) whatever I want.  Mrs. Root of Good tried (but failed) to retire in 2015.  She switched to part time work (for full time pay) and eventually joined me in early retirement in early 2016.  The last two years she worked, she had two paid summers off so we could travel to Canada for two and a half weeks and to Mexico for over seven weeks.

From the cruise ship

In a nutshell, this is the story of how I went from a thousandaire to a millionaire in 15 years.  Over the next few weeks, I’ll be expanding on most of the topics I have covered in this Overview post.  Stay tuned to Rootofgood.com!

To keep informed of the latest posts at Root of Good, make sure to subscribe on Facebook, Twitter, or by email or RSS reader (in the column to the right).

 

If you want to find out more about any particular area of our lives or finances, please share with me below!  

113 comments

  • This is one hell of an eye opener. What do you say to skeptics?

  • Oddly enough I haven’t encountered any yet, but I’m sure I will some day. I guess let them believe what they want!

  • I have no chance of making it by 33 or anywhere close to it unless I get very, very lucky. But your story is inspirational nonetheless. Thank you for sharing.

  • Great job! Exactly how risky were your investments?
    Can you share some of the risky investments that you piled money into?
    How much was enough? Just curious about your net worth. 🙂

    • Joe, nothing crazy. Small cap value, REITs, International REITs, emerging markets, along with plainer stuff like large cap indexes and value indexes. No options or futures or commodities. I almost bought an option once. Then didn’t.

      I’ll have a detailed post at some point outlining my investments.

      How much is enough? 🙂 Millionaire status, but just barely. Enough info to keep the reader intrigued? Thanks for stopping by again. I’ve been enjoying your comments.

  • Well done, sir. I wish I would have figured this out when I was much younger!

  • Looking forward to your investment ideas

  • I’m just curious if “went from a thousandaire to a millionaire in 15 years” includes all household assets (aka your wife’s) or if you track your own net worth separately?

    • Thanks for asking. We track all finances jointly. I also lump her investment accounts and mine into one pot and do portfolio allocation across all accounts to get the best investment choices available in each account.

  • Glad to hear you track your expenses jointly, as you should if you are married. I contemplated dumping more money into the market shortly after the crash of 2008. Unfortunately, I didn’t. On the bright side, I didn’t reduce my contributions or pull anything out either, so I am enjoyed the ride up as well. Not quite where you are, but hoping to be there by my early to mid 40’s!

    • Yes, our marital finances are totally joint. We already have 27 or so different investment or savings accounts and credit card accounts. I can’t imagine adding in more accounts so we can each have a separate account and one joint account. I never understood the concept of his and hers money, since you both share out of the same pot, and should be working toward joint financial goals (even if they are compromises). But I guess separate finances work for some!

      • You might understand “his and hers money” if you did as I did, raising no kids myself yet marrying a guy who has 4 kids with another woman….. stressful and messy! Therefore I keep every single dollar of our finances separate! But I am so happy for you and your wife– you guys seems to be living what one of the keys to wealth supposedly is: get married and stay married. The amount of $ I lost getting married the first time, expensive wedding and honeymoon, then divorce, then moving into an apartment, then getting remarried so another (less expensive) wedding and (less expensive) honeymoon…. ugh it will have me working several extra years to replace that $ that should have gone into retirement. I am really upset about all of that now — lost retirement $ — but what can you do ‘cept live and learn. I want to stay married this time! 🙂 Congrats again~ enjoying your blog

        • I definitely understand separate finances when the spouses come into a marriage with very unequal financial backgrounds and obligations. It keeps you on a fair footing to handle those differences if you maintain some separation.

          Glad you are enjoying the blog, and thanks for stopping by and commenting, Connie!

