Tuesday, March 2, 2010

Random Thoughts on Early Retirement

I think that many people can admit to fantasies of an early retirement. I know that I have had more than a few daydreams about the subject. Over the years I have found a few really good resources (and many more really bad ones) for seeking advice on early retirement.

But, I think that the best resources are the actual people who have retired early and are willing to share their thoughts. Let me first reiterate what I think are the three common themes among those who have retired early:

1) Living below your means (LBYM).
2) Maintaining a diversified investment portfolio on which to draw from.
3) Using a conservative 4% rule of thumb as a baseline for withdrawing from your retirement savings.

Billy and Akaisha Kaderli are a couple that retired in their late 30s. They claim to live off of $24,000 per year. In my communications with the Kaderlis I have determined that they live in what is commonly known as a mobile home. When asked, many people seem skeptical that they could live off of only $24k a year. And the thought of retiring to live in a mobile home is unappealing to many.

Some might characterize the Kaderlis' lifestyle as living "tightly". But, if you ever have the chance to communicate with either Billy and Akaisha, neither one of them would they say that they are at all uncomfortable with the lifestyle choices that they've made. In fact, they have been enjoying life, spending a lot of their time traveling around the world.

A key point that I want to underscore is that early retirees are often willing to do what most people are not. I think that many people could retire in their 30s or 40s, but they are not willing to make the lifestyle changes required to retire early. By contrast, early retirees are often willing to do what most people are not.

What some people refer to as early retirement is really a form of what is known as "voluntary simplicity". Extreme examples of this voluntary simplicity are turning down the heat to 55F, not drinking milk, and reusing gift wrap. Using this definition, practically anyone could claim "retirement" by reducing their consumption to a very small fraction of their net worth. The real question then is "would you be willing to reduce your consumption to this level?"

Along these same lines of voluntary simplicity is the book Your Money or your Life (YMOYL) written by Joe Dominguez and Vicki Robin. I read YMOYL a while back. While there certainly is a lot of good information in this book, some of the suggestions may be equally unappealing to many people.

The authors of YMOYL encourage the reader to thoroughly evaluate the value of each item they have, and track every last penny that comes into or out of your life. This is an activity that I personally frown upon, as I don't think that people should obsess about the minute details of every financial transaction.

YMOYL also advises investing virtually all of your money in US government bonds. I think that a more diversified investment portfolio of both stocks and bonds is a far more prudent choice. A portfolio made up of purely bonds violates rule #2, above. Also, as a historical note, Joe Dominguez died of cancer at age 58. And, this always left me with an uneasy feeling that the lifestyle he advocated in YMOYL may have contributed to his early demise.

In any case, I don't think that early retirement should be solely about depriving oneself to reach these goals. I will not tell you to give up eating meat, drinking milk, or buying your favorite latte drinks at Starbucks. Regardless, I think that everybody can make small steps that will bring an early retirement closer to reality.

Gold IRA at Lear Capital.



  1. When in the States we live in what is considered a park model with 1000 square feet. The amenities in our community include swimming pool, computer room, workout room with up to date equipment, library, lapidary, tennis courts, billiard hall etc.

    Currently we are running around Central America and you can follow our expenses at http://www.retireearlylifestyle.com/travel_expenses.htm where we list our daily expenses. You will see that some of our hotels have ocean views, mountain views, swimming pools, kitchenettes, wifi in the room, cable TV and so on. Not missing out on the luxury!

    Thanks PFStock for mentioning us. We do appreciate it.

    Billy and Akaisha Kaderli

  2. Billy and Akaisha: Thank you for visiting my blog and for leaving your comments. It seems that you posted your last comment from Guatemala. I hope that you are enjoying your travels!

    There is a question that I've been meaning to ask you, but didn't yet have the chance:

    "How do you think your lives would be different if you had children?"

    Nearly all of the early retirees that I've written about have no children. Among early retirees that I've communicated with, some have said that if they did have children, it would have easily pushed out their retirement date by 10 years or more.

    Among PF bloggers, there are two notable exceptions that I know of. Bloggers who retired in their 40s AND have young children: My Wealth Builder and Millionaire Mommy Next Door. But, I think that is the exception rather than the rule.

    Anyway, I hope that you are willing to share your opinion on this. Thanks.