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  • Found your blog through MMM — I’ve become fairly obsessed with his blog, and I’m really enjoying the layout of your site, and your approach thus far. Always looking for tips on how to “leave the lie” of society’s view of success…school/work/retire when it’s almost too late, and die. Makes no sense to me. The hard part for me is not the earning/saving, it’s the math. I’ve failed every math course in my life, and still can’t process (my left brain is pretty meager). So, looking for advice out there on where I am, where I could be, and when it is relatively safe to cut the chord, and declare FI. Hoping to find some answers here, based on your approach, and pairing with MMM and others — I find that my financial planner is (while a wonderful asset) someone who is wanting me to work/invest clear into my 60s, which I find to be an exhausting thought…

    • Here’s a quick outline:
      1. Figure out your annual expenses. Take those expenses and subtract out costs of working. Add in extra costs you might have in retirement (health insurance, fun money, vacations, hobbies). Here’s an example of how to do that: Developing a Retirement Budget
      2. Take your expenses and multiply by 25. Then take your expenses and multiply by 33. The 25x number is the least you will want to have saved before retiring. The 33x number provides a lot more safety and much less risk. (Example: You plan on spending $40,000 per year in retirement. 25 x $40,000 = $1,000,000. 33 x $40,000 = $1,320,000)
      3. Save and invest all that you can to grow your investments over time. Investing can be very easy – pick a couple simple index funds and stick your money in those and ignore it. Financial advisers make investing seem like an arcane art.
      4. When you reach your magic number (between $1,000,000 and $1,320,000 in my example), you’re ready. Retire!

      I hope to develop a step by step guide to “How To Retire Early” at some point that elaborates in much greater detail exactly how you do each of these steps. The main thing to do now is save early and save often. Reduce expenses (if you can), and save/invest the surplus of your income. If you have unknowns you need to figure out (like “how to invest”) that’s ok, you can do that later. Better to stick your money in a checking account getting 0.01% interest than to spend it all.

      • Thanks for the near-immediate reply — JustinRoG! I’ll work at running those numbers — the hardest part will be figuring out our expenses (though I know it shouldn’t be). I’m like you, I don’t run a budget, we just are frugal all along the way, and save as much as possible…it works for us, but understanding what’s going out the door on a monthly/annual basis is perhaps the only way to do the “can I retire” calculation. Away I go…thanks again! I think I’m (39, with a wife & 2 young kids) closer than I thought (given your goal of around 1.3 mm)

  • Fantastic article — I really enjoyed it! Our paths are remarkably similar, though I’m not quite there yet on the retirement front.

    Quick question though: if you saved so much money in your 401k accounts and other tax sheltered accounts that you generally can’t access until 59.5, what do you do between age 33 and 59.5 (assuming your wife wasn’t working)?

    I’ve struggled with this theoretical concept and love to get people’s opinions on the matter. It’s all well and good to have 25x-33x your annual expenses in savings, but if it’s in a 401k/IRA that you can’t access for years, how do you bridge the gap? I feel like there’s something I must be missing…

    • Here’s a link to a similar question that I responded to in a comment: http://rootofgood.com/a-simple-way-to-retire-15-years-earlier/#comment-268

      Basically, The 72t rule or SEPP rule lets you pull 3-4+% from your IRAs each year. In our situation, we have about 10-12x our annual expenses in taxable accounts that also happen to produce dividends and interest that covers about 1/3 our annual expenses. If the taxable accounts grow around 6-7% (after inflation) each year, then these accounts might last 15 years before being depleted, getting us to age 48 and 51, respectively. At age 51, Mrs. RootofGood would only have 9 years of doing 72t withdrawals before we can modify the payments.

  • What was your, your spouses income during the time you garnished so much of your nest egg. Trying to see how much of your growth was organic or contributed. Thanks great inspirational stuff.

    • We started out under $90k combined salaries 9 years ago, then ended up 2013 with ~$141k combined salaries. I just quit working, so next year will be only Mrs. RootofGood’s salary (about half our 2013 combined salaries). She might work another year or two.

      Since we were only working 9 years, most of our nest egg is contributions. The last few years have been very kind to us, however.

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  • Wow..Quite an inspiration. I will surely be reading your blog to learn more about investments.

  • Fantastic story! So many people fail to realize it isn’t that hard to make significant progress on goals of early financial independence when you invest regularly. Looking forward to more posts from you!

    • Some people act like it’s magic. Like money magically appears out of thin air, and they just don’t know the right verses to conjure this money into their retirement accounts.

      Fortunately for them, it isn’t magic, but persistence. Even saving 10% of a paycheck consistently will get you to retirement some day (regular age most likely).

  • What the heck is a Flexible Childcare Spending Account? Childcare costs a fortune in Canada.

    • Another way to save money on taxes in the US. A family can put up to $5k into a Flexible Spending Account to spend on childcare (preschool/daycare or even all day summer camp). It’s your own money you are spending. It saved us around $1000-1500 per year in taxes.

  • Wow, it seems that you’ve done everything almost exactly right. Nice work. While I’m doing well, I’ve made some choices that probably set my retirement back 5 years or so.

    Also, that mantis photo is just great!

    • You like the mantis? That’s my fancy $100 point and shoot camera on macro setting. And a lazy praying mantis.

      I think we had a solid plan to retire early and then we were lucky that nothing crazy was thrown in our path.

  • Would love to see the tax retun with $140,000 income and $600 in tax.

  • Wow, you and the missus truly had your head screwed on from a very early age. In a way I wish I’d figured this out earlier, but on the other hand I’ve only really started earning a decent wage. Now it’s time to pump up the savings! Also wishing we had those tax loopholes in the UK as well… Sheeesh that’s crazy!

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  • Amazingly you and I are the same age and have worked in very similar professions. I’m really impressed with how quickly you were able to not only plan but execute this strategy into becoming a reality.

    I am curious: Is all your post-retirement income from dividends? Did you ever take out SEPP’s / 72t distribution? Also how will this play out once your wife joins you for retirement?

    • I only retired 3 months ago, so I haven’t done any 72t or SEPP’s yet. I’ll probably eat away at the taxable portfolio for 10-12 years and do some Traditional to Roth IRA conversions during that time. Then I can withdraw the converted amounts from the Roth tax free and penalty free at any time. I also have about 2 years expenses in a 457 that I can withdraw if we have a big expense one year (although ordinary income tax will be due on withdrawals).

      Right now, the wife’s take home pay (even after maxing HSA and 401k) is enough to provide for our recurring living expenses. I have set my taxable investments to pay dividends in cash instead of reinvest automatically, so we should get another $8,000 or so each year from the taxable portfolio.

      After she calls it quits, we’ll continue to live off the taxable portfolio.

  • This is seven sorts of awesome! Congratulations!

  • Hey great story and the power behind people who are true savers. I laughed when you said your lifestyle is Un-American because you saved instead of spent raises. That is the sad reality, but I am looking forward to my retirement in a few years.

    • Part of the secret to reaching financial independence at an early age is rejecting the consumerist culture and instead focus on spending money and time on things that bring you value.

      • the consumerist culture is what drives the profits of the companies that pay your dividends and grow your money at 7% per year. If everyone spent that little and saved that much, the effect on your investments would not be the same.
        It’s about finding that balance, if you still enjoy it and it’s not an effort to enjoy life by spending so little, then your lucky to be wired that way.
        I’m sure it still took effort and determination so big congrats!

        • It is a strange relationship between capitalists and consumers. You’re right – most of the companies in the index funds I own are directly or indirectly tied to consumer spending in some form. If everyone started consuming like I did, I would expect a one time drop in the stocks I own but they should still be able to make a profit over time. We would just need a lot less stores and retail space in the world. More land for parks and libraries I guess?

  • Ok – new here to your site and call me a skeptic, but I’m curious. You went to law school? Who paid for that? Even with a full ride scholarship (did you have one?) you still have living expenses, right? I read something about you working for an engineering business. Did you also get an engineering degree (undergrad?) – who paid for that? What am I missing? We didn’t even get our undergrad/grad school loans paid off until shortly before we cash flowed our kids’ college. (Back in our day, interest rates on school loans were 9.7%). Our son is presently in law school (on a full ride scholarship, but that doesn’t cover living expenses and in NY rent alone is $1400/month). And where does your confidence come from re: your ability to jump right back into the marketplace should you need to do so? You can’t just quit practicing law for any significant amount of time and expect to be hired back as a lawyer very easily. Both the law and law-related technology change so quickly that you’d be passed over for newly graduated attorneys. I’m totally in awe of what you’ve done and simultaneously bewildered. Please give more details. Thanks.

    • Undergrad = engineering. My parents paid for part of the first year, and I paid for the rest through scholarships, working, research grants and some small student loans.
      Grad school = law school. I paid everything. Student loans paid for law school, along with working summer clerkships/internships (that paid well).

      Both undergrad and law school were in state, and relatively cheap.

      We still have some student loans, but the payments are very low. I have set aside funds to service the debt. Our loan interest rates are 0.75% fixed for 30 years. We have 23 more years left. Our loans are all federal loans, and we placed them in the income based repayment plan. We only plan to spend around $32,000/yr. That means our payments will be small or zero while the kids are in the house (17 more years). After that, there will be six years of payments in the low 4 figures each year. 23 years from now, all remaining student loan indebtedness is forgiven, however we will owe tax on the amount forgiven (under current tax law). Using a 7% discount rate, the net present value of the student loan indebtedness is $15,000 in today’s dollars. If they don’t forgive the remaining balance (ie if the law changes), the indebtedness is $30,000 NPV in today’s dollars.

      In the future, I hope to provide a nice long article explaining the income based repayment plan for student loans.

      As for practicing law, I never practiced law after law school (only summer clerkships during school). My career was in engineering. I ended up not really using my law degree.

      • >Our loan interest rates are 0.75% fixed for 30 years.

        How is that even possible? My wife and I are paying over 6% and that’s the lowest we can find. What magic am I missing???

        • I don’t know! We consolidated into 30 year fixed loans at 3%. Our lender offers a 2% reduction after paying on time for 4 years, and another 0.25% for signing up for auto-draft from the checking account. So that leaves us with 0.75%. I guess we lucked out if 6% is the going rate today. And all new loans are Direct issued instead of offered through local lenders (like in the 1990’s and early 2000’s). The local lender’s 2.25% discount is what really keeps our rates very low.

          If I was paying 6% I may not have borrowed as much or paid them off quicker.

          • My husband’s student loans for his law degree were also very low (1.6%). This included discounts (automatic payment, etc). They were Stafford loans and interest rates were really low back in 2005. They’re the only debt we still have given our money earns more elsewhere.

            • I’m the same way about cheap debt. At 1-2%, I figure I can almost guarantee better after tax returns elsewhere. We still have a tiny mortgage with a little over 2 years left on it at 1.99% and I’m in no rush to pay it off. Our portfolio yields more than 2% in dividends after all.

  • You make early retirement seem plausible! So excited to start reading your blog.

    • It is totally plausible. And whether you reach financial independence at 30, 40, or 50, it’s way better than never reaching FI and working till you (literally) drop.

  • Wow! Such flawless execution – a textbook example of early retirement! Congrats!
    It is wonderful that you have a same minded spouse – without her that would not have been possible. I’m speaking from my own experience – my husband is a spender. With our income we could have retired in mid-30ies, but it seems it will happen only in mid-40ies. Of course, it is still better than mid-60ies or never:) Kids, think twice before marrying someone who has credit card debt – the person MAY BE averse to frugality 😀

    • Very sage advice. We have been fortunate to be firmly on the same page our whole lives together (at least in terms of finances!). I don’t know how households with one spender and one saver can handle it. The saver resents the spender, and the spender feels like the saver doesn’t want them to have any fun.

  • Your story sounds a lot like mine. But please elaborate on that tax bill!

  • Thanks for the summary, very good read and very inspiring.

  • Wow, very impressive journey! Thank you for sharing. Although you and I appear to have taken different routes to FIRE, you’ve done what I hope to do when I hoped to do it. Really motivating for me, reminds me it can be done!

    • Thanks! I was just checking out your page and saw how you’re methodically adding positions each month. Cool to see someone just starting out and how you’re already getting thousands per year in dividend income.

  • How do you plan to go live off 1-1.3M at 32k/yr if you’re only 33? Don’t you intend to be around for 50-60 more years from now. This is much different than the 30-35 years that most people budget for withdrawing yearly for retirement since they assume they’ll be 55-60 years old when they retire right? Sorry if this is a dumb question but I’m just a teenager reading this and am confused by this. Let’s say you built up 1.3M to retire with (not sure if you disclosed the exact amount). If you are living off 32k a year, that’s 40 years. Definitely good but you’ll be 73. What will you do for the next 10-25 years? Or do you have money that is continue to generate profit or compound in the meantime somewhere?

    I’m wondering if I max out my 401k and Roth for 10 years from age 20 to 30 if I can do something similar to you. No lady on the horizon, but hopefully I can find a girl with similar ambitions as well. Is there an average % return I can use to calculate the compounding for my Roth and 401k? Is it generally 6% a year?

    • Good question! Yes, we have around $1.3 million in investments. They will continue to grow. I figure 6-7% real growth (above inflation) each year. However I’m not counting on returns that high. There’s a rule of thumb called the “4% rule” that says you can take 4% of your portfolio each year and it will last for 30 years with very little chance of running out of money (because the investments you don’t spend each year keep growing over time). If you want the investments to last 50-60 years, you need to withdraw closer to 3%. So spending $32,000 out of $1.3 million is slightly under 3%, and we should be fine.

      As for your own investments, yes maxing out 401k and IRA make sense. You save on taxes and let the investments grow tax free. Regardless of whether you’re saving in a brokerage account or IRA/401k, the main thing is to save, save, save. Keep expenses low. Find a compatible spouse and that will make saving and investing a lot easier obviously. For a % return, I would guess 6-7% real returns after inflation (more like 9-10% before inflation). That’s about what the markets have done the last century.

      • Thanks for the reply. I guess the fact that your savings continue to compound is obvious and I should’ve realized that will allow for even more money while you’re beginning to withdraw a portion each year to live off.

        Looking at my potential job prospects, I see myself starting at 58k gross in a major metro. This would be tough to max out a 401k with. I’m thinking I can put away 15k a year in retirement savings. That will be 150k contributed by the time I’m 30, not counting any employer matches or compounding. I’m having a hard time seeing how to get into the million. I suppose a significant other will greatly help, thsts just something I don’t realize at the moment I guess since I’m still quite young and not sure what will happen

        • Reaching a million takes time, and having a second income in the household will certainly help, too.

          As for your 401k, don’t forget you’ll be saving thousands of dollars in taxes when you contribute. A $15000 contribution to a 401k might only cost you $12000 after taxes, for example.

  • Hi. I found you on the MMM forum. Thank you for sharing your story. It’s nice to connect with others who share the same values and goals. Well done!

    My husband left his law firm after making partner so he could spend more time with our kids (3 & 6 yrs); I had left my job soon after we had our 2nd. The hard part for us is how to tell our friends and family. For now, we’ve just told them that he’s taking some time off to spend with the kids. Not sure how to go about it without living a double life or making them feel like we are rubbing it in their faces. Any suggestions?

    • Remember that no one is entitled to know how you run your family finances. What you disclose is up to you. For us, I’ve told close friends and some family and it seems to be a big net positive overall (but most friends seem indifferent honestly). Some friends are like “wow, cool, tell me more” and they have tilted toward saving more in a smarter way and thinking more about FI at a relatively young age. My in laws don’t fully know the story I guess because some still ask if I’ve had any luck in my job search. 🙂

      I would suggest disclosing what you feel comfortable with. “Taking time off from full time work” is a good explanation and leaves it open ended and vague without lying. Who knows, maybe one of you will find an incredible opportunity later in life that makes you want to work again. And it may not be practicing law or in the legal field at all! You can also be vague about your finances like “we were fortunate to have decent salaries while practicing law and managed to save a lot of money during that time”. You don’t have to say you will never have to work again, but I think it’s best to convey the fact that you aren’t one food stamp check away from destitution. Some people might genuinely worry about your survival, and I’d do what I could the alleviate any worry they might have. And sometimes you have to know when to bite your tongue!

      Interesting that you guys are young attorneys and FIRE’d at a young age. In a couple weeks here at Root of Good, I’m featuring another couple that has greatly downshifted away from Big Law partner to not working at around the same age (34/35). The husband in that household is switching from law firm to in house somewhere else, and they are financially stable enough to not have to worry about where they work exactly or whether one (or both) take some time off.

      • Thanks for the quick and insightful reply. I can see how some family and in-laws would react with sincere concern or disbelief or even disappointment. And I do have a lot of experience biting my tongue. =)

        Oh, my background is actually in finance. I worked at a high tech company for 11 years in different areas of finance and accounting. Two lawyers in the family would have been super hectic.

        Interestingly, my husband actually did consider in house for quite sometime where many of his colleagues had gone. But he also learned from some that the hours were often just as brutal.

        For now, he’s enjoying volunteering once a week at our daughter’s school, so perhaps he’ll pursue a teaching career. I can see how that would be more meaningful to him than what he calls pushing papers.

        We’ll keep you updated on how things go. This has been a pleasant outlet. Thanks again for listening.

        • Hey, no problem! “How to tell friends/former coworkers/family I’m early retired” is a pretty common topic of discussion in the early retirement world.

          Oh, I see now you didn’t say you were a lawyer, too. Yeah, probably a smart move to limit the number of lawyers to one per family. 😉

  • With a lot of your money poured into qualified plans, how are you taking distributions from those plans penalty free since you’re 33 years old

    Thanks!

    • We saved a good bit (about 25% of our total investment portfolio) in taxable brokerage accounts in addition to our tax deferred qualified plans. So we have enough we can touch at any time to fund the next 10-13 years (depending on investment results). During those 10-13 years, we’ll be converting traditional IRAs and 401ks to Roths. 5 years after a conversion, we can withdraw the amounts converted penalty free and tax free.

      I also have a 457 plan that allows penalty free withdrawals at any time (just pay regular tax on the withdrawals). That will get us through 2 more years.

      • For Roth conversions, don’t you still have to pay hefty taxes at the time of the conversion?

        • Roth conversions add to your taxable income. Taxes don’t have to be hefty if you convert slowly. If we convert $40,000 per year and have $15,000 of capital gains and dividends we won’t pay hardly any tax (maybe zero – haven’t done the math). $15,000 of cap gains means we could sell $40,000 of appreciated shares to live on if it consists of $15,000 gains and $25,000 basis.

          The key is to convert slowly over time. And once you are pulling living expenses from a Roth, those withdrawals are all tax free. So you can keep converting the $40,000 per year or whatever at a low or zero tax bracket.

  • Hi Justin, i linked to your site through J$s list at Rockstarfinance. I have to say that i am very impressed! I like to look through the top net worths on that site to see what people are doing in order to make them wealthy. Let me tell you i was not expecting you to be in your mid 30s and retired with that Net. My hats off to you.

    The thing i like so much about your site is you don’t seem like you are pinching every single penny and you are still doing things that I consider to bring happiness to your life like travelling. I personally can’t fathom being one of those people that has never left the country they live in, there is too much world to see out there.

    If your up for it, in the future i would like to pick your brain on a few topics, but that is for another day.

    Anyways i look forward to clicking through the rest of your site. Hopefully i will be able to borrow some good ideas from you and get my net up to over a million. Half way there!

    Jeff

    • Hi Jeff, thanks for stopping by!

      We pinch pennies where it doesn’t matter and spend dollars where we get real enjoyment. 🙂

      Sure, fire away if you have questions!

  • Hi Justin

    Came across your site and first time reading it.

    Awesome impression right from the start.

    I guess some of the queries have been answered above. But just one question and not sure if anyone ask you this.

    You had 3 kids while maintaining official FI last year. How does their appearance impact your savings and goals into achieving FI. Do you have any particular plans to hold off at some point before you are more financially independent to raise the 3 kids?

    The reason I am asking is I have 1 kid whom was born 6 months ago and I can see how those expenses have eaten up most of my savings. My plan to reach an early FI was on its way until this happens. Of course, this only means that FI route will only go longer but I believe that its all worth it. Any comments on that?

    • We had kids pretty young (9 months after I started full time work 🙂 ), so our finances have always included kids. I’ve done some rough calculations and I figure they cost us around $9-10k total (plus paying for childcare to a family member some years while working FT) and then we get around $5500 in tax breaks for the kids. Maybe those numbers aren’t accurate, since I don’t include the cost of our 4 BR house in the $9-10k figure. We have to live somewhere, and it’s hard to find houses smaller than 3 BR anyway.

      The first year can be expensive if you have big medical bills. We just finished paying installments on kid #3 in 2014 when he turned 2! Childcare can be very expensive. We live near family and paid below market rates to Mrs. RoG’s mother who watched our kids full time.

      Overall, I don’t think kids will be a huge impediment to reaching FI, although it might postpone reaching FI by a few years (depending on how much you spend on them). For further reading, I wrote on the advantages of retiring early with kids a while back.

  • I am a fan of MMM and found your blog through one of his forums. Very inspiring! I have a question though: what do you plan to do about healthcare once your wife leaves her job? I imagine the rates are insane for a family of four.

    • Affordable Care Act aka Obamacare. Our premiums will be around $1,000/year, depending on how finely we tune our income to optimize the subsidies (or, put another way, to minimize our premiums).

      • The healthcare piece is what we’re working through right now for 2015. We have a very small window of income range to optimize subsidies. Most of our income will come from interest, dividends, and IRA to Roth conversions, so we’ve been really reviewing the tax rules and calculations so we know exactly what amount we’ll need to convert at the end of the year. It’s nice to see we’re not the only ones fine tuning our income. =)

  • I wonder how much your salary jumped after your PE? I have a PhD in Civil Engineering (earned in the mid-1990s) and I got my PE after a couple of years in the industry (score 97). My salary did not jump. In fact, I did not even get a raise that can be called a raise. As a reward, boss did give me $100 to take DW to dinner. I wonder what I did wrong (it is too late to go back and fix it though).

    I quit Civil Engineering within a year. It is 2014 and I am still making a five-figure salary. Never got a promotion in my two decades (more or less) of experience, and have been laid off once in my career. So, bottom line, in financial terms, I’ve been slow and steady like a tortoise.

    That said, if I use your definition of ‘enough’ we have enough as well … for me to retire and DW to keep working!

    • I think I received a $7500 raise for the PE, although that was probably $5000 PE and $2500 performance based. Others receiving their PE at the same time at the same firm didn’t get as much. Maybe $3000-4000. In my job, having a PE meant being able to represent clients at public hearings and testify as a professional witness. It also meant I could review and seal engineering plans and reports, so I was a much more useful employee and able to do more project management.

      In your case, maybe you already have been near the top of what you could earn with a PhD and the PE didn’t increase what you could make any. I know where I used to work, there was a sort of ceiling to what certain level employees could make because we were charging their time to clients and we couldn’t have people making more than the next level up of management.

  • Loved your story! It’s great that you were able to retire so early. I just turned 30, and am hoping to eventually have my own business/businesses and ‘retire’ from my job, which I kind of dislike 🙂 I don’t have nearly enough to completely retire, but then again, I’ve always dreamed of having my own biz, so I’m hoping that won’t feel as much as work, and the schedule will be more flexible. Blogs like yours give me renewed hope that it’s possible, and writing my own blog keeps me accountable. It’s great to ‘meet’ like minded individuals. Best of luck in your retirement!

    • Thanks. What we are doing (pursuing and eventually achieving financial independence) is far enough outside the mainstream group think of spend spend spend that you have to have some form of community to get your thoughts straight and keep focused on your goals.

      • I couldn’t agree more! I find it hard to meet people who think like that, and the lack of a supporting community is what made me look for it online. It’s very inspiring reading people’s stories of success.

  • Justin, thanks for sharing your story. It’s stories like these that validates my journey towards being free at 35. Right now, I see ramping up my active income as pivotal in the strive for FI.

    Thanks again for this. I’ve subscribed.

  • Hello! Thank you for writing such an awesome blog. Congrats on being Financially Independent so early.

    I am seriously curious how on earth you managed to max out your 401k and IRA when you first started working. I make very good money for only being 25 years old, and my base living expenses are below $900 for everything (Rent, food, insurance, gas, phone), which is very low for my age and salary. If I were to max out my 401k right now I would be left with roughly $500 a month after my basic living costs, which would be just barely enough to max out my IRA. How on earth did you pull off maxing your 401k and IRA and still have any resemblance of a social life or do any kind of traveling?

    • I started at a decent salary ($48,000) as I revealed here. Back in 2004 when I started full time work, IRA limits were $3000 and 401k limits $13,000, so only about 1/3 my salary. We paid very little taxes, so we were left with maybe $26-28k for spending. We sort of kept living like we were in college (though our house was nicer and bigger, mortgage payments were tiny). Mrs. RoG started full time work in late 2005 after the birth of our first child, and our combined earnings rose from there.

      Maybe you’re missing the tax savings from maxing 401k and IRA? You’ll save $3500 to $5900 in federal taxes if you max a 401k and an IRA.

      • I guess the difference is that I was contributing to a ROTH 401k up until now. Are ROTH’s not advised for Early Retirement?

        • I personally like traditional IRAs and 401ks because you get the huge tax write off, and then in early retirement you can slowly withdraw or convert to Roth IRAs. For typical early retirees, you find yourself in the 15-25% brackets while working and making big bucks, then drop down a bracket or two during early retirement.

          • Thank you for being so quick to respond and helpful (I guess you have all the time in the world now that you are FI!)

            One last question if you don’t mind, do you have an article with a breakdown of your expenses?

            As I mentioned above, my living expenses are very low for my income and area (rent is only 9% of my Gross income) but I’m still having trouble coming up with a way to save like you did (more than half a million dollars between you and your wife in 10 years time if my rough numbers are right).

            Seriously, thanks again!

            -Carl

  • Awesome blog.

    I don’t necessarily dig into your personal fiances, but heck, isn’t this blog is all about; (you anonymously)? 😉

    You – with family – live on 24k a year. Check. some other helpful numbers would be
    – the nest egg you withdraw from
    – investment returns in a year (portfolio you allocate in?), your projected inflation
    – your withdrawal rate
    Couldn’t find these together; I though this would best fit in this very post

    Sorry if too personal; thanks!

    • Hey Karl!

      For spending, we budget $32,400 per year. This includes the $24k core expenses plus extras like health insurance and fun stuff like traveling the world (on a budget, that is, and free hotel/airline miles from credit cards of course. 🙂

      Each month I put out a financial update and share my net worth (here’s the latest one from March 2015; subscribe and ye shall receive April’s update in very early May). It’s mostly investments, but also includes home equity and some earmarked accounts like kids’ college funds (529’s). Let’s call it $1.4 million in investments, and probably $1.2-1.3 million of that I feel comfortable spending on recurring annual expenses in retirement.

      Investment returns and projected inflation are somewhat correlated. Equities as an asset class tend to keep up with inflation pretty well. If you want a number, I figure 4-5% real returns long term are likely, and possibly as high as 6-7%, though maybe not from today’s valuations. And I’ll note that I have zero clue what the next decade will look like, though in 50 years I bet the market will be much higher than it is today in real terms. 🙂 Inflation. Somewhere in the 2-3% range. I think the fed targets 2% average inflation so that seems like a great starting point, although a few years of high inflation can push the average to 3% or more.

      Withdrawal rate: that’s an easy one! $32,400 divided by $1.2 million gives us a 2.7% withdrawal rate. As for a target withdrawal rate, I’ll feel comfortable spending up to 4-5% of my investments each year, though I’ll probably trim the spending a little if it gets to 5% and/or try to make a little side money beyond what I already make from this blog and the occasional freelance writing gig.

  • 31 and trying to wrap up this full time running around by buying 3 fourplexes on east coast where housing is so cheap. there are 3bd 2ba 1980s houses in nc, sc and georgia for $35,000-$80,000 dollars and rent out for 650-900. thats my goal to collect what fourplexes or SFH i can and collect mailbox money ( and have kids). great blog keep posting its encouraging.

  • Love your story, and the great articles here. I am curious now about the company you started early on, making $30K with “relatively little effort”! How did you pull it off?

    • I’ll have to save the long story for a full blog post. 🙂

      The short version is I founded an engineering data collection firm. I hired a dozen or so college students as necessary and collected data. Nothing glamorous at all. I basically charged clients $35-40/hr and paid my college student contractors $15/hr. That $20-25/hr spread was my profit. Most of the profit came from one large job that lasted 5 weeks and required 16 hour days (which wasn’t fun, but was immensely profitable).

  • Hi Justin,

    How do I subscribe to get notified when you post to your blog?

    • Check the sidebar on the right to subscribe on Facebook, Twitter, or by email or RSS reader (in the column to the right).

      I just added your email address to my email subscription, which may require you to click on it to activate the subscription.

  • This blog post is probably my favorite blog post I have ever read! Thank you for posting!!!!

    Basic question is this: If you have a $300,000 mortgage and only around $50K saved for retirement ($10K in a taxable brokerage account) what would you focus on:

    Paying-off mortgage
    Boosting retirement
    Boosting Investing

    Assuming a salary of $80K, 3 kids and an age of 35.

    Thanks so-much for the answer!

    • If the mortgage is under 4%, I’d probably invest. Especially when the market is down. If the market goes up a lot, maybe focus more $ on paying down mortgage.

      Max your retirement accounts first, at least to get the match and the tax savings. Then add to taxable accounts.

  • Inspiring article! Live is too short to work for the man your entire life. Great job, enjoy your early retirement!

  • How did you learn about investing and making the right choices in choosing funds and managing your portfolio? My husband save in our Roth 401Ks and Roth/Traditional IRAs, but I want to learn more!

  • Mr Root

    Congrats on your discipline and foresight to retire so early.
    But you are an engineer! Don’t you want to put all that calculus and algebra to good use in building stuff ?
    I dropped out of engineering to work in the telco industry.
    Pete (NZ)..

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